A new law working it's way through the Kauai, HI, county council would regulate some vacation rentals and outlaw others in certain residential areas.
In Clearwater Beach, FL, 30 property owners sued the city over an ordinance that outlawed short term rentals of less than 30-days, effectively ending the business of vacation rentals.
The town of Blowing Rock, NC, does allow for some short term rentals but only in certain zoning districts, based on a law that had been on the books since 1976, but not fully enforced until 2000.
Since then the enforcement has pitted local residents against property owners and rental agents.
In your zeal to seal a deal in the hot vacation rental sector of the second home market, don't overlook the fact that the cash flow you hoped to land from rental income may not exist.
That's because a growing number of housing communities -- from individual homeowner association-run developments to entire cites -- may stiff vacation rental returns by slapping bans on short term leases.
"It seems it is becoming more prevalent. I hear this from at least one owner a week," said Christine Karpinski, real estate investor, author and director of Owner Advocacy for HomeAway.com, a network of vacation rental listing websites.
"This is why when I advise people who are looking to purchase, I always tell them that the No. 1 step is to check for home owner association, city and town zoning laws to be sure there are no restrictions," she said.
Karpinski, who chronicles the trend in How To Rent Vacation Properties by Owner, Second Edition (Kinney Pollack Press, $26), says there are three primary conditions driving vacation rental bans.
"Even if an area has 25 percent owner-occupied properties vs. 75 percent owned by out-of-town residents, the out-of-towners often have no 'vote'.
"Two places that come to mind are Hawaii and the Florida Keys. Both have limited the number of vacation rental licenses they are issuing," said Karpinski.
As an example, the hotel industry recently upped the ante on spending this year for capital improvements -- from $5 billion to $5.5 billion -- largely to attract the new breed of traveler.
According to PricewaterhouseCoopers' Hospitality & Leisure practice, the bulk of the cash will go into adding technology lures to their accommodations -- in-room MP3 (a digital audio format used by iPods and similar devices) compatible sound and television systems, high definition televisions (HDTV) and high-speed wireless Internet services.
What can you do?
First, avoid areas where you'll have to fight for short term rentals if you can't afford the battle, says Karpinski.
Otherwise:
"Your number one defense against vacation rental bans in your area is to collect and pay sales taxes. Sales tax revenue has been a heavily weighted deciding factor on whether or not the bans get passed. Where the majority of the property owners collect and pay sales taxes, they don't usually lose their right to rent.
