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The Ins & Outs of Short-term Rentals in Managed Communities" offers more information about short-term rentals and how you can protect your association.
The fact is, money matters—and frugally stretching every dollar has become a popular trend. So it should come as no surprise that condo owners are now leveraging their homes as short-term rentals to make a little extra money. However resourceful this may be, renting out your home on a short-term basis has the potential to negatively impact property values, the quality of life for residents in your building and the overall morale of your community.

Over the past two years, vacationers have demonstrated an increasing interest in the idea of home sharing as an alternative to traditional hotels. Texas alone has seen a large spike in listings on short-term vacation rental sites, shooting up an average of 600 percent [1] across major mecca cities just since 2014, with the trend expected to continue for the foreseeable future.

You may be asking, “What can my association really do to lessen the impact of short-term rentals in my high-rise condominium community?” Let’s talk about proactive, practical solutions to combat this rising trend before it becomes a real problem.

What exactly is a short-term rental, anyway?

By definition, a short-term (vacation) rental is the renting out of a furnished home for a short stay—typically less than 30 days. Short-term rentals have become popular through sites like Airbnb, VRBO and the Austin-based company, HomeAway. These sites offer travelers the opportunity to rent a “home away from home” with all or more of the comforts and conveniences of their own home.

Peak seasons for short-term vacation rentals tend to mirror those for hotels. The more popular times are generally during holidays and large in-town events—like the Super Bowl, which happens to be coming to Houston in 2017.

What’s the big deal?

Short-term rentals can affect the integrity of your community. Not only does this type of rental often violate an association’s policies, it also poses security issues for a number of reasons:
  • Homeowners rarely conduct background checks.  Short-term rental sites do not require or even offer background checks on renters. This task is left solely to the discretion of the homeowner. Other residents in a building are typically not privy to the rental to begin with. And this type of below-the-radar, transient type of rental can expose the association to a host of liability concerns.
  • Crime is more likely. Unauthorized, short-term occupants pose the potential for increased crime and suspicious activity.
  • Renters have less at stake. Most vacationers do not take care of their temporary home the same as they would if it were their own home. Temporary guests are less likely to show concern for their rental home or for their neighbors with regard to loud noise, odors, cigarette smoke and even improper use or damage to the building’s amenities or common areas.
  • Renters don’t know emergency procedures. As temporary, unsupervised guests, renters may be unaware of emergency or evacuation plans the association may have in place. As a result, they could cause unnecessary danger to themselves or their neighbors in the event of an actual emergency.

Other than the obvious security red flags, these potential risks leave the association financially vulnerable. For instance, if crime or suspicious activity were to increase, it’s likely that the community would need to spend money for additional security coverage: more cameras, more staff, etc. Any property damage would also require that the community cover the cost of repairs. These unplanned costs could increase dues or result in a special assessment. It just takes one bad short-term renter to directly affect every owner in your building.

Get ahead of it.

Even if this is not an issue for your community (yet), it’s probably just a matter of time before you’re introduced to the world of short-term rentals. It’s easy to see why the idea of home-sharing and short-term rentals would appeal to homeowners, but as a board member it is your fiduciary obligation to protect the property values and integrity of your community.

First thing’s first. You need a solid plan. If this topic has not already made it onto the agenda of your board meetings, there’s no time like the present. Make a point of discussing this important topic at your next meeting. Here are a few methods our Texas high-rise communities have implemented to enforce restrictions and address rental violations:
  • Know your documents. This might seem a little rudimentary, but it is the best place to start. If there is a clause in place already that speaks to short-term rentals, you can begin taking action immediately.
  • Find out if your city has restrictions. Each city has its own regulations on short-term rentals. In Texas, city regulations can vary from being nonexistent to practically prohibiting short-term rentals altogether.
In Galveston, for instance, owners of short-term rentals must pay a $50 annual fee. This fee covers the cost for a renter’s brochure explaining the noise ordinance. Fort Worth requires short-term rental owners to register as an official bed and breakfast. To rent out your entire home, your house must be in an area that is zoned for commercial, rather than residential, use—essentially making short-term rentals illegal in Fort Worth.[2]
  • Create a new policy. If you do not have a policy in place, it’s time to put one together. While developing this new policy, it is a good idea to pair it with a stern fining schedule for any violations. A firm punishment establishes a sense of urgency and deters homeowners from testing the waters. An experienced condominium association (COA) management company can help you draft, file and enforce the specific policies you adopt.
  • Call in the reinforcements. Once you have a policy and fining schedule, how do you identify policy violators? Monitoring short-term rental sites can be a tall order for your management team to tackle, especially when there are probably more important tasks you’d prefer that they handle.

Consider forming a committee of condo owners who are equally vested in protecting home values in the building. Committee members can regularly peruse online short-term rental sites for listings that resemble homes in your community and inquire as a “secret shopper.” They could then pass along the names of any violators to the management team for policy enforcement.

Although short-term vacation rentals may be a hot trend, they can be a cold detriment to your association if not properly addressed. The right COA management company will partner with you to ensure your community is protected with a clear, well-defined policy.

Learn more about how you may benefit from a professional management company that can provide a local, customized experience for your community. Contact FirstService Residential, the leading community management company in Texas.
Monday November 28, 2016