Austin’s short-term rental (STR) market is on the verge of major regulatory changes. The Austin City Council will hold a public hearing on February 27, 2025, to discuss three ordinances that could reshape how STRs are licensed, taxed, and regulated. For investors and property owners operating in the STR space, these proposed changes introduce new compliance requirements, stricter enforcement, and revised zoning policies that could impact both profitability and operational viability.
At Neuhaus Realty Group, we specialize in guiding investors through regulatory shifts to ensure compliance while maximizing returns. Below is a breakdown of the proposed changes, their potential impact, and how investors can prepare.
Key Changes in the Proposed STR Regulations
Ordinance No. 1 – STR Licensing & Enforcement
This ordinance establishes stricter licensing requirements for STRs, enforces compliance, and introduces penalties for violations. All STRs must obtain an annual operator’s license that is non-transferable upon sale. A new 1,000-foot separation rule will limit multiple STRs owned by the same person in close proximity. STR platforms such as Airbnb and Vrbo will be required to remove unlicensed listings within 10 days. Every STR must maintain a minimum of $1 million in liability insurance. STRs must have a 24/7 local contact who must respond within two hours to complaints. Strict noise limits of 75 dB at the property line will be enforced, with fines of up to $500 per day for violations. Repeat violations can result in license revocation and temporary bans on reapplication.
Read the Full STR Licensing & Enforcement Draft: Click Here
Ordinance No. 2 – STR Zoning & Land Use
This ordinance redefines STRs as an accessory use and updates how they are classified in Austin’s zoning code. STRs will now be permitted in all residential zoning districts as an accessory use. The city is eliminating previous STR classifications, including Type 1, Type 2, and Type 3. Zoning-based prohibitions on STRs will be removed, though HOAs and private deed restrictions may still apply.
Read the Full STR Zoning & Land Use Draft: Click Here
Ordinance No. 3 – STR Hotel Occupancy Tax (HOT) Collection & Compliance
This ordinance strengthens tax enforcement by requiring STR platforms to handle tax collection and reporting. STR platforms must collect and remit hotel occupancy taxes (HOT) directly to the city. STR owners must submit quarterly reports detailing tax compliance. Platforms will be required to provide the city with a list of licensed STRs and tax payments collected. STR operators who fail to report or pay HOT taxes may have their licenses revoked.
Read the Full STR Hotel Occupancy Tax Draft: Click Here
Strategic Considerations for Investors
These regulatory changes signal a more structured, compliance-driven environment for STR operators in Austin. While this will reduce opportunities for non-compliant operators, it also presents an advantage for those who can adapt and meet the new requirements. Key considerations for investors include reviewing current STR properties to ensure compliance with licensing, insurance, and tax requirements, assessing portfolio adjustments if the 1,000-foot separation rule will impact property holdings, monitoring platform compliance to avoid sudden deactivation of listings due to non-compliance, and evaluating the impact of new zoning rules on long-term investment strategies.
Next Steps for STR Owners and Investors
Public Hearing Date: February 27, 2025. Location: Austin City Hall – 301 W. 2nd St., Austin, TX. How to Participate: Attend in person or submit public comments online.
City Council Meeting Info & Agendas: https://services.austintexas.gov/edims/document.cfm?id=445818
Partner With Experts in STR Compliance and Investment Strategy
At Neuhaus Realty Group, we work with sophisticated investors and STR operators to navigate regulatory shifts while maintaining strong cash flow and property value. Contact us today for a consultation.
Email Us: [email protected]
Call Us: 512-827-8830
Visit Our Website: www.NeuhausRE.com
Final Thoughts
Austin’s STR market remains one of the most profitable in the country, but it is also one of the most regulated. These proposed ordinances underscore the city’s commitment to increased oversight, and investors should act now to position themselves ahead of enforcement changes. Those who plan accordingly will not only remain compliant but also strengthen their market position as less-prepared operators struggle with new requirements. For experienced investors looking for expert guidance and strategic insight, our team is here to assist. Contact us to discuss how these changes may impact your portfolio and what steps you can take now to protect and optimize your short-term rental investments.