Austin Council Passes New Short-Term Rental Rules After Legal Battles

New Regulations Aim to Bring Order to Austin's Short-Term Rental Market

Austin’s short-term rental market has faced significant challenges over the years, with legal battles and inconsistent enforcement weakening previous regulations. However, city leaders are now taking steps to implement a more structured and enforceable system. On Thursday, the City Council approved a set of new rules designed to tighten restrictions on short-term rentals and impose stricter requirements on platforms like Airbnb and VRBO.

“This has been a thorny and difficult issue,” said Council Member José Vela. “It has been through many lawsuits and permutations, and I feel like we're finally getting to a point where we have a workable, enforceable ordinance that can withstand legal challenge and also generate the hotel occupancy tax that we've been trying to get into the city coffers.”

This is the second major change to Austin’s short-term rental regulations this year. In February, the council transitioned from a zoning-based system to a business-licensing model, requiring platforms to collect hotel occupancy taxes from hosts. The latest package adds new leverage for the city, ensuring better oversight of both rental hosts and online listing platforms.

Key Requirements for Platforms and Hosts

After hours of public testimony and amendments, the council approved a comprehensive set of measures. These include:

• License Number Requirement: Platforms such as Airbnb and VRBO must now require a city license number in each listing.
• Quarterly Tax Reporting: These platforms are required to provide quarterly documentation of hotel occupancy taxes collected.
• De-listing Unlicensed Properties: They must remove unlicensed properties from their listings when requested by the city.
• Prohibition on Fees for Unlicensed Rentals: Platforms are not allowed to charge fees for unlicensed rentals.

According to city data, the problem is widespread. Austin has 2,413 licensed short-term rentals, but 94% of 311 complaints involve unlicensed units. This highlights the urgent need for stronger enforcement mechanisms.

Restrictions on Rental Locations and Numbers

The new ordinance also places specific limitations on where and how many short-term rentals can operate:

• Distance Between Rentals: Individual hosts cannot operate rentals within 1,000 feet of each other, though multiple residences may be listed on a single lot.
• Lot-Based Limits: On lots with three or fewer units, up to two may be used as rentals.
• Apartment Complexes: Up to 10% of units in apartment complexes may be rented short-term.
• Mixed-Use Buildings: Buildings with commercial space may list up to 25% of units as short-term rentals.

Additionally, tenants who have permission in their leases can now apply for a license. Violations will result in a $500-per-day fine for both hosts and platforms.

Most of these rules will take effect on July 1, 2026. In the meantime, the city plans to launch an online licensing portal and sign a data-scraping contract to identify unlicensed listings.

Legal Challenges and Previous Efforts

Despite the progress, some neighborhood groups and housing advocates argue that the new rules do not go far enough. They have called for geographic caps to reduce nuisances and preserve housing availability.

Council Member Marc Duchin proposed neighborhood-level density limits, but the measure failed 8-3. Colleagues raised concerns about legal risks, fairness, and past failures of similar restrictions, which led to widespread noncompliance.

Austin first attempted to regulate short-term rentals in 2014, allowing casual, owner-occupied rentals but targeting investor-owned, whole-home listings. However, courts struck down those provisions, removing the city’s ability to preemptively ban non-owner rentals. Enforcement became challenging, often requiring staff to prove violations during a stay, which was impractical and left the ordinance ineffective.

Industry Support and Future Goals

Council Member Ryan Alter, who worked closely with staff and platforms to draft the new policy, noted that the changes have industry support. “It's been a long time coming,” he said. “I'm glad we finally have a set of rules that work.”

Alter hopes future changes will make applications cheaper and more accessible, encouraging more local residents—rather than out-of-town investors—to apply for licenses. He emphasized the importance of creating a fairer system that benefits both the community and the city’s economy.