New short-term rental rules ahead for South Lake Tahoe after ordinance is overturned

An ordinance regulating short-term rentals (STRs) in South Lake Tahoe, California, has been overturned by the El Dorado County Superior Court. The city decided not to appeal the ruling and passed a 45-day moratorium on issuing STR permits while it explores a new approach to STR regulations.

The STR law, Measure T, was approved by voters in 2018 and phased out existing STRs in prohibited areas over a period of three years. The ordinance applied to properties rented for 30 days or fewer outside the city’s tourist core and required operators in those areas to cease offering short-term rentals after December 31, 2021. An exception allowed permanent residents to rent their properties on a short-term basis for up to 30 days a year.

When the law was passed, approximately 400 short-term rentals were located within the tourist core, and about 1,400 located in residential areas were affected by the ban.

In 2021, the South Lake Tahoe Property Owners Group filed a lawsuit against the measure, arguing that it discriminated against property owners who are not full-time residents. The measure was upheld by an appeals court in 2023. However, the latest ruling from the El Dorado County Superior Court struck down the entire ordinance, stating that the permanent resident exception was unconstitutional and discriminatory.

Prior to Measure T, the city approved an STR ordinance in 2017, with rules that included:

• STR license requirements for operators
• A 1,400-property cap on STR properties in residential neighborhoods outside the city’s core
• Noise, trash, and parking rules
• A “three strikes” provision in which rental owners who have three violations within a 24-month period can permanently lose their short-term rental permit

Since Measure T was passed, the city has made changes to some rules, including increasing fines for violations to as much as $5,000 for a third offense.

If the City Council hadn’t issued the moratorium on new STR permits, the law would have automatically reverted to the 2017 law once Measure T was overturned. There’s still the option for the city to return to these prior rules, but the City Council plans to take advantage of the moratorium to discuss how to move forward.

South Lake Tahoe STR operators are required to collect city transient occupancy tax from their guests and pass those tax revenues on to the city. Although Airbnb and Vrbo collect lodging taxes on behalf of their hosts in some California cities, they don’t do so in South Lake Tahoe. That means STR operators are responsible for registering, collecting taxes from their guests, filing tax returns, and remitting taxes to the city. 

Avalara MyLodgeTax can help automate and simplify tax compliance for STR operators. For more on lodging taxes in California, see our state vacation rental tax guide. If you have tax questions related to vacation rental properties, drop us a line and we’ll get back to you with answers.