Austin's crackdown on unlicensed short-term rentals loses steam due to legal questions

In September, city staff said there were about 11,000 short-term rentals (STRs) in Austin, but only 1,875 were licensed.

AUSTIN (KXAN)-- There are thousands of unlicensed short term rentals, like AirBnbs, in Austin, but the city said they're not focusing on a crackdown, anymore, due to legal questions.

In September 2022, city staff said there were about 11,000 short-term rentals (STRs) in Austin, but only 1,875 were licensed. In response, city council passed a resolution in December aimed at getting more of them in compliance.

The resolution directed the city manager to change city code to bring in companies like Airbnb and VRBO to make sure properties are licensed before they're posted on their platforms.

It also directed the city manager to create an online database of licensed STRs.

Former city council member Kathie Tovo sponsored the resolution, saying licensing helps the city track rentals better and make sure they’re following code.

But now, a city spokesperson said they're shifting focus.

"The [Development Services Department] Code Division continues to process short term rental license applications. However, due to the evolving law in this area, the division has refocused its enforcement program on behavioral issues that make short-term rentals incompatible with Austin's neighborhoods. Practically speaking, this means that the City Code requirements that address how a short-term rental is operated are the focus of enforcement efforts. This is generally achieved through engagement with property owners and guests to educate them on city ordinances.

The DSD Code Division continues to work with City Management to refine the scope of this multi-departmental project to ensure that all relevant stakeholders and city staff are included and can move forward to fulfill Council's direction. We are not yet at a point in our efforts where we can speak to the specifics of what that might look like."

Tara Long, City of Austin Development Services Department

The city did not outline any specific legal questions surrounding the resolution, but a lawsuit out of New York City is causing concern with at least one STR management company in Austin.

In a statement posted online, Airbnb said New York City's rules "effectively ban short-term rentals." The company claimed NYC's city codes are confusing; it's registration system complicated; and some rules too restricting, like a ban on internal locks on bedroom doors.

Dustin Abney's company, Portoro, manages 30 properties in Austin that are listed online, including on Airbnb.

He doesn't think Austin's rules are as restrictive as New York City's.

"It actually came as a relief that there were very well-described and accessible policies that we could find," Abney said.

But he's worried about what might happen if New York City wins the legal battle.

"More jurisdictions who want to stop short-term rentals are going to point to that and say, 'See, New York City, this big, you know, amazing city with tons of rentals did that, why can't we?'" Abney said.

Abney said he's not opposed to regulation; he supports Austin's new resolution.

"I would say that Austin still has a long way to go to enforce unpermitted homes," he said.

He said all his properties are licensed, which comes at a cost.

"For owners and property managers like us who want to do the right thing. It comes at a cost and there are a lot of people that are not doing the right thing," he said.

But he worries about over-regulation.

"We want rules, we want policies, we want to operate," Abney said. "We want balance within the city between long term residents, long term rentals, short term rentals-- we can all win."

In-Depth: "The Airbnb Effect"

There is a lot of research out there on how short-term rentals could be raising prices for home-buyers.
Through platforms like Airbnb, property owners are offering rooms, apartments and entire homes as short-term rentals.

Those properties would likely otherwise be listed in the residential rental or housing market.

This means they are effectively reducing supply and driving up prices.

A professor at Purdue University researched three cities where Airbnb had implemented a policy to restrict hosts to just a single address.

With that policy, rents and home values dropped by about 3%.