The Texas Supreme Court has 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 on platforms such as Airbnb, HomeAway, and VRBO.
Kenneth Tarr began renting out his home near San Antonio for short terms in 2014, but the Timberwood Park Homeowners Association argued that he was not allowed to do so, since the association’s deed specified that his home could be used as a “single family residence” for “residential purposes” only.
In 2015, a Bexar County district judge ruled in favor of the homeowners association, as did the Texas Fourth Court of Appeals in 2016. The unanimous Supreme Court decision overturned those previous rulings.
“So long as the occupants to whom Tarr rents his single-family residence use the home for a ‘residential purpose,’ no matter how short-lived, neither their on-property use nor Tarr’s off-property use violates the restrictive covenants in the Timberwood deeds,” Justice Jeff Brown wrote on behalf of all nine Supreme Court justices.
The ruling will directly affect short-term rentals within homeowners associations that have similarly worded deeds, but the precedent it sets could also affect the ultimate outcome of legal challenges involving cities’ restrictions on short-term rentals.
The most prominent of these is a lawsuit filed in 2016 against Austin’s short-term rental law 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.
Austin has one of the oldest and most restrictive short-term rental laws in the state. The city plans to phase out certain types of short-term rentals altogether and place limits on how many short-term rentals are allowed in certain areas.
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.
Airbnb automatically collects the state portion of the tax for bookings on its platform, but Austin Airbnb hosts must collect and remit the Austin portion of the tax themselves. Hosts who use other platforms, such as VRBO and HomeAway, are responsible for collecting and remitting all lodging taxes themselves, since those platforms do not collect lodging taxes on behalf of operators.
The short-term rental issue has also been on the agenda of state lawmakers, who introduced two bills restricting the powers of cities to regulate short-term rentals. Neither were passed, but the issue could be raised again in the next legislative session.
Lodging tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
FAQs
The Texas Supreme Court has sided with short-term renters, delivering a win to Texas homeowners who hope to take advantage of websites like Airbnb and HomeAway, and likely bolstering a separate, ongoing case against the City of Austin's short-term rental ordinance.
Is it legal to Airbnb a rental in Texas? ›
In Texas, the laws for short term rentals are crafted at the city level, with no specific state limitations on operations. Hosts are required to register with the Texas Comptroller's Office for state hotel occupancy tax collection but do not need a state license for running a vacation rental.
Can an HOA ban short-term rentals in Texas? ›
Texas has no blanket restrictions on short-term rentals. Prohibitions on such use must come from the HOA or the local municipality. Most restrictions on short-term rentals are stated in the HOA's declaration. The declaration is a contract to which all homeowners are parties.
Did Austin ban Airbnb? ›
A federal judge has struck down part of a short-term rental (STR) law in Austin, Texas, that bans unhosted STRs in residential areas. The ruling by Senior U.S. District Judge David Alan Ezra addressed a lawsuit filed by STR owners Robert and Roberta Anding.
What is considered short-term rental in Texas? ›
A short-term rental, or STR, is the rental or offer for rental of any dwelling or any portion of a dwelling for a period of less than 30 days.
Do I need a permit to host Airbnb in Texas? ›
As an Airbnb host, you must apply for a hotel occupancy tax permit from the state comptroller's office, which is tied to your property's address. Currently, the hotel occupancy tax is 6% of your listing price.
Do you need a license to host Airbnb in Texas? ›
Licensing and taxes
There are no requirements to get a license at the state level to run a vacation rental business in Texas. But many major cities have specific licensing requirements, so you must check them before listing your property on Airbnb, Vrbo, or Booking.com.
Is Airbnb considered commercial or residential in Texas? ›
No: the state of Texas considers a short term rental any stay in a residential unit of a duration of up to 30 consecutive days.
How do I get around an Airbnb HOA? ›
The best way to strategize on short-term rental restrictions is to speak to a board member. At the same time, you can consult the CC&Rs' (Covenants, conditions, and restrictions) advice. Knowing the potential risks of getting around HOA's restrictions is important. And we highly recommend doing it the legal way.
Do you need a real estate license to manage short-term rentals in Texas? ›
Texas Administrative Code Rule 535.4: Per this rule, you need a real estate sales agent or broker license to: Operate a rental agency.
Why is Airbnb Illegal or Restricted in Certain Places? Some localities have outlawed or put restrictions on Airbnb hosting for several reasons. One is that it takes away tax revenues (although now Airbnb works with cities to collect such taxes), or siphons business from traditional hotels that do pay taxes.
What states are banning Airbnb? ›
5 Cities Where Airbnb Is Illegal
- Los Angeles, California. The most recent city to enact strict Airbnb regulations is Los Angeles. ...
- New York City, New York. ...
- Santa Monica, California. ...
- Las Vegas, Nevada. ...
- San Francisco, California.
Report a code violation by calling 3-1-1, using the 3-1-1 app, or submitting a report online. You can always report anonymously. For more information on code violations, please refer to the Austin Code list of common code violations or search Austin's Code of Ordinances.
What is a Type 2 short-term rental in Austin? ›
Type 2 STR: A use that is rented for less than 30 consecutive days, includes the rental of an entire dwelling, is not part of a multi-family residential use, and is not owner occupied or associated with an owner-occupied principal residential unit.
Can I do short-term rental in Austin? ›
– Only a homestead owner may apply for a short-term rental special use permit, but may do so for the homestead or another property owned by the homestead owner. – Only one permit will be issued per homestead, regardless of whether the permit is for the homestead or another property owned by the homestead owner.
Does Austin allow str? ›
Owners of Short-Term Rentals (STRs) are required by the City of Austin to obtain an operating license and renew annually.
Can you rent out your apartment as an Airbnb in Texas? ›
The only state-wide requirement on how to start an Airbnb in Texas is to register with the Texas Comptroller's Office and pay state hotel occupancy tax, as well as local lodging tax. However, different Texas cities also introduced their own laws and regulations that limit vacation rentals.
Can I Airbnb instead of renting? ›
Almost certainly, you cannot do that. Because either the rental agreement would forbid it, or, more likely, your local zoning laws would. Rental apartments are, for the most part, considered “residential” zoning, for very good reason. Running an AirBnB is a commercial use.
How profitable is Airbnb in Texas? ›
The typical Dallas host made about $9,600 in 2022, according to Airbnb. Across Texas, hosts brought in about $10,800 in median earnings last year.
What is the average income for Airbnb in Texas? ›
What Is the Average Airbnb Host Salary by State
| State | Annual Salary | Monthly Pay |
|---|
| Texas | $35,747 | $2,978 |
| Wisconsin | $35,724 | $2,977 |
| New Hampshire | $35,514 | $2,959 |
| Nevada | $35,038 | $2,919 |
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