I get asked about regulations more than almost anything else. And honestly, the question usually comes way too late in the process. Someone finds a property they love, runs the numbers, gets excited — and then asks, “Wait, is this even legal?”

That’s backwards. Regulations should be the first thing you look at. Not the last.

Here’s the reality. Short term rental regulations vary wildly across the country. We’re not talking small differences. We’re talking about markets where you can get a permit online in twenty minutes versus markets where you literally cannot legally operate a short term rental at all. Same country. Sometimes the same state. The regulatory landscape is that fragmented.

After closing over 5,000 transactions across more than 20 markets with our team at The Short Term Shop (theshorttermshop.com/buyer), I can tell you with absolute confidence that regulatory risk is both the most underappreciated and most avoidable threat to your investment. That’s not a contradiction. People ignore it because it feels like boring legal stuff, but it’s avoidable because the solution is straightforward — buy in the right markets.

Let me walk you through everything you need to know.

Why Regulations Matter More Than Your Revenue Projections

You can run the most beautiful spreadsheet in the world. Perfect occupancy assumptions, conservative nightly rates, every expense accounted for. None of it matters if the local government decides short term rentals aren’t welcome anymore.

I’ve watched investors buy properties in markets that looked incredible on paper, only to have the rug pulled out from under them six months later when the city council passed new restrictions. That property that was going to cash flow beautifully? Now it’s a long term rental generating half the income, or worse, sitting there while the owner tries to figure out what to do with it.

This isn’t theoretical. It happens constantly in certain types of markets. And the pattern is predictable if you know what to look for.

The Regulatory Spectrum

I think about short term rental regulations on a spectrum. Not every market falls neatly into one category, but this framework has served our clients well over thousands of transactions. Think of it as three tiers.

Short Term Rental Friendly Markets — Low Risk

These are your gold standard markets. They share a few common characteristics. Short term rentals have operated here for decades — we’re talking generations in some cases. Tourism isn’t just part of the economy, it is the economy. Permitting is clear and straightforward. There are no caps on the number of permits available. And the regulatory environment has been stable for years.

The Smoky Mountains are the textbook example. Gatlinburg, Pigeon Forge, Sevierville — short term rentals have been the backbone of this region’s economy since long before anyone called them “short term rentals.” They were just cabins and vacation homes that people rented out. The local governments aren’t just tolerant of short term rentals, they depend on the tax revenue. You can check out our full Smoky Mountains market hub for specific details on investing in that area.

Gulf Shores and Orange Beach, Alabama are the same story. Beach vacation rentals have been operating here for decades. The local economy runs on tourism dollars. The permitting process is clear and well-established. There’s no existential regulatory threat because restricting short term rentals would be like a factory town shutting down its factory. Take a look at our Gulf Shores market hub if you’re exploring that area.

The same applies to Destin, 30A, and Panama City Beach along the Florida panhandle. Broken Bow, Oklahoma — a newer market in terms of investor attention, but vacation cabins have been there for years and the local government is firmly supportive. Blue Ridge, Georgia is another one — our Blue Ridge market hub has specifics on that market. Orlando resort communities that were literally built for short term rental use. The Outer Banks in North Carolina. These markets all share that DNA of tourism-dependent economies with decades of short term rental history.

When I say “low risk,” I don’t mean zero risk. Nothing in real estate is zero risk. But the probability of a sudden, dramatic regulatory shift in these markets is about as low as it gets. The local governments understand that their revenue, their jobs, their entire economic structure depends on visitors coming and staying in short term rentals.

Regulated but Workable Markets — Moderate Risk

The middle tier is where things get more nuanced. These are markets where short term rentals are legal and permits are available, but there are more hoops to jump through. Maybe permits are zone-specific — you can operate in some neighborhoods but not others. Maybe there are additional requirements around safety inspections or parking or noise ordinances. Maybe the regulations were recently updated but have since stabilized.

Scottsdale, Arizona is a good example. Short term rentals are legal, and Arizona has been relatively friendly at the state level. But the experience varies enormously depending on the specific HOA community you’re buying into. Some HOAs welcome short term rentals. Others have minimum stay requirements or outright bans. The government regulations might be fine, but the private restrictions can trip you up.

Savannah, Georgia has caps on short term rental permits in the historic district. You can still operate, but there’s a limit on how many permits are issued in certain zones. That means if you’re buying a property banking on getting a permit, you need to verify that permits are actually available — not just theoretically allowed.

Various Florida municipalities fall into this category too. Florida has been generally friendly to short term rentals at the state level, with some important preemption laws we’ll talk about later. But individual cities and counties still have their own layers of regulation. Some require specific licenses, inspections, or insurance minimums. It’s workable, but you need to do your homework.

The theme with moderate-risk markets is that investing there isn’t a bad idea — it just requires more due diligence. You need to understand the specific rules that apply to the specific property you’re buying, not just the general market reputation.

Restrictive Markets — High Risk

Then there’s the other end of the spectrum. These are markets where regulations are actively hostile to short term rentals, or at minimum create significant uncertainty and risk.

Nashville is the poster child. They’ve capped non-owner-occupied short term rental permits. If you don’t live in the property, your ability to operate it as a short term rental is severely limited. The permit situation has been contentious, litigated, and unstable. I lived in Nashville for years. I watched this play out in real time. Great city to visit. Tough city to invest in for short term rentals right now.

Colorado ski towns have been tightening aggressively. Communities like Breckenridge, Vail, and others have implemented various restrictions driven by concerns about housing availability for local workers. When ski resort employees can’t afford to live anywhere near where they work because every house is a vacation rental, the community pushes back. Understandable from their perspective, but brutal for investors who bought before the rules changed.

Austin has Type 2 short term rental restrictions that limit non-owner-occupied rentals in residential areas. The regulations have shifted multiple times, creating the kind of uncertainty that makes long-term investment planning difficult.

And then there’s New York City. Local Law 18, which took effect in 2023, effectively banned most short term rentals under 30 days unless the host is present in the unit. It’s about as close to a complete ban as you’ll find in a major American city. If someone tells you they want to buy a short term rental investment property in NYC, the answer is don’t.

Most major urban cores trend toward restriction. It’s not universal, but the pattern is clear. Cities with housing affordability crises — and that’s most big cities at this point — view short term rentals as part of the problem. Whether that’s fair or accurate is a separate debate. What matters for you as an investor is the regulatory direction, and in urban cores, that direction is almost always toward more restriction.

Why Vacation Markets Are Fundamentally Different

This is the core argument, and I want to make sure it lands clearly because it’s the single most important concept in this entire piece.

In established vacation markets, restricting short term rentals would be economic self-harm. These communities exist because of tourism. The restaurants, the shops, the attractions, the tax base — all of it depends on visitors. And visitors need places to stay. Short term rentals aren’t competing with resident housing in these markets because there isn’t a significant permanent resident workforce being displaced. The houses were built for vacationers. The economy was built around vacationers. Everyone from the county commissioner to the local handyman benefits from short term rentals operating.

Urban markets are fundamentally different. In a city like Nashville or Austin or Denver, short term rentals are operating in neighborhoods that were built for residents. They’re taking housing units off the market in places where people need to live and work year-round. That creates a real tension. Neighbors get frustrated. Housing prices get pushed up. Politicians respond to constituent pressure. And regulations tighten.

This isn’t a moral judgment. I’m not saying urban short term rentals are bad. I’m saying the political and economic dynamics in urban markets create ongoing regulatory risk that doesn’t exist — or exists at a dramatically lower level — in traditional vacation markets.

That’s why The Short Term Shop operates exclusively in established vacation markets. Not because we couldn’t make money elsewhere, but because we care about long-term regulatory durability for our clients. We want you to buy a property that’s still legally operating as a short term rental ten and twenty years from now. The best way to ensure that is to buy where the entire community’s economic survival depends on short term rentals continuing to operate.

I wrote about this philosophy extensively in my book Short-Term Rental, Long-Term Wealth (amzn.to/4pQOZAU), and it’s one of the first things I cover because it drives every market selection decision we make. If you want an even deeper dive into the analytical side of choosing markets and properties, my second book Midterm Rental, Long-Term Wealth (amzn.to/4aLun8D) covers the flexibility angle — how to structure investments that work across multiple rental strategies so you’re never fully dependent on one set of regulations.

The 7-Point Regulatory Due Diligence Checklist

Before you put an offer on any short term rental investment property, you need answers to these seven questions. Not “pretty sure” answers. Definitive, verified answers.

First — is the property zoned for short term rental use? This sounds basic but it trips people up constantly. Zoning determines what you can and can’t do with a piece of real estate, and not every residential zone allows short term rentals. Some zones allow them by right. Some require a conditional use permit. Some prohibit them entirely. Check the zoning before you fall in love with a property.

Second — what permits and licenses are required? Almost every jurisdiction that allows short term rentals requires some form of permit or license. Sometimes it’s a simple business license. Sometimes it’s a specific short term rental permit with its own application process, fees, and requirements. Know exactly what you need to obtain and what the process looks like before closing.

Third — are there caps on the number of permits? This is a big one. Some markets issue unlimited permits. Others have hard caps, either market-wide or within specific zones. If there’s a cap and all the permits are taken, your property can’t legally operate as a short term rental. Period. In markets with caps, you need to verify permit availability as part of your due diligence, not after you’ve already bought the place.

Fourth — what taxes apply? Short term rentals are subject to a patchwork of taxes depending on location. Occupancy taxes typically range from 3 to 15 percent. Sales tax may or may not apply. Some areas have tourism development taxes or lodging taxes on top of everything else. These taxes don’t just affect your bottom line — they’re also your compliance obligation. Failing to collect and remit the correct taxes can result in penalties, fines, and permit revocation.

Fifth — what are the operational requirements? Many jurisdictions have requirements beyond just getting a permit. Safety inspections. Fire extinguisher and smoke detector standards. Maximum occupancy limits based on bedrooms or square footage. Parking requirements — especially in dense areas. Noise ordinances with specific quiet hours. Requirements to have a local contact person available 24/7 if you’re not managing the property yourself. Some of these are easy to comply with. Others can affect how you set up and market the property.

Sixth — what are the HOA rules? This is completely separate from government regulations, and people confuse them constantly. A property can be in a jurisdiction that’s perfectly friendly to short term rentals, but if it’s in an HOA that prohibits them, you’re stuck. HOA restrictions are private covenants, not government regulations, and they can be just as restrictive. Sometimes more so. Always get and read the CC&Rs before buying. Not the summary. The actual documents.

Seventh — what’s the regulatory trend? This might be the most important question of all. Is the market tightening its regulations? Loosening them? Stable? A market that currently allows short term rentals but is actively debating restrictions is a very different proposition than one that’s been stable for years. Look at recent city council meeting agendas. Search local news for short term rental regulation stories. Talk to local property managers and real estate agents who specialize in the market. The direction matters as much as the current rules.

Our team at The Short Term Shop does this due diligence work with clients every day (theshorttermshop.com/buyer). We know the regulatory landscape in every market we operate in because it’s our job to know it. But even with expert guidance, you should understand the framework so you can ask the right questions and evaluate the answers.

2026 Regulatory Trends

Let me give you the lay of the land as we head through 2026.

Urban markets continue to tighten. This trend isn’t slowing down. If anything, it’s accelerating in certain cities. Housing affordability remains a top political issue in most major metros, and short term rentals remain a convenient target. Whether new restrictions take the form of permit caps, primary residence requirements, or outright bans varies by city, but the direction is consistent.

Established vacation markets remain stable. The Smokies aren’t suddenly going to turn against short term rentals. Neither are Gulf Shores, Destin, Broken Bow, or the other tourism-dependent markets we work in. These communities reaffirm their support for vacation rentals every time they pass a new tourism marketing budget funded by short term rental tax revenue.

State preemption laws are a wildcard worth watching. Florida and Arizona have both passed laws that limit how aggressively local governments can restrict short term rentals. This creates a floor of protection for investors in those states. Other states have gone the opposite direction, giving local governments more authority to regulate. The state-level legal framework matters because it determines what your city or county can even do, regardless of what they want to do.

The gap between friendly markets and hostile markets is widening. Five years ago, the regulatory spread was narrower. Today, the difference between investing in the Smokies versus investing in an urban market is massive from a regulatory perspective. That gap is getting bigger, which actually makes the investment case for established vacation markets stronger than ever. The certainty premium — knowing your rental will be legal next year and the year after — has real economic value.

I talk about these trends regularly on our YouTube channel (bit.ly/youtubecasts) and our Instagram (bit.ly/strgram), so follow along if you want to stay current as the landscape evolves. We also cover market-specific regulatory updates on The Short Term Shop Plus (bit.ly/stsplus) for investors who want deeper analysis.

The Bottom Line on Regulatory Risk

Look, I could sugarcoat this and tell you that regulations don’t matter if you find the right deal. But that would be irresponsible. Regulatory risk is real, and it has cost real investors real money. I’ve seen it happen too many times.

The good news is it’s almost entirely avoidable. Buy in markets with established short term rental histories. Buy where the local economy depends on tourism. Buy where the regulatory environment has been stable for years and the political incentives point toward keeping it that way.

That’s the philosophy behind every market The Short Term Shop operates in. We didn’t choose the Smoky Mountains and Gulf Shores and Blue Ridge and Destin because they were trendy. We chose them because they’re durable. The tourism economies have been there for decades. The regulations have been favorable for decades. And the economic incentives for keeping them favorable aren’t going anywhere.

Regulatory due diligence isn’t glamorous. Running the numbers is more fun. Scrolling through listing photos is definitely more fun. But this is the work that separates investors who build lasting portfolios from investors who get blindsided. Do the boring work first. Then have fun with the spreadsheets.

Frequently Asked Questions About Short Term Rental Regulations

How do I find out what short term rental regulations apply to a specific property?

Start with the county and city government websites for the property’s location. Look for short term rental ordinances, zoning maps, and permit applications. Call the local planning or code enforcement office directly — they’ll tell you exactly what’s required. If you’re working with an agent who specializes in short term rental investments, they should already know the regulatory landscape for their market inside and out.

Can short term rental regulations change after I buy a property?

Absolutely. Regulations can and do change. Some jurisdictions grandfather existing permit holders when new restrictions pass, but not all do. This is exactly why buying in stable, tourism-dependent markets matters so much. The risk of sudden adverse changes is dramatically lower in markets where the entire economy depends on short term rental tourism.

What’s the difference between government regulations and HOA rules?

Government regulations come from your city, county, or state. HOA rules are private covenants that apply to specific communities or developments. A property can be fully compliant with government regulations but still prohibited from operating as a short term rental by its HOA. Both matter. Check both. They operate independently.

Are short term rental regulations getting stricter everywhere?

No. The trend is location-dependent. Urban markets and some resort communities with housing shortages are tightening. But established vacation markets — the Smokies, Gulf Shores, Destin, Broken Bow, Blue Ridge, Outer Banks — remain stable and supportive. The trend is a widening gap between friendly markets and restrictive markets, not a universal crackdown.

What happens if I operate a short term rental without the proper permits?

Penalties vary by jurisdiction but can include fines, liens on the property, permit revocation, and in some cases legal action. Platforms like Airbnb and Vrbo are also increasingly requiring permit or license numbers before listing, so operating without proper authorization is getting harder even from a practical standpoint. Don’t risk it. Get permitted properly.

Do I need a lawyer to navigate short term rental regulations?

For most purchases in well-established vacation markets, a knowledgeable short term rental focused real estate agent can guide you through the regulatory landscape. That said, if you’re buying in a market with complex or recently changed regulations, consulting a local real estate attorney who understands short term rental law is money well spent. When in doubt, get professional advice.

What taxes do short term rental owners typically pay?

It varies by location, but expect some combination of occupancy tax (also called lodging tax or hotel tax), general sales tax, and potentially a tourism development tax. Rates range from about 3 percent on the low end to 15 percent or more when multiple taxes stack. Most booking platforms collect and remit some of these taxes automatically, but not always all of them. Know your obligations in your specific market.

How does state preemption affect local short term rental regulations?

Some states, like Florida and Arizona, have passed laws that prevent local governments from banning short term rentals outright. This creates a baseline level of protection for investors. However, local governments in those states can still regulate operational aspects like permitting, noise, parking, and taxes. Preemption sets a floor, not a ceiling. It’s favorable but not a free pass to ignore local rules.

Why should I work with The Short Term Shop for my short term rental investment?

Our team has worked with over 5,000 investors and closed more than $3.5 billion in short term rental transactions. We’ve been the number one short term rental team at eXp Realty multiple times and have been ranked in the Wall Street Journal and RealTrends Top 20 nationwide. Our work has been featured in The New York Times, Forbes, The Wall Street Journal, Yahoo Finance, and BiggerPockets, among others. We operate exclusively in established vacation rental markets because we believe regulatory durability is just as important as revenue potential. When you work with us, you’re getting a team that has seen more short term rental transactions than virtually anyone in the country (theshorttermshop.com/buyer).

Can I convert a short term rental to a long term or midterm rental if regulations change?

Yes, and this is actually a smart part of any investment strategy. Buy properties that work across multiple rental strategies — short term, midterm, and long term. That way, even if regulations shift, your property still cash flows. I talk about this flexibility approach in detail in both of my books (amzn.to/4pQOZAU and amzn.to/4aLun8D). A good investment property isn’t just a good short term rental. It’s a good rental, period.

Contact Us

Ready to invest in a short term rental in a market with proven, stable regulations? Our team is here to help. Visit theshorttermshop.com/buyer to get connected with an agent who specializes in your target market. Follow us on YouTube (bit.ly/youtubecasts) and Instagram (bit.ly/strgram) for ongoing market updates and regulatory news. And check out The Short Term Shop Plus (bit.ly/stsplus) for deeper market analysis and investor resources.

Disclaimer

The information in this article is for educational and informational purposes only and does not constitute legal, financial, or investment advice. Short term rental regulations vary by jurisdiction and change frequently. Always consult with qualified legal and financial professionals before making investment decisions. Verify all regulatory information with local authorities before purchasing any property.

Short Term Rental Regulations: The Complete Guide for Investors in 2026