Short Term Rentals continues to be a fast-growing and quickly changing area of real estate investing. Many real estate investors have moved from traditional long-term rentals to short-term rentals in the past few years, lured by the elevated rents and appreciations. While STRs generally offer more opportunity towards cash flow and wealth, there are risks involved that any savvy short term rental investor must keep up to date with. There are many key ingredients toward short term rental success, including figuring out the best markets to invest and how to finance a scaling portfolio, managing ever-evolving and changing short term rental laws and regulations is also key. Read on for updates on changes and developments in short term rental laws in Dallas, Texas in June 2023. Considering the city’s large size and influence, these new regulations likely will have a large effect on the industry.
Dallas Texas Enacts STR Zoning Ordinance
On Wednesday June 14, 2023, the Dallas City Council enacted stringent new rules on short term rentals. The ninth largest city in the United States passed an ordinance with big effects for STRs in the city. The Dallas short term rental regulations focused on zoning (which properties and areas short term rentals can operate) and licenses (for STRs in approved areas, rules related to registration and fees).
Short Term Rental Laws have been a topic of discussion in Dallas for years. In the published ordinance from the city council meeting (Ordinance No. 32482), the city council notes Dallas began examining the impact of short-term rentals in 2019. The discussions and briefings fell under the city council quality of life, arts and culture committee. The short term rentals regulations in Dallas primarily respond to concerned local property owners. Particularly, owner-occupants of neighborhoods primarily consisting of single family residences.
New Dallas STR Zoning Rules
The biggest change for STRs in Dallas is new zoning rules for short term rentals. The new STR regulations state that properties in areas zoned for single family residences can’t be short term rentals. However, the regulations do not affect multifamily, mixed use or commercial areas. How do you know if a property is allowed under the new Dallas short term rentals law? Here is a helpful link to the Dallas zoning map: Dallas Zoning Tool. Properties in MO(A), GO(A), multifamily, central area, mixed use, multiple commercial, and urban corridor districts zones are generally okay. If in a different zone, the new Dallas short term rental regulations prohibit STR use. However, the new STR regulations prohibit STRs in multifamily properties with fewer than 20 units.
New Dallas Short Term Rentals Fees
For properties that are eligible under the new zoning, there are also new registration and fee rules. The new ordinance requires yearly registration. A re-registration is also required when ownership of the residence changes. The annual fees for a STR in Dallas for 2023 is $404 (this covers the initial inspection costs). Investors must also pay $234 if re-inspection is required. Part of the registration and application is also the acknowledgement of all of the new rules and regulations.
Other New Dallas STR Regulations
In addition to the major changes regarding zoning and registration, additional new short term rental regulations for Dallas include:
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- Requiring a “local responsible party.” This is defined as “a natural person who represents the owner or host who may be contacted 24 hours a day, seven days a week, in the event of an emergency condition at a short-term rental.” This can make out-of-state investing in Dallas STRs challenging. While part of owning short term rentals can mean responding to emergencies, this goes a step further by requiring a local representative.
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- Limit of three people per bedroom in the residence.
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- Limit of a maximum of 12 guests. While this shouldn’t affect the majority of Dallas short term rentals, this could affect some large, luxury properties aimed at groups.
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- Noise Restrictions between 10:00 pm and 7:00 am. This is a reasonable regulation that shouldn’t have much effect as many airbnbs likely have this rule.
- Minimum stay of two nights. This regulation aims to prevent parties that typically occur on one-night stays. Most Airbnb hosts aim to avoid parties and one-day stays anyway, so this will likely not have much effect.
Short Term Rental vs. Medium Term Rental
The new Dallas STR regulations also defined “short term rental” in line with the industry. It defines a STR as “rented to occupants for fewer than 30 consecutive days or one month.” This means in contrast, properties rented with minimum thirty day stays don’t fall under the regulations. These regulations thus are another example of why real estate investors favor medium term rentals.
Medium term rentals are generally defined as properties rented out for greater than 30 days but for less than a year. Also known as mid term rentals, stays are usually between 30 and 60 days. Investors sometimes list their MTR properties on the same platforms as STRs, such as airbnb. Many STR investors, in cities like Dallas that enact similar regulations, are likely to pivot towards the MTR strategy. Especially if estimates, which project that these new short term rental laws will prohibit 95% of existing STRs in Dallas, are true.
Timeline of Enforcement
While the new Dallas Short Term Rental Laws went into effect June 17, 2023, enforcement will take time. Main challenges will include implementation of registration software and other administrative tasks. The city has stated a goal of December 2023 to begin enforcement.
New Development – Austin STR Regulations Court Case
On August 2, 2023, a federal judge ruled that similar Austin, Texas STR regulations were unconstitutional. While this case was regarding Austin, not Dallas, it was issued under federal jurisdiction. This means that not only could short term rental laws be affected in other Texas cities, but cities nationwide as well. For now, legal experts are still sorting through the effects of this case. Smart short term rental investors should continue to monitor closely.
Short Term Rental Loans by Easy Street Capital
Easy Street Capital continues to be proud to be America’s leading short term rental loan provider. We aim to partner with professional real estate investors seeking to scale portfolios and build financial freedom. More than just a lender, we work closely to provide STR regulations updates to our borrowers, as well as many tools to enable STR success.
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Check out our Short Term Rentals Resource Page, which includes:
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- Free STR Revenue Calculator Tool powered by AirDNA – get up-to-date ADR, Revenue and Occupancy estimates for any potential STR property
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- Information on our EasyRent DSCR Loan program specialized for short term rental loans
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- Helpful articles on STR markets, podcasts, industry conferences and more
- FAQs – all the frequently asked questions and answers on STR Loans
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