Airbnb & Short Term Rental Laws and Regulations in Texas
From the wide open plains to the bustling city centers, Texas has it all, particularly for those seeking out their next vacation destination. Perhaps it is not surprising, then, that VividMaps placed Texas as the fourth most-visited state in the entire country, in part because of a rising trend dubbed by news outlets like Oxygen Financial as “The Great Escape”, a drive for both home buyers and tourist travel to explore the great outdoors with more vigor.
More travelers means more demand for vacation rental properties in Texas, which means the time is right if you’ve been thinking about getting into or expanding your short term rental (STR) business. Profits are skyrocketing – a local Texas ABC News affiliate reported that rural Texans alone netted more than $100 million in Airbnb profits in 2021.
Adding fuel to the fire is that the short term rental (STR) market continues to exhibit impressive growth. AirDNA reported earlier this year that 2021 was the most profitable year ever for the short term rental industry. With industry leaders like Airbnb leading the way, the short term rental market is booming.
Before this boom goes bust, now is the time to take advantage of this growing STR market in the Great State of Texas. But wait: don’t throw on your cowboy boots and saddle your horse just yet. Launching a successful short term rental business in Texas takes a bit of legwork at the beginning. You’ll need to know the core and current regulations that guide Texas STRs, which is where this guide comes in.
What is considered a “short term rental” in Texas?
Let’s start with the basics: how does the state of Texas define a “short term rental”? The state of Texas relies upon a very general definition. According to 85 (R) H.B. 2551, a “short term rental” is any residential property, “including a single-family dwelling or a unit in a condominium, cooperative, or time-share, that is rented wholly or partly for a fee for a period not longer than 30 consecutive days”.
With this definition comes a caveat: this is the blanket definition for STRs across the state of Texas, and perhaps because it has such a reach, it is decidedly ambiguous. This leaves a lot of latitude for each city and county government, meaning each municipality has the wherewithal to adjust their operating definition as they wish.
In fact, it was at the city level that some of the first regulations for STRs were first put in place. The popular city of Austin was the very first in Texas to put STR regulations on the books in 2012 when they began mandating that short term rental businesses hold licenses specific to vacation rental properties. Since that point, the regulations have become increasingly restrictive in Austin, and other cities have followed suit.
Major destinations like Forth Worth and San Antonio have, as we will soon see, placed incredibly strict restrictions on STRs within their respective city limits. This is not to say that building a thriving STR business in these locations is impossible. Rather, we share this information to underscore the need to do your research. The landscape is always changing when it comes to STR regulations, so the knowledgeable STR manager in Texas will always review local statutes.
Again, this is not the time to worry: you’re in the right place to learn what you need to know to keep your STR business going strong. We’ll walk through some of the most common city-specific elements in a moment. To get us started, though, we’ll use this general statewide STR framing as our jumping-off point.
Starting a Short Term Rental Business in Texas
Now that you have a general definition of a short term rental in mind, let’s dive into the business components. The good news from the outset is that Texas does not have a requirement at the state level for special permits for STR businesses. This means you do not need to apply for a special state-level permit or license specifically for your short term rental.
That being said, you will need to build the legal framework for your business venture in Texas just as any other company would. What does this process entail? Texas makes it pretty straightforward and has even consolidated all of the essential information, including links to forms and policies, on its state website. Given this, we’ll spare you the minutiae and offer a high-level overview of the components you’ll need to get in place.
Registering Your Business
Right out of the gate, you’ll want to register your business with the state authorities. You might be thinking this sounds excessive. Perhaps you are envisioning running your STR business as your “side hustle,” or perhaps you envision that your net profits won’t be sufficient for forming an officially registered company.
There are valuable benefits, though, that registering your company can bring. One of the biggest benefits is that by registering your business you stake your claim to your name and your concept. This gives you the optimum control over your business idea rather than leaving it available for a competitor to steal. Another key perk is that officially registering your business means you can take advantage of tax and loan implications. In other words, registering your business means you can gain greater access to loans if you want to grow your business or ways to protect your earnings.
So, while it might seem like a lot of paperwork up front, in the long run, registration will be worth it.
Required Documentation to Start a Texas Short Term Rental Business
With the very basics in place – a business plan, a location in mind, and a means to finance your business – your next step will be to apply to the state. During this process, you should be prepared to supply the name of the business you are creating and how you plan to structure your business.
Generally speaking, here are several of Texas’ most common business structures:
- Sole proprietorship
- General partnership
- Limited liability corporation
- Limited partnership
- Limited liability partnership
Selecting the right structure for you means figuring out who you want to run your business. For example: will you be operating your business alone, or do you have a partner who will team up with you? This structure will also influence how your business will be run in the future. We’ll leave that thought process up to you, but keep in mind that, depending on the format you choose, you might also need to draft Articles of Organization or Incorporation. You’ll also want to apply for your Employer Identification Number (EIN) from the Internal Revenue Service as this process progresses, as this will be necessary for local permits down the line.
Now, let’s talk about permits: we’ve already shared that the state of Texas does not mandate an STR-specific permit. That doesn’t mean, though, that you will be able to sidestep permits entirely. On the contrary: all businesses in the state of Texas that plan to rent tangible property need to obtain a Texas sales tax permit. These permits can be applied for online and are free of charge.
Main Regulations for Vacation Rentals in Texas
As a state, Texas offers a pretty light hand when it comes to regulations for vacation rentals. Moreover, a recent Supreme court decision (which we’ll dive into below) seems to suggest that the state wants to stay out of statewide regulations. That being said, there are some important tax implications and regulations that you’ll need to manage if you want your STR business to thrive.
Texas Supreme Court ruling on short term rentals
Soon after the short term rental market was heating up across the country, a 2012 landmark case was brought to the Texas Supreme Court. The issue in the spotlight? A San Antonio defendant in suit with his homeowner’s association (HOA) over the use of his property as a short term rental.
A quick summary of events leading up to the case: the defendant had been transferred for work, which meant his purchased property in an HOA-governed community was uninhabited. He decided to rent this space out, but soon after the HOA confronted him stating that his property rental was a violation of the HOA regulations. The case turned on one line in the HOA bylaws, that stipulated that the home was to be utilized only “for residential purposes”; from the HOA’s perspective, renters did not fit this definition.
The defendant and his attorneys, however, refuted this interpretation, and the judges were convinced. The verdict, offered in 2018, was unanimous in favor of the defendant, with the Texan Tribune reporting that Justice Jeff Brown concluded by stating, “So long as the occupants to whom [the defendant] rents his single-family residence use the home for a ‘residential purpose,’ no matter how short-lived, neither their on-property use… violates the restrictive covenants” of the HOA association.
The result of this verdict set the stage for relatively lax regulations for short term rentals at the state level. Some experts on the case have even gone so far as to suggest that this verdict could set a legal precedent and help to chip away at individual city regulations in the future. There have been efforts as well at the state level to ensure that prohibitive restrictions like those enforced in some Texas cities are limited. For example, Bill SB 451, which was introduced in April 2017 by state Senator Kelly Hancock, aimed at reducing the number of infringements on property’s owners’ rights that these regulations were imposing.
While these might be positive signs at the state level, we note it here to underscore that regulations for STRs are not really mandated by the state; rather, it is the individual municipalities that crack down on how STRs can function (and we’ll walk through these in the coming pages).
Tax Implications for Vacation Rentals in Texas
The biggest regulations that the state of Texas applies to STR businesses come in the form of taxes. While the specific rules and requirements for short term rental operations will vary depending on locality, the vast majority of short term rentals in Texas will be subject to taxation.
Federal Tax Implications
We haven’t mentioned the federal government yet, but it seems prudent to note that even in the eyes of the United States government, your property can qualify as a short term rental business if it meets the following aspects:
- You rent your property out for a minimum of 14 calendar days each year
- You use that property personally for no more than 14 calendar days (or, more than 10% of the time that your property is occupied in a calendar year)
By meeting both of these requirements, you can maximize your potential federal tax benefits and deductions. Common expenses you can deduct when it comes to your short term rental business property include:
- Repairs and maintenance
- Insurance premiums
- Taxes (like HOT discussed below)
- Utilities, like water, gas, and electricity
- Supplies – bed linens, bath towels, even wine glasses or pool toys!
- Legal and accounting fees
To maximize these deductions and make the smartest moves when it comes to preparing your taxes, it is best to work with your accountant. That being said, the upshot is that if you are fastidious with your receipts and documenting the work you put into your short term rental, you can reap the benefits when it comes to tax season.
The Hotel Occupancy Tax (HOT)
Any Texas business that rents rooms is subject to the Hotel Occupancy Tax (HOT). The HOT is assessed on the state and on the local level. The difference between the two is the threshold at which the HOT is mandatory:
- At the state level, HOT is owed for any room rented for more than $15 per night
- At the local level, HOT is owed for any room rented for more than $2 per night
The local HOT percentage depends on a given municipality but can range anywhere from 6% to 11% and is paid in addition to the state-mandated HOT of 6% of the per-day cost of a rented room. The city of Austin, for instance, charges an 11% HOT; meanwhile, Houston mandates an HOT of 6%. This means that if you are renting an STR in Houston for $100 per night, you will owe $12 in HOT ($6 each for state and local HOT accounting). Here is a handy list of HOTs by city so you can get a better sense of the rates in your area.
Your payments are due on the 20th of each month for the HOT collected the previous month. As an example: your HOT amounts collected in January will be due to the state of Texas by 20 February. You’ll want to keep this monthly schedule in mind, as Texas reserves the right to levy some hefty penalty fines for late payments. Submitting your HOA payment even one day late results in a $50 fine; one month late and you’ll owe a 5% penalty; two months late and that penalty jumps to 10% (and the state also starts to charge you interest).
The good news is that paying your Texas HOT taxes is relatively simple. Once you register with the Texas Comptroller’s Office, you can complete a brief HOT Questionnaire (Form AP-102). The comptroller’s webfile system means you can process your payments online. Furthermore, Texas gives one perk to those who are consistent in their payments: if you pay your HOT by the due date, you can deduct 1% of the HOT due on your next monthly return.
Making matters even more simple: in order to boost compliance, in most cases, Airbnb will automatically deduct and file HOT for STR properties listed in the state of Texas.
Airbnb and Short Term Rental Rules by Major Texas City
What a relief: we’ve covered the basics in terms of establishing your STR business in the state of Texas and outlined some of the more far-reaching regulations in the state. Now let’s get down to business: it’s time that we talk about the rules and regulations that govern STRs in Texas’ most popular communities. We cannot stress enough the importance of remembering that cities throughout Texas can (and do) set their own rules and regulations when it comes to short term rental properties. This can mean different permits, restrictions, and permissions all depending on what city will be host to your short term rental business. Given this variability, make sure that you study the points we make about your municipality below because you don’t want to end up in violation of your local STR regulations.
In an era of increasing innovation and entrepreneurship, one might legitimately ask why any rules are needed at all when it comes to the STR market in Texas. The answer is: it’s complicated. One factor was that many communities were not adequately prepared for the meteoric rise in popularity that the short term rental enjoyed. Between 2007 and 2014, STR powerhouses like Airbnb entered the market and experienced incredibly impressive success, such that according to SuccessBug, by 2014, Airbnb had already logged more than 10 million guests and more than $10 billion in profits. The rapid rush to the STR market that ensued resulted in a remarkably rapid rise of the short term rental industry amid previously lax (or non-existent) municipal regulations.
Following that initial surge in many communities, though, were the first signs of stress. So, the regulations that many Texas cities adopted were not so much to punish travelers (“guests”) or short term rental owners (“hosts”), but rather to establish a level playing field to ensure the safety and satisfaction of guests, hosts, and their larger communities.
Generally Shared Rules and Regulations Across Major Texas Cities
We are going to go into depth in the coming pages all with the nitty gritty details for setting up your short term rental in some of Texas’ most popular cities. Before we dive into those specifics, though, we thought a brief overview of the general expectations of STR managers shared across these urban centers might be helpful.
Generally speaking, most major cities in Texas include short term rental rules and regulations like:
City Registration/Licensure and Fees
Most of the major Texas cities require STR owners and business managers to register their short term rental property with the city government. As we’ll see, this registration process often requires a bit of paperwork but is relatively painless. Accompanying this process is often a registration fee, which can vary widely. You will want to investigate the exact amount you will owe to your specific city when you’re registering, and you’ll also want to confirm how frequently you’ll need to renew your STR registration or license. Some major metropolises like Austin mandate annual renewals; meanwhile, San Antonio permits are valid for up to three years.
Texas city STR regulations also typically place some limitations on how many guests can stay within a given short term rental property. Again – these vary depending on the municipality, but the general rule of thumb when it comes to STR properties in Texas is that occupancy is capped at two people per property bedroom, plus two additional people. So, for example, if your short term rental has five bedrooms, you could host up to 12 people (two per bedroom for a total of 10, plus two additional guests). Some cities also apply a cap to the total number of people who can be hosted at a time.
Regulations by STR Type/Location
As we will showcase, several major Texas cities have established subdivisions of properties into “types,” and these types dictate in many cases how an STR can operate in that city. For example, these types distinguish between residential and commercial zones, and then can also influence the density of STRs allowed.
Unanimously across these Texas urban centeris an emphasis on the safety of an STR property for its guests. In addition to the blanket expectation that STR properties are kept up to city code and do not present any risks of violation, ordinances associated with short term rental property management often require owners to supply:
- Proof of insurance, to guarantee coverage in case anything catastrophic might happen;
- Documentation of safety resources, including floorplans of the STR property indicating the location of devices like fire extinguishers, smoke alarms, or carbon monoxide detectors;
- A clear map to be provided for guests that outlines the best evacuation route from the STR in case of emergency; and
- Email, phone number, and address for the STR property’s designated contact, the individual who will be available immediately to address any issues or emergencies (this could be you the owner or another individual.
Having these components in place not only provides peace of mind for your guests, but it also relays to the city that you are committed to running a responsible STR.
Many Texas municipal codes relating to short term rentals also emphasize the need for STR properties to contribute to – not detract from – the well-being of the overall neighborhood. Accordingly, many Texas cities uphold ordinance articles that regulate:
- Noise: many Texas cities require short term rentals to follow the rules of local noise ordinances, with cities some even banning outdoor gatherings at STRs during evening hours to limit noise impacts
- Parking: short term rentals in most Texas cities are required to document onsite parking that is available (in order to alleviate parking congestion on city streets)
- Trash: several cities in Texas also underscore that STR owners must follow local trash pick-up schedules and cannot leave their trash bins unattended between pick-up days.
Consistent Compliance Monitoring
Another common refrain among the local ordinances guiding short term rentals in major Texas cities is that many stress the importance of compliance and the practice of regular monitoring of properties. This is as general as noting when permits or licenses are not renewed in a timely manner or as specific as a 311 call by a concerned neighbor who reports your STR property and prompts an investigation.
These violations can result in hefty fines or the revocation of your STR’s registration, so it is important, regardless of the Texas city in which you operate your short term rental business, that you are constantly mindful of the state of your property. Several ways you can do this include:
- Set reminders for important due dates. For instance, license renewal or HOT payment deadlines – so that you don’t have to fret over lapsed credentials or late penalty payments.
- Don’t delay maintenance, and fix any major issues that might cause neighborhood concern.
- Inform your guests of local rules, including trash pick-up days or noise regulations.
These might already be part of your STR business best practices; if not, we highly recommend adding them into your routine.
Texas Cities with the Most Restrictive STR Regulations
As we explore some of the major cities in Texas to get a sense of how their short term rental requirements vary, you’ll see that we’ve broken them into two key categories. The first of those mentioned in this city-by-city list are those with the most restrictive regulations when it comes to STR management. As you’ll see, many of these cities share in the types of expectations and regulations they place on short term rentals, but the degree to which they limit or control such properties can make a great deal of difference.
Austin Short Term Rental Laws
Out of all of Texas’ major municipalities, Austin perhaps has some of the most restrictive STR laws on the books. The first regulation of short term rental properties in Austin began in 2012, when an adopted ordinance set the definition of an STR that echoed that defined at the state level (in short, any residential property that is rented for less than 30 days). At the same time, the ordinance established a licensure process. From that point, Austin’s oversight of short term rental properties has only become more contentious.
To give a sense of just how charged the conversation over short term rentals in Austin is, let’s take a look at the case Zaatari v. City of Austin (NO. 03-17-00812-CV), which involved a lawsuit over the constitutionality of severe restrictions imposed by the city.
Austin STR “Types”
- Type 1 short term rental: properties that are occupied by the owner who lives there at least 51% of the year to attached to an owner-occupied unit (like a guesthouse) in residential districts.
- Type 2 short term rental: single-family properties not owner-occupied (or not associated with an owner-occupied unit) in residential districts.
- Type 3 short term rental: properties not owner-occupied in buildings with multiple dwellings or units in commercial districts.
As part of this ordinance, Austin also declared that no additional licenses would be approved for Type 2 properties and that, by 1 April 2022, all Type 2 properties could no longer function at STRs. In other words, as of 2022 date, no STR in a residential district in Austin could operate unless it was owner-occupied (Type 1).
As if that is not restrictive enough, the ordinance went even further in limiting the types of “assemblies” that could occur at Type 1 properties. These prohibited gatherings included:
- Any type of group congregation between 10 pm and 7 am
- Any group of six or more adults outside between 7 am and 10 pm
- Capping occupancy at no more than six adults unrelated to each other (ten if the adults are related)
- Capping occupancy as well to two adults per bedroom (plus two additional individuals)
These rigid regulations resulted in the lawsuit noted above. The verdict, in that case, ruled that these restrictions were unconstitutional. Nevertheless, a final judgment in the case has yet to be recorded, so for the time being Austin is holding firm to their regulations.
To be fair, some small adjustments have been made. For example, while it is still not possible to apply for a new license for a Type 2 STR, the city of Austin now deems existing Type 2 STR licenses can still be renewed (they did not phase out in April 2022 as originally stipulated). The city also waived its draconian restrictions on gatherings, but it upholds a cap on percentages of short term properties in each city district, as per ordinance 25-2-2793, so now even new Type 1 or 3 licenses might not be possible depending on the density of STRs in your area.
Austin STR Licensure
If you are one of the fortunate STR property owners who fit into one of Austin’s accepted definitions, you will still not be able to operate your short term rental until you have received your license from the city. To complete the Austin Code Department’s Short-Term Rental (STR) Operating License Application, you will need to supply the following information:
- STR Location Information (including address, number of bedrooms, and average price charged)
- STR Local Contact Information (for an individual who can act on behalf of the STR property in the case you are unavailable)
- Property Owner Information (including address, email, and telephone number)
- Insurance policy information
These components round out the application, but in addition to this form you will also need to supply as additional documentation:
- Proof of insurance coverage (e.g., a copy of your policy’s declaration page)
- Proof of past HOT payments (unless you are just launching your STR)
- A current Certificate of Occupancy (to verify your STR is your primary residence)
- Driver’s License
You will also need to pay the required application fee, which is currently set at $643.
Austin’s STR licenses are valid for one year, and before it expires, you must begin the renewal process. Fortunately, renewing your STR license in Austin is a bit more streamlined: this time all you will need is proof of your insurance coverage, proof of HOT payments, and a $355 renewal application fee.
Fort Worth Airbnb and STR Regulations
For those excited about starting up an STR business in Fort Worth, you might wish to reconsider: Fort Worth competes with cities like Austin for the remarkably restrictive STR rules they enforce. Currently, the city of Fort Worth allows STRs to operate only in “mixed-use and most form-based districts, commercial and industrial districts.” In other words, short term rental properties are currently outlawed in all of the city’s residential districts.
The city of Fort Worth is also purportedly considering the development of an external STR registration platform where STR owners can:
- Pay their fees, including a new annual fee as well as HOT
- Provide essential documents, like insurance declarations and local contact information
- Sign an affidavit that confirms the STR property complies with local safety standards (e.g., that the property is equipped with sprinklers or smoke detectors)
Additionally, Fort Worth would demand of its STR owners registered with this system to meet the following requirements:
- Only one group at a time in each STR at a cap of 3 people per bedroom (with a maximum of 9 guests total)
- A ban on outdoor events after 10 pm
- On-site parking provided along with compliance with local parking ordinances
- Adherence to all local noise and trash collection ordinances
To encourage STR registration, the city is also mulling a mandate that STR platforms like Airbnb or Vrbo could only advertise those short term rental properties registered with the city.
What these proposals and other options on the table suggest is that the landscape for short term rentals in the city of Fort Worth is bound for additional changes, potentially in the near future. With this in mind, it will be even more crucial that you stay ahead of these Fort Worth STR regulations.
San Antonio Airbnb Laws
You might have noted a trend thus far regarding STR restrictions in Texas, and San Antonio is no different. Similar to Austin, San Antonio also subdivides short term rentals into types as follows:
- Type 1: This category includes STRs that are also the primary residence of the owner and can include accessory dwellings
- Type 2: This category comprises STR properties that are not considered the owner’s primary residence
San Antonio also limits the operation of STRs to certain residential districts within the city limits. Within those districts, the city specifically requires that all Type 2 STR properties consume at a maximum 12.5% of a given blockface (one side of a street between two perpendicular intersections).
In addition, if an STR is operating in a multi-family unit, only 12.5% of those units can be short term rentals. It is possible that you can establish an STR beyond these capacities, but to do so will require a Special Exception permit from the San Antonio Board of Adjustment.
San Antonio STR Permits
To operate an STR within San Antonio’s city limits you will need an active permit on file with the city. Permit applications require you to provide:
- Contact information for both the property owner and the designated property contact (if different than the owner).
- Property floor plan that indicates any space for parking and number of bedrooms. This plan should also indicate the location of safety features, like fire extinguishers and the route for an emergency evacuation from the unit.
- Proof of ownership of the property.
These materials, along with a $100 application fee, need to be submitted to the city of San Antonio’s online portal. Once approved, your STR permit is valid for three years and renewal is completed via the same portal for the same $100 fee. The difference at the renewal stage is that you need to provide documentation of any changes you’ve made to the property as well as certification that your 9% HOT payments are current.
Texas Cities with the Least Restrictive STR Regulations
Dallas Short Term Rental Regulations
Dallas might be one of the best cities in the state of Texas to watch in terms of STR regulations as they are set to vote in Fall 2022 regarding a set of regulations that might impact how short term rental properties operate in the city. Just like so many other Texas cities, tensions have been high since the discussion of these regulations began, but until these most recent regulations are voted upon Dallas STR businesses might enjoy a bit of breathing room.
Dallas STR Registration
One of the key requirements for operating a Dallas STR is to register your property via the city’s online system, MUNIRevs. Designed to help streamline the tax-paying process, MUNIRevs allows registration to occur with only a few simple steps and offers STR owners a simple means to calculate and pay HOT (which, in Dallas, is set at 7% of the nightly STR rate).
The problem, though, and the issue that proponents of new regulations point to, is that merely a fraction of operating STRs in the city limits of Dallas are actually registered via this portal. A Dallas city memorandum from May 2021 noted that while over 2,000 STR properties were operating in the city, only roughly 750 of those properties were actually registered. Avoiding registration in MUNIRevs means sidestepping HOT payments in the short term, but in the long-term it has chipped away at the city government’s confidence as to the reliability and clarity of STR expectations in Dallas.
Houston Airbnb Laws
Counter to many of its fellow Texas municipalities, the city of Houston does not have any current rules or regulations in place. This might make you Houston STR property owners breathe a sigh of relief. Keep in mind, though, that even though the market is unregulated at the moment it is important that STR owners keep their properties up to a certain standard. This includes:
- Meeting the requirements laid out in Houston’s Hotels and Motel Ordinance. Under Houston’s definitions, most short term rentals fall into the category of hotels, but it is valuable to review the ordinance in its entirety to ensure you understand where your property falls and, accordingly, what if any specific permits are necessary.
- Verifying that you are upholding all rules and restrictions in place in your STR property’s vicinity. For example, if your STR is within a gated community or is part of an HOA, reach out to the appropriate parties to confirm that operating an STR does not violate any bylaws. If hosting a short term rental is possible in your location, then make sure to work with these associated parties to set STR ground rules to establish a strong relationship of trust.
- Ensuring that your short term rental property is up to code as laid out by the city of Houston’s Building Code Enforcement Division. Again, the review of these codes will depend on the location and nature of your property, so it is worth it to carefully study these requirements.
- Planning to pay the 7% HOT that the city of Houston requires from all hotels.
Overall, setting up an STR in Houston is strikingly simple compared to other Texas locations.
Arlington STR Rules
Though it is the nestled neighbor between both Fort Worth and Dallas, the city of Arlington does not share in the same extensive restrictions placed on STR properties. Arlington’s 2019 ordinance no. 19-014 started a new era for short term rentals in the city. From that point, STRs were allowed in single-family medium-density zoning districts as well as all districts deemed non-residential and mixed-use. Arlington also established the STR Zone, a district that spans a one-mile zone from the central entertainment hub of the city.
Arlington also states clear rules that must be followed for all STR properties in the city. These regulations include:
- Capping occupancy to two people per bedroom plus two additional (with an absolute maximum of 12 occupants)
- Offered parking limited only to those spaces physically off the street
- No excessive noise nor outside events between the hours 10 pm and 9 am
- Following trash pick-up schedule, with the placement of bin on the curb no earlier than the evening before pick-up will occur
All operating STRs in one of these eligible districts are required to apply for a permit with the city. To complete this application, you will need to provide:
- Contact information for the owner of the property as well as for the local responsible party
- Any applicable HOA information
- Your City Registration Number (for remitting HOT)
- Your proof of insurance (showing a minimum of $1 million in coverage)
- Draft of STR house rules to be shared with guests
- Property rendering that indicates:
- Location for possible parking spaces
- Dimensions of main interior rooms of the property, including bedrooms
- Safety features, such as emergency evacuation routes
Accompanying this permit application needs to be the fee of $500, owed annually with each permit renewal.
Galveston STR Rules
One of the most recent Texas cities to adopt rules and regulations for STR operation, Galveston now regulates some aspects of the short term rental market. The landscape, though, continues to be one of the more lenient in the Lone Star State. Ordinance 21-051, adopted in 2021, states that all operating STRs in Galveston need to register with the city. Yearly applications must be submitted no later than 31 December and cost $50. Even better: all of the required paperwork can be submitted online.
Beyond the required registration, STR owners in Galveston are expected to maintain their properties in a manner that contributes to the well-being of the neighborhood. The Short Term Renters Association of Galveston has assembled a quick guide for these parameters, which include basics like keeping ahead of local laws, knowing about the 9% HOT rate, and also using some additional strategies like greeting guests on arrival to help them settle into the area or limiting rentals only to those guests 25 years or older. This Galveston association also offers a Good Neighbor Brochure for STR owners to provide for their guests.
Frequently Asked Questions (FAQs) about Airbnb and Short Term Rentals in Texas
Now that we’ve covered the basics for operations STRs in some of Texas’ most popular cities, we wanted to recap with some frequently asked questions (FAQs) to hit on some of the main takeaways we’ve discussed in depth in the previous pages.
Can I Airbnb my apartment in Texas?
This is an involved question because there is no statewide set of regulations that determine whether you can or cannot use your dwelling as an STR. Accordingly, the answer here is wholly dependent on the city in which your apartment stands.
It is also dependent on the nature of your unit: is it a condominium complex under the direction of an HOA? How many units are in your complex? In what zoning district does your property lie? Answering these will help you get started in determining whether you can list your property as a short term rental on Airbnb; even better: begin your search at your city government’s webpage so you can easily start your research.
What does it mean for a property to be “owner-occupied”?
Generally speaking, an owner-occupied property is one that serves as the primary residence for the property’s owner. Different municipalities differ on the exact number of days that the owner needs to reside at that address to consider it your primary residence. However, one standard rule of thumb that is applied by some Texas cities when determining owner-occupied status is that you can verify that the address of your STR matches that listed as your primary residence on your income tax return.
How often will I need to renew my short term rental license?
This depends on the municipality in which you have a short term rental. Some cities, like Austin or Arlington, require annual renewal; others, though, like San Antonio renew short term rental registrations every three years. You should check with your local city code to ensure you comply, but you can expect in most cases an annual/biennial renewal schedule. Keep in mind as well that different cities place different deadlines as to when renewal is necessary. Galveston, for instance, requires STRs to renew their registration by 31 December each year rather than one calendar year after your initial registration date.
I’ve heard about some of the lawsuits related to STRs in Austin. With all this tension, is it better if I just forgo the creation of my STR business in Texas?
While the future for short term rental regulations in cities like Austin is still very much up in the air, it is not yet time to despair. Remember that, in most cases, these regulations that are put in place are not designed to punish STR owners but rather to strike a balance within each city zone of property usage types. Moreover, as we noted earlier, there is consistent pressure against the severity of limitations imposed on STRs by cities like Austin, so optimistically we can imagine that there might be some form of relief in the future.
Keep in mind as well that, despite the difficult STR market in cities like Austin, San Antonio, and Fort Worth, other fantastic destination cities in Texas still keep a more open approach to short term rental properties. So, if you are not fixed on a city location yet, peruse the entire state to find a city to whose regulations you are amenable.
Does San Antonio require a minimum night stay in STR properties?
No: despite the numerous San Antonio short term rental regulations, there is no mandate of a minimum number of nights for a given reservation. This offers a little bit of freedom for STR owners, particularly if their location is well suited for shorter stays, like a quick weekend stay for a wedding or overnight lodging for a concert.
Is a “short term rental” and a “short term lease” the same thing?
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. A short term lease could refer to a three-, six- or even nine-month contract (really any duration less than a year). This is valuable to keep in mind because short term leases are regulated significantly differently than short term rentals.
Is there a way to avoid HOT?
Not typically: HOT is assessed to virtually every property that charges at least $15 for overnight accommodations. There are some categories, however, that do make your property exempt from HOT. Some religious organizations and nonprofits, for example, can have the HOT waived (a full list of eligible organization types for this exemption can be found on the State of Texas Comptroller website). That being said, even though these groups do not automatically receive this exemption; they need to follow the application process outlined by the comptroller to qualify.
The state of Texas levies a 6% HOT, but my bookkeeper shared that I owe a 15% HOT. How is this possible?
Keep in mind that the HOT is levied at both the state and local levels. This means that while 6% of your nightly rate will be owed for the state HOT, you will also be responsible for an additional percentage – in this case, 9% – of that same nightly rate that will go to your local municipality.
How can I easily keep track of what I owe in HOT?
One way you can ensure you are logging the correct amount is to simply set aside the HOT percentage (again, combined for both the state and your local municipality) when running through your accounting books each month. An added convenience for those who list their properties with Airbnb is that the company will automatically deduct these payments for you with each STR listing reservation.
So, if you want one less accounting task to oversee as you get your short term rental business up and running, this perk is yet another reason to list your properties on sites like Airbnb.
How much money can I make establishing a short term rental in Texas?
Of course, the profit you can make managing an STR in Texas is a serious consideration, and the good news here is that the return can be significant. Your total earnings will be dependent on the location and category of your STR property, but overall Texas short term rentals like those listed with Airbnb have shown to rake in some serious cash. The Houston Chronicle, for example, reported that new Texas Airbnb owners made more than $170 million on reservations in 2021, making Texas the third most profitable state for Airbnb earnings that year.
I only want to rent out my STR occasionally for major events in our Texas city. Do I really need to register with the city?
It might be tempting to skirt the regulations for short term rentals in your Texas municipality, particularly when some of the cities we’ve profiled do require some steep fees for STR permits or licenses. We cannot encourage you enough, though, to comply with these local requirements. First, there is the risk of penalties to be assessed if your STR is discovered to be operating with proper registration. These can be hundreds of dollars, which can quickly wipe out any earnings advantages you think you have by not registering your property. Second, following local regulations means you are behaving as a responsible STR owner. With all of the legal challenges that have been raised among Texas communities, modeling the appropriate behavior as a model STR owner can go a long way to reinforcing to the neighborhood that having short term rentals can contribute to the community.
The STR market in many Texas cities might present some challenges, specifically as individual Texas cities and municipalities have the right to set their own rules and regulations when it comes to short term rentals. Embracing this challenge, though, can result in some fantastic profit. This is perhaps why an ever-increasing number of Texans are following the national trend in investigating how they can start their own STR business in Texas.
How, though, can you navigate this complex market successfully? We hope that this guide has proven to be a helpful starting point for you. It provides the key information you need to get started as you search for the perfect place to set up your STR business. As we conclude our guide, we could list numerous takeaways, but to be brief we’ll highlight two key ones. Perhaps the most important to keep in mind is that you need to master the local mandates for your property. This means learning what you can from your city’s local governmental departments. It also means that you need to keep on top of the news: what legal challenges are coming up? Are there new ordinances being proposed?
Stay abreast of these new developments, and don’t be afraid to advocate for your STR business as well. You can, for instance, attend town hall meetings and showcase the added value of STRs to your community. This level of commitment not only showcases your own dedication to the well-being of the community, but it also means you will be up-to-date at all times with the status of the STR market at all times.
Our second main takeaway is that you should keep in mind that many of the hurdles to setting up an STR in Texas need to be cleared at the beginning. For example, in many cities, ample paperwork is required to initially register your property, but in many cases, the renewal process is more streamlined (and less expensive). The same goes for code enforcement issues: you might need to make upfront repairs or updates to your STR property, but going forward, this cost can be recovered over time.