For the better part of a decade, Texas lawmakers have tried—and thus far, failed—to pass laws regulating short-term rentals (STRs) across the state. STRs are required to pay the state’s hotel occupancy tax, and a business entity created to manage or operate STRs will have to register with the state and pay franchise taxes, just like any other business. But otherwise, regulation of STRs lies with local governments.
In 2015, the Legislature amended Section 156.001 of the Texas Tax Code to levy the state’s hotel occupancy tax on STRs. But other bills affecting short-term rentals have ultimately failed to pass or even garner much attention from lawmakers.
For example, the following bills were considered during the 2021 regular session:
- State ban on city bans of STRs—HB 1960 would have prohibited cities from banning or limiting the use of property as a STR or applying city ordinances (like noise restrictions) to STRs in a way that is more restrictive than the application of the ordinance to other property. The bill also specified how a city is permitted to regulate STRs, such as requiring registration and setting maximum occupancy limits. HB 1961 was almost identical to HB 1960 but included provisions that would have allowed cities to revoke a STR permit for repeated violations of municipal requirements, prohibited listing services from listing a STR that doesn’t hold a required city permit, established a statewide database of local STR regulations, and required STRs to file reports with the comptroller. A similar bill to HB 1960 and HB 1961 was proposed in 2019. All these bills died in committee.
- Penalizing STRs that violate city ordinances—HB 2515 would have required STR listing services to remove a listing for 30 days upon receiving notice from a city that the STR committed three violations of a municipal ordinance within a one-year period. The bill died in committee.
- Allowing certain counties to regulate STRs—HB 2537 would have allowed certain counties to regulate STRs located in the unincorporated area of the county. The bill died in committee.
- Allowing HOAs to regulate STRs—HB 1963 would have allowed a homeowners’ association to regulate STRs. The bill is technically unnecessary, because the Texas Supreme Court already acknowledged that HOAs can regulate STRs. A similar bill was proposed in 2019. Both bills died in committee.
- Taxes—HB 1962 proposed requiring STR listing services (e.g., Airbnb) to collect any county or municipal hotel occupancy taxes and remit the collected amounts to the county/city or to the comptroller, who would deduct a small percentage and then distribute the remaining amount to the county/city. A similar bill was proposed in 2019. Both bills died in committee.
If you’re a STR investor or owner, you should stay up to date on STR regulations and changes proposed by your state and local governments. Need help interpreting or challenging a Texas statute, agency rule, or local ordinance? Contact Cobb & Counsel today.