Last updated: July 14, 2023

The Pros and Cons of Short-Term Rentals

Local governments have much to consider when developing a balanced approach to short-term rentals in their jurisdiction.
Posted by GovOS Team
Exploring Short-Term Rentals

To allow or not to allow? That is the question dozens of cities across America have been contending with this year. Finding how best to manage short-term rentals (STRs) in a jurisdiction is a complex task for municipalities large and small. On one hand, STRs can boost economic benefits to residents and the municipality. On the other hand, STRs can raise concerns about how the community will be impacted in the long term.  

If your municipality is on the fence about how to manage your local short-term rental economy, you’re in good company. When weighing the pros and cons of STRs, it is crucial to consider the unique circumstances and needs of your community. Check out some of the most commonly cited pros and cons to help you make an informed decision about STRs.

Pro #1 - STRs bring economic benefits for you…and you…and you…

One of the primary advantages of STRs is the significant economic benefits they can bring to the community’s businesses and residents. For the municipality, STRs are a great way to bring in additional tax revenue that doesn’t tap into your resident tax base. STRs attract out-of-town visitors and help generate additional revenue for local businesses including restaurants, shops, and other local attractions. STRs also provide a source of income for homeowners, particularly in areas with high demand for short-term accommodations. This can lead to increased property values and local economic growth.

Pro #2 - STRs increase flexibility for homeowners

Real estate is one of the most popular ways for the average American to invest and grow wealth. Allowing short-term rentals within your municipality offers homeowners the flexibility to utilize their properties on a greater level, providing an additional income stream and enabling them to monetize their assets. This can be particularly beneficial for individuals or families who own second homes or have spare rooms that are underutilized. STRs can offer a way for homeowners to offset the costs of their properties and make better use of their investments.

Pro #3 - STRs elevate your appeal to tourists

A recent study found that of individuals who use both STRs and hotels when traveling, about 60% prefer staying in STRs. STRs can boost your municipality’s appeal to tourists visiting your jurisdiction. By offering a wider range of accommodation options, STRs can attract more visitors, including those who prefer the comforts of a home-like setting over traditional hotels. This can help diversify the tourism industry and extend the length of visitors' stays, resulting in increased spending on local businesses and area services.

Con #1 - Identifying STRs can be challenging

Accurate identification is a fundamental part of any STR management program, but without the help of software, gathering the information needed to make data-driven decisions can be challenging. This is often due to variables such as the time of year the community sees the most visitors, local attractions that might be seasonal, and specific one-off events in a jurisdiction which might result in a spike in the number of listings. Furthermore, some hosts list their property on multiple STR platforms, which means identification is not as simple as adding up listings on websites.

Con #2 - STRs could bring potential for disruption

Allowing STRs to operate without establishing guidelines can lead to disruptions in residential neighborhoods, particularly if there is inadequate regulation and enforcement. Without proper planning, good neighbor practices, and the availability of community support in the form of an STR complaint hotline, issues such as noise, parking congestion, and transient visitors can disrupt the sense of community and quality of life for permanent residents. Additionally, if a significant portion of properties in a neighborhood are converted to STRs, it can result in the loss of historic community value.

Con #3 - STRs present regulatory challenges

Regulating STRs can be a complex, time-consuming task for local municipalities. Implementing effective regulations to address rapidly evolving concerns around safety, taxation, zoning, and neighborly conduct requires careful planning and resources. Balancing the interests of homeowners, residents, and the tourism industry while ensuring compliance and fair enforcement can be a significant administrative burden for local governments, many of which are already significantly understaffed when compared to the private sector.

Whatever you choose, be prepared with effective STR management

Ultimately, the decision about how to manage your jurisdiction’s STRs should be made with careful consideration, though it is important to note that regulations are quickly changing in different communities. In such cases, developing clear and enforceable regulations becomes even more critical to strike a balance between the interests of various stakeholders.

Whichever way the tide turns on STRs operating within your jurisdiction, it is good sense to have a solution that can help you manage all the STRs seamlessly without needing to hire additional staff. Utilizing a robust platform purpose-built for STR management can streamline the identification, registration, and tax collection processes, plus help monitor compliance to make it easier for both homeowners and government officials to navigate the complexities associated with STRs.

By adopting a thoughtful and proactive approach to managing short-term rentals, you can maximize the potential benefits while mitigating the challenges they may bring.

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