As the short-term rental (STR) market flourishes across Texas, homeowners and entrepreneurs are creating lucrative revenue streams by renting out their properties. But it’s not just tourists and travelers who seek temporary homes; thanks to SiniSTAR’s home-sharing platform for insurance housing, individuals relocating after home damages can now turn to STRs as a reliable solution.
Whether you’re considering renting out a second home or already running a successful rental business, you need to be up to date on city and state regulations. Doing so ensures you operate your rental legally and responsibly while avoiding costly fines or legal issues. To that end, this overview covers STR regulations across Texas and in some of its major cities.
Definition of an Short-Term Rental
In Texas, a short-term rental is defined as any residential property—a single-family home, a condo unit, a co-op, or a timeshare—that is rented out for a fee for stays no longer than thirty consecutive days.
Statewide Rules
True to its laissez-faire reputation, the Lone Star State is welcoming to short-term rental ventures with minimal state-level interference. Texas delegates STR regulations to its cities, allowing for a diverse array of local ordinances. The only state-level requirement is to register with the Texas Comptroller’s Office for the Hotel Occupancy Tax.
State Tax: the HOT
No, Texas doesn’t have a tax for being too good-looking (phew!), but it does have a Hotel Occupancy Tax (HOT). The state collects it for rooms rented out for more than $15 per night. Compliance with this tax involves paying a 6% state levy (with exemptions for certain types of guests). Prompt monthly payments to the Comptroller’s Office ensure that you avoid penalties and benefit from a 1% deduction.
Municipal Rules for STRs
Texas’s hands-off approach at the state level means that the responsibility to regulate short-term rentals falls to municipalities. To a certain extent, cities and towns across the state have the authority to establish their own rules and restrictions and tailor regulations to address their communities’ needs and concerns.
Austin
In Austin, those operating a short-term rental must comply with the relevant city ordinances. They need to obtain one of three types of STR licenses.
Type 1: Owner-occupied properties
Type 2: Non-owner-occupied properties
Type 3: Multi-family non-owner-occupied properties, such as condos or apartments
STR Licensing Application Essentials
To apply for an STR license, the following are required:
Fee: A total of $863.80, which is non-refundable and covers the application, notification, and technology fees.
Proof of Property Insurance: You must provide the declarations or summary pages from your insurance policy.
Hotel Occupancy Taxes: If the property has been rented out previously, proof of payment for city hotel occupancy taxes is necessary.
Certificate of Occupancy: An up-to-date certificate is mandatory and can be obtained through the city’s Development Services. This confirms the property meets all building and safety standards.
Identification: For Type 1 applications, the driver’s license information must match the applicant’s property details.
Authorization for Agents: If a third party is managing the property, a notarized authorization from the owner is required.
Complete Applications Only: Ensure all documents are included; partial submissions will not be processed.
License Renewal Process
Renew your license before it expires to avoid any interruptions in your rental operations. If there have been changes in ownership or the property’s address, you should submit a new application. For other updates, a signed letter from the owner will suffice.
When it’s time to renew your STR license, you’ll need the following:
Renewal Fee: $490.00, which is non-refundable
Current Property Insurance: Up-to-date proof is required.
Hotel Occupancy Taxes: The most recent quarter tax report or a zero report if there were no renters in the past quarter.
San Antonio
San Antonio has had a short-term rental ordinance in place since November 1, 2018. To operate an STR within city limits, owners must obtain a permit and are responsible for payment of the Hotel Occupancy Tax.
Types of STRs There are two main types of STRs recognized in San Antonio:
Type 1: Owner-occupied or operator-occupied homes, including both primary residences and accessory units.
Type 2: Non-owner-occupied properties.
Zoning and Density
STRs are allowed across various residential zoning districts, with some exceptions in commercial and industrial zones (C-3, L, I-1, and I-2 districts). You can check the zoning for your property here.
Density rules differ for Type 1 and Type 2 STRs.
Type 1 STRs have no density limits.
Type 2 STRs are limited to 12.5% of units on a blockface (defined as one side of a street between intersections). Multifamily buildings (those with five or more units) are limited to 12.5% of the units on the property. To operate a type 2 STR where density limits have been reached, a Board of Adjustment special exception is required. The fee for properties with a Homestead Exemption is $400; otherwise, it’s $600. Apply for the special exemption here.
Permit Application Requirements
To secure a permit, which is valid for three years and non-transferable, applicants must do the following:
Pay a $100 non-refundable application fee.
Provide contact information for the owner, applicant, and a 24/7 contact person.
Submit floor and parking plans along with proof of ownership and authorization.
Advertising and Tax Obligations
Advertisements for STRs must include the permit number.
STR operators are required to remit the HOT, which includes a 9% city tax and a 1.75% county tax.
Enforcement and Reporting
Enforcement of the STR ordinance is strict with fines for non-compliance. The city has phone numbers and several online avenues to report issues with STRs or unpermitted operations.
For comprehensive details and updates or to apply for an STR permit, visit the San Antonio Development Services Department website. Keep tabs on city resources for up-to-date information.
Houston
Houston has a decentralized approach to managing short-term rentals. Here’s what potential STR hosts and renters need to know.
Neighborhood-Specific Rules
Homeowners Associations and property deed restrictions are the primary sources of regulations. These can vary significantly from one neighborhood to another, covering issues such as noise control, parking regulations, and rental duration and frequency.
Potential Regulatory Changes
The Houston City Council has shown an interest in creating regulations. Discussions in early 2023 suggest that changes could be forthcoming. STR hosts should stay alert for new rules.
Dallas
Zoning and Operational Restrictions
Dallas has implemented new zoning rules that significantly impact where STRs can operate. In neighborhoods zoned for single-family homes, STRs are now prohibited. However, they are allowed in areas zoned for multifamily dwellings (with twenty or more units) and commercial zones albeit with a cap in multifamily residential areas.
In multifamily residential areas with 20+ units, up to 3% of units can be used as STRs.
STRs are permitted in commercial and mixed-use zones.
Registration and Fees
All STRs in eligible zones must register with the city annually. The process includes a fee that covers inspection costs.
Annual registration fee: $404 (includes initial inspection costs)
Re-inspection fee (if necessary): $234
Operational Guidelines
Dallas has set clear operational guidelines for STRs to maintain neighborhood harmony and safety, including the following:
A designated local responsible party must be always available.
Occupancy limits: three people per bedroom with a maximum of 12 guests
Noise restrictions enforced from 10:00 p.m. to 7:00 a.m.
Two-night minimum stay requirement
Enforcement and Compliance
The city is allowing for a transition period leading up to the enforcement of the new regulations.
Code enforcement preparation will start in December 2023.
There will be no grandfathering for existing STRs; they all must comply with the new regulations.
You now should have a general idea of what regulations to expect in the Lone Star State. But keep in mind that rules governing STRs are subject to change and can vary widely by location. For the most accurate, complete, up-to-date information, contact your local municipal government. Best of luck with your STR project!