The Indy Explains: Nevada’s new short-term rental law, impact on companies such as Airbnb

Exterior view of the Lakeshore Terrace condo complex in Incline Village, as seen from Lake Tahoe on Monday, June 28, 2021. Photo: David Calvert / The Nevada Independent

Tabitha Mueller | The Nevada Independent

Friday, July 2, 2021

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Frustration over an ineffective ban on short-term rental properties in unincorporated Clark County and a patchwork of rules across municipalities prompted state lawmakers this spring to pass a bill aimed at standardizing rules and holding hosting platforms such as Airbnb or Vrbo liable for noncompliance with local regulations.

The measure, AB363, has faced criticism both for going too far and not going far enough — the bill drew opposition during the legislative session from short-term rental owners, neighborhood associations, rental platform companies and others who warned that it would kneecap the industry. The bill also attracted a broad swath of influential supporters, including the Nevada Resort Association and Culinary Union, and passed through both the Senate and Assembly with a two-thirds majority.

Bill sponsor Assemblywoman Rochelle Nguyen (D-Las Vegas) told The Nevada Independent that despite some confusion over the bill’s provisions, the measure is the first step to addressing a lack of uniform short-term rental regulations, which has been blamed for uncontrollable party houses and a dearth of affordable housing.

“Anyone can go on Airbnb’s platform or Vrbo’s platform or HomeAway’s platform, and they can pull up literally thousands of illegal listings,” Nguyen said. “We need to make sure that other parts of our state [without regulations] are protected from this proliferation of unregulated short-term rentals.”

Much of the confusion stems from substantial changes made between the initial version of the bill and the final version approved by legislators. Despite early discussions centered on creating a statewide policy, the bill as passed applies only to counties with a population greater than 700,000 (Clark County) and to cities within that county that have a population greater than 25,000 (Henderson, Las Vegas and North Las Vegas).

During the bill’s presentation and in discussions surrounding the measure, Airbnb and other opponents warned that night minimums and distance requirements restricting short-term rentals near gaming properties could hinder Nevada’s post-pandemic recovery.

In a statement to The Nevada Independent, Airbnb’s Public Policy Manager Adam Thongsavat wrote that Airbnb generally supports efforts to legalize short-term rentals, but still saw the bill as overly restrictive.

“We echo Hosts who were disheartened to see punitive, anti-competitive amendments included that made this bill a gift for resorts at the expense of regular Nevadans who share their homes,” Thongsavat said. “Short-term rentals have been a lifeline for residents who rely on the income to make ends meet — now is the time to work together to bolster Nevada’s economy and hospitality industry, not make it harder for travelers to visit the state.”

Supporters hold that the measure could lead to substantial tax benefits — Airbnb alone estimated that it would have collected and remitted up to $14.5 million in hotel room taxes on behalf of Nevada-based hosts had the law been in effect in 2019. Nguyen estimated that untaxed short-term rentals represent a loss of about $45 million in room tax revenue annually.

But the measure does more than just require the adoption of new regulations and strengthen enforcement mechanisms — it also limits the number of short-term rental permits individuals can hold and establishes licensing requirements while allowing existing city policies surrounding short-term rentals to be grandfathered in.

Here’s an in-depth look at the measure, where it applies and some of the decision-making behind it:

What the new law does

The bill requires Henderson, Las Vegas, North Las Vegas and unincorporated Clark County to include short-term residential spaces in their legal definitions of “transient lodging” — meaning they are subject to the same taxes that hotels charge guests.

The current Clark County hotel tax rate ranges from 12.5 to 13.38 percent along the resort corridor, and for other lodging facilities ranges 10.5 to 13.38 percent. In Southern Nevada, Clark County collects room taxes in the unincorporated county (which includes the Strip) and the municipalities collect within their jurisdictions. The tax revenue is then distributed to various entities including the Convention and Visitors Authority, state education fund, school districts and transportation district.

A vacation rental sign featuring a notice for accommodations at Lake Tahoe on Monday, June 28, 2021. Photo: David Calvert

Under the new law, local governments will have to create a process requiring anyone renting out a room or space to submit an application for a short-term rental permit, pay an annual fee set by the municipality to maintain that permit, designate a local representative for the rental and maintain liability coverage for the unit. All transactions and permits will go through local jurisdictions as opposed to a state agency.

Other changes the bill makes:

Sets a minimum stay of two nights for short-term rentals, excluding owner-occupied properties that can be rented for as little as one night
Limits maximum occupancy for short-term rentals to 16 people
Establishes a minimum distance of 660 feet between any two short-term rentals, except for units within a multi-family dwelling
Requires a separation of 2,500 feet between the property line of a resort hotel and a short-term rental that is a single-family residence
Caps the percentage of allowed short-term rentals in a multi-family dwelling at 10 percent of units within the dwelling (such as condominium units, townhouses and duplexes)
Prohibits apartments or rooms in apartment buildings from being used as short-term rentals
Requires short-term rental owners to have a designated local representative who is responsible for the rental and available 24 hours a day, seven days a week to respond to any issues
Prohibits short-term rental owners from holding more than five short-term rental permits (one permit per property).

The law goes into effect on July 1 and stipulates that local authorities have the ability to suspend a permit or impose fines or penalties if a short-term rental owner or manager violates the ordinance. Fines for a single violation against an individual renting out a property must not be less than $1,000 or more than $10,000.

The law also specifies that local governments cannot enact an outright ban on short-term residential rentals.

To encourage unlawful short-term rental operators to apply for permits, the law protects them from being penalized during the application process. After local jurisdictions adopt a new short-term rental ordinance and give at least 30 days notice of the application period, unlawful actors have up to six months to apply for a permit. Though the law does not require payment of back taxes, county commissions can charge a “reasonable fee” for any such application and the law does not automatically require them to grant permits to unlawful operators.

Nguyen said the measure marks the first time a state has enacted a policy stipulating that local jurisdictions can penalize short-term rental platforms that do not comply with local ordinances. The law does not specify what the actual penalties must be, leaving the decision up to local jurisdictions.

"I do want to make sure that these local jurisdictions are able to hold these platforms accountable when appropriate,” she said, adding that she hoped the law will encourage rental platforms to address problems from bad actor property owners and managers.

When jurisdictions establish their ordinances in line with the new law, they can be stricter than the provisions outlined in the bill, Nguyen said. By setting floors and ceilings on regulations such as fines and distance requirements, she said state lawmakers were trying to ensure that local governments had enough autonomy to make necessary adjustments, while also protecting long-term residents.

“Local jurisdictions can be more restrictive, but they can't just bury their head in the sand and say ‘Hey, we banned them’ and not do anything about them,” Nguyen said.

Patchwork network of short-term rental regulations

Prior to the legislative session, three counties (Clark, Washoe and Douglas) and a handful of cities had adopted formal policies on short-term rentals. The policies ranged from total bans (unincorporated Clark County), no regulations (Washoe County), to allowing rentals only in owner-occupied homes (City of Las Vegas) to requiring each unit to have a landline telephone (City of Mesquite).

Under the law, existing short-term rental properties are grandfathered in, but Nguyen said that the bill gives the larger cities within Clark County more enforcement mechanisms and a greater ability to regulate the market.

A short-term rental sign near Tahoe's Incline Village on Monday, June 28, 2021. Photo: David Calvert

The grandfather clause only applies to existing, lawful properties. For example, if a current short-term rental is within 2,500 feet of a resort, it may remain. A short-term rental application submitted after the law goes into effect on July 1 will not be approved if it lies within 2,500 feet of a resort.

Southern Nevada municipalities each had adopted separate policies on short-term rentals prior to passage of AB363, though many of the provisions appear similar to those in the new law because Nguyen based the bill’s regulations off of these existing policies.

Henderson currently requires short-term rental managers to pay an annual $820 registration fee, and applicants must submit a noise management plan as part of their registration. No more than 25 percent of all units in a multifamily complex may be registered as short-term rentals, and planned communities have the authority to ban them outright.

Henderson property owners or site managers are also required to complete a certification program and offer guests a copy of the city’s Good Neighbor pamphlet containing information about quiet hours, trash regulations and contact information for police and the city’s short-term vacation rental complaint hotline.

Within the City of Las Vegas, short-term rentals are only allowed in owner-occupied homes that have three or fewer bedrooms and are at least 660 feet away from another short-term rental. Rentals must comply with licensing, noise and parking requirements.

Applicants for short-term rental licenses from the city must have the proposed short-term rental inspected by a code enforcement officer and pay a non-refundable application fee of $50 and an annual permit fee of $500. Licensees are also required to provide proof of liability insurance with a $500,000 coverage minimum.

North Las Vegas allows short-term rentals as long as a property owner applies for (and receives) a conditional use permit. After property owners receive such a permit, they must apply for a business licence. To receive a license, an owner must send a copy of the city’s Good Neighbor brochure to all property owners within 200 feet of the short-term rental. The conditional use permit has a one-time fee of $100, and the business licence fee is $900, paid annually.

North Las Vegas also requires a 660-foot separation requirement from other short-term rentals, and property owners must install noise monitoring equipment outside. Short-term rentals can only exist within multi-family zoning where the units are individually owned and can make up no more than 50 percent of the units or a maximum of eight units (whichever is less within a duplex, condominium or townhouse). Individual room rentals are only permitted if the residential unit is owner-occupied.

All three municipalities stipulate that short-term rentals are only to be used as overnight accommodations and may not be used for weddings, special or sales events, bachelor or bachelorette parties or other similar events.

Nguyen said that Boulder City asked not be included because city officials felt they did not have the resources to put together an ordinance and wanted to maintain its ban on short-term rentals.

“I personally think it was short-sighted. You’ve got to come up with really easy regulations and then you will also benefit from the protections that we also included in the bill … but that is up to them,” Nguyen said. “There were some substantial benefits. I know that's why Clark County was so involved in some of the added provisions for enforcement because they knew that it was coming, and they wanted to make sure that they had some of that extra teeth to go after some of the platforms.”

Washoe County

Unlike Clark County, Washoe County never adopted a ban on short-term rentals. The county collected taxes on short-term rentals, but previously had no restrictions or regulations in place, leading to complaints about party houses and lack of cleanliness from guests.

The county includes not only the city of Reno but also the Incline Village and Lake Tahoe communities, which feature a thriving short-term rental market and tension between long-term residents and tourists.

Earlier this year, the county finished putting together an ordinance that will require a permitting process and various regulations around safety, occupancy limits, noise levels and trash pickup among other requirements. The ordinance is set to go into effect on Aug. 1.

Because the ordinance was adopted while the bill was being debated in the Legislature, the county requested to be left out of the provisions of the new law but has plans to continue working with Nguyen in the interim on potentially adopting a statewide short-term rental policy.

“These regulations are going to come up again and it's a real concern … Sometimes you're on the county level and you're all by yourself doing this, and the fact that the state is looking at these things too with you as a partner and … finding something that works for all of us, I think that's what we're trying to do,” Washoe County Commissioner Alexis Hill said in an interview.

Between March 2016 and February 2021, Airbnb’s tax collection agreement with Washoe County generated around $7.6 million in revenue for local jurisdictions. Hill said that the county is monitoring the implementation of the new ordinance and seeing how it affects the local short-term rental market and economy. She added that the ordinance is not set in stone and the county will make adjustments as needed.

“We're all very open to seeing how we can make things better,” Hill said.

Platform liability and housing market protection

Giving local governments the ability to enforce and enact rules and ordinances that penalize platforms that do not comply with the regulations — establishing platform liability — is one of the hallmarks of the new law.

Platforms will be required to list a host’s short-term rental permit number, so when a consumer is using their site, they will know whether a property is licensed. And if a host repeatedly fails to comply with ordinances, local authorities will have the ability to hold the platform accountable. The bill leaves the method of accountability up to the county, but Nguyen said that it could be in the form of a fine or another enforcement mechanism.

The limit on the number of permits is also designed to prevent larger companies or organizations from purchasing multiple properties and using them as short-term rentals, thereby protecting the region’s housing stock and alleviating the housing shortage.

The law’s requirement for hosting platforms to verify the registration status of third-party short-term rental listings — opening up such platforms to penalties for host noncompliance — may be subject to legal challenge.

In 2016, Airbnb sued the city of San Francisco, arguing that an ordinance requiring hosts to register with the city violates an online home-sharing company’s free speech rights. A year later, Airbnb settled with the city, creating a registration system for Airbnbs within San Francisco and agreeing to deactivate listings if there is an invalid registration.

Vivek Sah, director of the Lied Center for Real Estate at UNLV, said that short-term rentals can disrupt communities and may over time reduce home equity. Regulating short-term rentals helps mitigate these issues, he said, adding the caveat that he is unsure how the new law could affect the affordable housing market because there is not much research or empirical evidence surrounding affordable housing and short-term rentals.

“We don't have enough data, because this is something very, very new, to see for sure what kind of implications it may have,” Sah said. “We're not getting rid of them. We’re just regulating them.”

Nguyen said that discussions around short-term rentals are far from over, and said she expects to make adjustments to the law in the future and work with other local governments.

“I think when you take on a topic that is this big and that is this scale … there'll be things that need to be revised. We will see what is working and what is not working,” Nguyen said.

Tabitha Mueller is a reporter with The Nevada Independent, a 501(c)3 nonprofit news organization. The following people or entities mentioned in this article are financial supporters of The Indy: Rochelle Nguyen - $665.00. This story was first published June 30 and is republished here with permission. For more Nevada news, visit The Nevada Independent.

The Indy Explains: Nevada’s new short-term rental law, impact on companies such as Airbnb

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