New Seattle City Ordinances Impose Restrictions on Short-Term Rental Operators

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Over the course of the past several years, an enormous market for short-term and vacation rentals through platforms such as Airbnb, VRBO, HomeAway, and Vacasa has developed across the U.S. and worldwide. Operators of these short-term rentals range from homeowners and hosts renting out a spare bedroom, mother-in-law unit, or apartment, to larger operators renting out entire homes, vacation properties, and villas. The popularity and consumer base of these technology-backed marketplaces has allowed many property owners to augment their income or develop new businesses based around short-term property rentals.

Concurrently, the dynamic emergence and predominance of short-term rentals has led to a great deal of controversy, discussion, and ultimately legislation regulating the ability of property owners to engage in the short-term rental market. This legislation aims to balance the interests of property owners in monetizing extra space or vacant properties, with the interests of hotel companies and more traditional short-term rental entities, as well as with the interest in providing stable and affordable long-term housing in increasingly expensive urban markets.

On November 13, 2017, the Seattle City Council passed an ordinance approving a new tax on short-term rentals – imposing a tax of $14 per night on rental operators renting out entire units, and a tax of $8 per night where the operator rents out only a portion of a home, such as a spare bedroom or mother-in-law unit. The tax was described as a part of broader regulations the City Council would be implementing pertaining to short-term rentals.

On December 11, 2017, the City Council approved accompanying regulations designed to prevent property owners from operating short-term rentals in a hotel-like manner. Among them are a restriction on the number of units a property owner may rent out on Airbnb, capping the number for new Airbnb operators at two units (inclusive of their primary residence), while hosts already operating prior to September 30, 2017, will be permitted to rent two units in addition to their primary residence – with a few exceptions. The new Seattle Municipal Code provisions also require short-term rental operators to hold a valid short-term rental license and to maintain liability insurance with a limit of no less than $1,000,000.

These new regulations will undoubtedly impact many Seattle residents – and may pave the way for similar regulations to be passed in the greater Puget Sound region. The developments at the municipal level are just one of many factors a property owner must consider in determining whether to continue operating short-term rentals or to begin doing so. Stay tuned for another blog post discussing the broader issues and concerns that short-term rental hosts should consider and be mindful of in operating an Airbnb or VRBO rental.

About the Authors

Samuel Winninghoff

Samuel is an associate in the firm's land use and real estate practice groups.

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