Bridging the divide: A balanced approach to short-term rental regulation

The annual college football game between South Carolina and Georgia kicks off in Columbia this weekend, and local short-term renters couldn’t be happier.

A recent search of Airbnb listings in Columbia indicated that far more homes were booked ahead for gameday weekend than the weekend prior (when the UofSC football team was out of town), suggesting football fans are relying on the rental website for their stay. Meanwhile, hotels in the downtown area are charging a predictable premium, with a Saturday night stay for two guests at the Sheraton costing at least $512, and a night at the nearby Hilton going for $550.

For gameday, vacation, graduation, or anything in between, short-term rentals (STRs) have become a popular choice for visitors to the Palmetto State and its inviting cities. Instead of a traditional hotel stay, STRs give travelers the option of renting an entire house, condo, apartment, or even a single room. For property owners, the STR market is a great opportunity to earn extra income without the commitment and risk that often comes with long-term renting.

However, short-term renting has itself become controversial in South Carolina and elsewhere. The issue has pit renters against residents, property owners against concerned citizens, and many local governments have struggled to find a reasonable middle ground that considers both sides.  

Questions over policy have caused friction in places like Greenville, North Charleston, Spartanburg and Columbia. We identified at least 11 South Carolina municipalities now with existing or proposed STR ordinances, a number likely to grow over time.

With livelihoods at stake for many, we prepared a report that lays out policies, principles, and perspectives for short-term rental regulation that strikes a balance between renters’ property rights and community interests. We also review a range of local STR policies, highlighting those which have taken a limited yet effective approach, and address some common misconceptions about the short-term rental market.

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Best practices for STR policy

• Rely on existing laws where possible – Cities should avoid creating redundant STR regulations when existing laws can achieve the intended goal. Columbia, for example, which is considering sweeping new STR policies, including additional noise and odor rules, already has robust anti-nuisance laws on the books. Its current policy not only prohibits someone from creating a nuisance, which covers a lengthy list of prohibited conduct, but also states that homeowners must not let one occur on their property. There’s no clear reason why this policy wouldn’t currently extend to STR properties – making the passage of additional nuisance rules unnecessary. 

• Avoid regulations that impose an unnecessary burden on renters – If city officials find that additional regulations are necessary for STR management, they should be able to 1) demonstrate how the proposed rule(s) addresses a specific issue or issues affecting renters, guests, or the community and 2) ensure that no new requirement imposes an unnecessary burden on any party involved, especially renters.

Columbia’s proposed ordinance has several examples of regulations we suggest be avoided in this regard, such as requiring properties to have a fire protection sprinkler system, requiring evacuation plans to be posted in all sleeping rooms, and setting hot water temperature standards for sinks, tubs and showers.

• Make data collection a priority – One of the most effective ways a city can identify and resolve STR-related issues is through organized and proactive recordkeeping. Cities should collect the following information through a simple and free registration so that renters (or designated points of contact) can be quickly identified and alerted when issues arise:
  • Property owner names and the name of any management company used
  • A designated point of contact who can quickly respond to issues at the property
  • Addresses and general descriptions for each STR property owned
  • The maximum number of guests permitted to stay at each property

It’s also good practice for cities to keep STR data separate from other rental records so that there’s no confusion when trying to identify short-term renters.

• Establish consequences for repeated offenses; make sure offenses are clearly defined – Cities should set clear and reasonable consequences for renters that violate local policies. Initial violations should be met with a warning that is promptly communicated to the owner. Repeated violations should eventually result in the temporary loss of rental rights.

Columbia appears to be looking at setting a policy along these lines. Under its proposed ordinance,  the city would issue a written warning after a first violation. If another violation takes place at the same dwelling within a 12-month period, the owner’s rental registration would be revoked. However, the local chief of police could skip the warning and immediately revoke the registration if the violation were serious enough.

• Policies that limit STR availability are off limits – Two of most harmful policies a city can pursue with regard to short-term rentals are 1) banning them from specific zoning districts, namely residential areas and 2) restricting the number of STRs that can operate within city limits. Only the market can determine what constitutes the “right” amount of STRs for a city, not arbitrary caps or boundaries set by government. Artificially restricting the supply of STRs is not only unfair to owners, but it also risks driving up rental prices.

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Addressing misconceptions and challenges related to STRs

While the data indicates that most STR owners are in good standing with their neighbors, there will always be some renters who create issues within a community and cause challenges for local government. It is important for local officials to understand the facts about these matters before making policy.

Through our research, we have found that challenges arising from short-term rentals generally fall into one of three categories: nuisance issues, safety issues, and tracking/enforcement issues.

Causing a nuisance

The most commonly heard complaint from city officials and others is that short-term rentals can become a nuisance to the community. They claim short-term rental properties are often the site of parties, loud noise and unwanted behavior, or that guests will leave out trash and make a mess of the area.

While this may be true in some cases, city leaders should be cautious not to generalize short-term rentals in this way. STRs are used by many responsible travelers who need somewhere to stay while seeing family, attending a graduation, or making a business trip. Many cities, due to location, size, and other factors, will never experience a high volume of party-prone vacationers.

Moreover, Airbnb – the largest short-term rental website – recently announced a policy that bans parties on its properties. Both Airbnb and VRBO (the second largest STR platform) have a feature that allows hosts to rate their guests after a stay, a system which heavily disincentives bad behavior.

Safety concerns

City officials and police also cite overcrowding/overoccupancy, street congestion, parking, and a lack of proper safety maintenance as reasons why STR regulation is necessary. Local governments are well within their right to protect the safety of residents and guests, but officials should take current rental policies and other factors into account before passing new laws.

Hosts will often set a cap on the number of guests permitted to stay in their home when making a listing. The guest limit is generally based on the number of bedrooms and beds available.

For example, in a search of Columbia area rentals for six guests on website Airbnb, most listings had at least three bedrooms. In the same search for eight guests, most homes had at least four bedrooms, though some had three. Users who bring more guests than a host allows are at risk getting a negative profile rating and losing access to the rental service.

Hosts are naturally encouraged to provide parking if they want their rental to be successful. As a result, the parking “issue” often resolves itself. Guests will often rent entire homes, where generally at least one designated parking space is provided, and possibly more. Parking instructions are usually included on rental listings.

In terms of maintenance, STRs generally self-police better than long-term rentals simply because owners are regularly keeping up the property to make it presentable for new guests. Meanwhile, bigger safety issues can often be addressed through existing laws or building codes.

Tracking and enforcement

In cities without specific STR laws, it is common to find that short-term rentals are not tracked separately from long-term rentals, making it harder to find and address the small number of properties that cause issues.

As mentioned earlier, proper recordkeeping can be an effective and relatively hands-off way for cities to identify and resolve specific problems when they arise. City officials should ask whether they can modify existing paperwork to meet their needs rather than creating new laws where possible. At a meeting earlier this year, Columbia’s chief code enforcement officer told the city’s special STR committee that his team doesn’t track all short-term rentals, though all rental property owners are supposed to fill out this form.

It’s also worth noting that passing new laws meant to improve safety and reduce bad behavior can inadvertently create new tracking and enforcement challenges, leading to diminishing returns.

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How SC cities are approaching regulation

Update: Folly Beach City Council on Tuesday, Sept. 13, passed an ordinance amending its short-term rental policies, which includes adding a fee that renters must pay during the registration process.

Positive examples of STR policy

Hilton Head

• Doesn’t ban STRs from specific zoning districts
• A point of contact must be given to respond to complaints/issues
• Establishes a hotline for STR complaints
• Sets relatively light regulations for noise and trash

Folly Beach

• Doesn’t ban STRs from specific zoning districts
• Doesn’t create additional nuisance rules
• STRs must be registered (at no charge)
• Must post beach rules on property

Hilton Head and Folly Beach, two popular vacation destinations, show that it’s possible to have some regulations in place to help with tracking and managing STRs without taking steps to limit their supply and where they can operate.

Poor examples of STR policy

Charleston

• Sets a four-guest limit
• Imposes a burdensome application process: requires submission of a floor plan; requires submission of a site plan showing off-street parking spaces; owners must submit photograph(s) of the property; requires approval by zoning administrator
• STR rules differ based on zoning category (1, 2 or 3)
• Sets other miscellaneous rules: STR owners must provide a packet with city rules and safety information to guests; each renter’s STR permit number must be posted on all listings, advertisements and marketing materials

Mauldin

• Renting individual rooms is prohibited
• Renting townhomes or apartments is prohibited
• Requires that parking spaces be paved
• Requires hosts keep a guest register going back at least two years

Mt. Pleasant (changes being considered)

• Caps the number of residential short-term rentals at 400 (a proposed change would create an exemption for existing STR operators)
• Rental permits expire after one year, meaning renters must re-apply annually (this is a problem due to the limited number of permits)
• Creates a two-tier application process: part-time rental application fee is $250, full-time rental application fee is $500 (proposed change, not current law)

Columbia (proposed ordinance)

• Non-owner occupied STRs cannot operate in residential zoning districts
• Non-owner occupied rental permits cost significantly more than owner occupied rental permits ($500 vs $100 fee)
• Sets burdensome and/or unnecessary regulations: non-owner occupied rentals must have a fire protection sprinkler system; water temperature requirements for sinks, tubs and showers; minimum five-pound fire extinguisher must be kept on site

Here are several examples of harmful or excessive rules and regulations that we suggest be avoided by cities considering STR policies.

One of the most concerning rules, enacted by Mt. Pleasant, caps the number of available STR permits at just 400, which risks driving up rental prices and threatens to put owners out of business (though a change to this policy is being considered).  

Other policies to avoid include Charleston’s four-guest limit, and Mauldin’s prohibition on renting individual rooms, townhomes or apartments. Columbia, meanwhile, is considering a policy that would prohibit STRs not occupied by an owner from renting in residential areas – a move that would ban many rentals in the city.

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Fast facts about short-term rentals

While the potential downsides associated with STRs are routinely noted by critics, the value they provide to entrepreneurs, guests and even the community deserves more attention.

The vast majority of STR owners are in good standing with their community – According to a survey by the College of Charleston (CoC), 4 in 5 STR owners reported getting no complaints from neighbors or community members. 4 in 5 owners with “good neighbor practices” in place also reported having positive relationships with most of their neighbors.

People depend on revenue generated from STRs – The CoC survey found that, on average, STR owners relied on rental revenue for 38% of their income. Those owning and managing STRs said they depended on the earnings for over half (56%) of their income.

The STR market facilities job creation – The survey also found that more than half of STR owners (57%) hired up to three contractors/service providers to assist with maintaining their property. Of those hiring workers, 84% paid wages up to $25,000 in a 12-month period, while 13% paid wages between $25,001 – $75,000.

STRs are a vital lodging option for most towns and cities – STRs provide a level of flexibility and choice that can’t always be met by traditional hotels, especially for those on vacation with children and big families. According to one study of the lodging market, 60% of vacation travelers said they prefer staying at Airbnbs over hotels.