On February 27, 2025, the Austin City Council enacted significant changes to the city's short-term rental (STR) regulations, while deferring other proposed measures pending the outcome of the current Texas legislative session.

Approved Changes:

• Hotel Occupancy Tax Collection: Starting April 1, platforms like Airbnb and Vrbo will be required to collect and remit the city's Hotel Occupancy Tax (HOT) on behalf of STR operators. This move aims to capture revenue from unlicensed rentals that have previously evaded taxation.
  
  

Deferred Proposals:

• Licensing Enforcement: Measures to mandate that STR listings display valid city-issued license numbers have been postponed. This requirement is intended to curb the proliferation of unlicensed rentals operating within the city.
• Proximity Restrictions: A proposal to prohibit owners from operating multiple STRs within 1,000 feet of each other has been delayed. This regulation would primarily impact operators managing multiple properties in close proximity.
• Ownership Restrictions: Licenses for STRs will now only be granted to properties owned by individuals, trusts with individual trustees and beneficiaries, or single-member LLCs. Multi-member LLCs and corporate entities are no longer eligible for STR licenses. This change seeks to prevent large corporations from dominating the STR market and impacting housing availability.
  
  
  

Rationale for Delays:

Mayor Kirk Watson recommended postponing these initiatives until after the conclusion of the state legislative session. This strategy allows the city to adapt its regulations in response to potential state laws that could limit municipal authority over STRs. By waiting, Austin aims to avoid implementing rules that might soon be preempted or require significant revisions.

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Five Star Vacation Home Rentals Opinion Section

Watching the conversations unfold between homeowners, property managers, and city council members was truly fascinating. There were clearly passionate viewpoints on all sides. Ultimately, we believe the decision to delay the larger regulatory changes was the right move. Implementing large policy shifts takes significant city resources—resources that could go to waste if the state legislature later passes laws limiting cities’ ability to regulate short-term rentals (STRs). Pausing until the state’s position becomes clearer is the smart and practical choice for everyone involved.

We also believe that the approved change requiring platforms like Airbnb and Vrbo to collect and remit Hotel Occupancy Tax (HOT) will be a positive step overall—especially for the estimated 20% of operators who are already properly licensed and paying into the system. These responsible operators will no longer feel like they are at a disadvantage compared to unlicensed properties that have been flying under the radar.

For those operators that have skirted the system all of these years but have still been struggling with lower revenue and ongoing price reductions, this could put even more of a financial strain on them. Adding an 11% tax hit from the city could be difficult to absorb for some.

One important aspect to note: with platforms now responsible for reporting HOT collection, the city will likely have better visibility into which properties are paying—and which aren’t. This could make it easier for the city to identify and track unlicensed properties and owners. If you’ve been operating without a license, now is the time to focus on getting compliant. We’ve already seen similar enforcement efforts roll out in places like San Antonio, so it’s reasonable to expect Austin to follow suit.

The bottom line: the STR landscape is evolving quickly, and proactive compliance will put you in the best position for long-term success. If you need guidance, we’re here to help.

— The Five Star VHR Team

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