New data helps Austin crack down on illegal short-term rentals

The city of Austin, Texas, has been sending out warning notices to short-term rental operators believed to be operating without a required permit, and city officials plan to make a push to enforce short-term rental laws against thousands of illegal vacation rentals starting early next year.

While more than 10,000 Austin short-term rentals are being advertised, only about 2,500 have licenses to operate, according to recent findings by Host Compliance, a company hired by the city to track illegal short-term rentals. The city expects Host Compliance to provide advertising and location data for 3,500 of the illegal listings by February, at which time the city plans to start enforcement actions, according to a memo from Austin Code Director Cora Wright.

In the past, the city mainly enforced vacation rental laws by responding to complaints about short-term rental properties. According to Todd Wilcox, Austin Code Department (ACD) division manager, hiring Host Compliance to detect illegal vacation rentals adds a new tool to enforcement efforts.

“This will help us proactively combat the growing number of STRs that were previously unidentified due to ACD working almost exclusively in a reactive mode,” Wilcox said.

The city has received 1,312 complaints related to short-term rentals since October 1. Citations were issued to 581 properties, 93 percent of which were unlicensed.

Austin has one of the oldest and most restrictive short-term rental laws in the state. Along with requiring short-term rentals to obtain city licenses, it prohibits unlicensed short-term rentals from advertising, with fines of up to $2,000 per day for violations. The law also restricts the density of short-term rentals and limits noise levels and occupant numbers. Short-term rentals in residential areas will be required to cease operation by April 1, 2022.

Short-term rental hosts in Austin must also collect a total lodging tax of 15 percent from guests and pass it on to tax authorities. This includes a 6 percent state hotel occupancy tax and a 9 percent city hotel occupancy tax. Hosts are required to register with tax authorities at both the state and city level and file regular lodging tax returns.

Airbnb and Vrbo/HomeAway automatically collect the state portion of the tax for bookings on their platforms. However, Austin does not have a collection agreement with any online short-term rental platforms, so Austin hosts must collect and remit the city portion of the tax themselves.

MyLodgeTax can help vacation rental hosts automate and simplify lodging tax compliance, from registration to tax return filing, at both the state and city level. For more information on short-term rental taxes in Texas, see our state Hotel Occupancy Tax Guide.

Austin’s short-term rental law has been controversial within Texas. The law was targeted in 2016 by a lawsuit filed by the Center for the American Future, a legal arm of the Texas Public Policy Foundation, representing short-term rental owners. The legal challenge has received the support of Texas Attorney General Ken Paxton and is winding its way through the courts.

Last year, the Texas Supreme Court ruled in favor of a Texas homeowner whose homeowners association pressed to restrict his short-term rental activity. The decision may have wider ramifications in the controversy over Texas short-term rentals.

If you've got tax questions related to your Austin rental property, drop us a line and we'll get back to you with answers.