Staying in a short term rental for SXSW? Odds are, it’s unlicensed
AUSTIN (KXAN) — If you’re one of the tens of thousands of people traveling to Austin for South By Southwest (SXSW), odds are you’re staying in a short term rental (STR) that doesn’t have the permit required to operate in the City of Austin.
Despite Austin City Council members expressing the need to regulate STRs better, thousands of them remain without a city-required license, according to the City’s Development Services Department.
For Austinites, it means the city is missing out on millions of dollars in fees, and city staff have said it makes cracking down on nuisance properties much more difficult.
When we checked in with the Development Services Department, there are only 2,236 active STR licenses in Austin, well short of the total number of listings.
While the City of Austin said it doesn’t have an accurate way of tracking all short term rentals in the City, AirDNA — which has been used by the City to provide estimates to City Council previously — estimates there are just short of 10,000 total short term rentals in Austin, according to the latest data.
During major events like ACL and SXSW, that number swells to well north of that, Austin staff have said previously.
“We are actively looking at revising our STR policies in the coming months to make sure they address bad actors and better serve our community,” Austin City Council Member Zohaib “Zo” Qadri said.
What gives?
Part of the issue, as KXAN has previously reported, has been legal challenges to STR ordinances nationwide. In December of 2022, Austin City Council passed a resolution aimed at cracking down on those rentals, but legal challenges in other cities forced staff to shift gears.
Court rules Austin short-term rental ordinance unconstitutional
A federal judge also ruled against the City of Austin last year after a Houston couple filed a lawsuit aimed at the city’s STR ordinance prohibiting people from operating one without living at the property. That has further complicated the city’s efforts.
Matt Curtis, the founder of Smart City Policy group, just so happened to be in a heavy tourist town in Pennsylvania when we reached out this week, at a conference talking about short term rentals. He says this issue is not unique to Austin, and has plagued other major U.S. cities.
“The bigger challenge with Austin currently is we’re kind of at an in between point, where we had created some rules that showed some degree of compliance, we change those rules and the state contested some of the rules that we had,” Curtis said. “It seems like the city is primed to come back and readdress creating some local rules that will meet the goals of the community.”
City staff say they also struggle to pinpoint where those short term rentals are.
“The most significant challenges associated with taking enforcement action against unlicensed short-term rentals is having a reliable way to establish their location and the lack of platform accountability. This could be resolved through greater transparency with partners who can confirm location and up-to-date contact information so STR staff could work with property owners,” a spokesperson for the Development Services Department said.
What’s the solution?
The Austin Tourism Commission recommended the following to city council in a meeting last month:
Maintain a database of STR licenses
Focus on underreported Hotel Occupancy Taxes
Enhance transparency and streamline licensing by simplifying the application process
Implementing platform fees and holding platforms accountable for non-compliance
According to the City of Austin’s Development Services Department website, applying for a short term rental license costs $863.80. That includes a $45 notification fee and a $1.81 Development Services Department technology fee.
That license has to be renewed annually, which costs $490, according to the Development Services Department website.
One solution other cities have implemented to get more property owners on board — drop the cost of entry.
“Now there’s other ways to create revenue from this activity, including greater fine structure, but having a lower fee will get more people into the program,” Curtis said.
One city Curtis has worked with that’s seen success — Galveston, Texas. There, the city brought together destination marketing teams and the short term rental operators to restructure the city’s rules and to educate the public, he explained.
“We really worked hard to weed out any bad actors by putting in place really strict rules. But we also made it easy for people to get regulated and enter the program,” Curtis said.
As a result, Galveston went from about 2,200 registered short term rentals to roughly 5,100 today, Curtis said.
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