Buyer Beware: Towns take aim at short term rentals
By HARRY McNAMARA
A turnkey property, great design and killer pics to bump your Instagram page — that’s all it takes to launch a successful Airbnb rental, right? If you think it’s that easy, prepare yourself. Towns throughout the region have been enacting laws that regulate Short Term Rentals (STRs), and some are tough enough to change the whole trajectory of your plans.
The Hudson River and Catskills region has been a red hot market for would-be investors, but towns in the area have responded to the commodification of their local housing stock by enacting laws on STRs as varied as the hamlets themselves. Local laws often include features like: Limits on the number of permitted non-owner occupied rentals, residency requirements, health and safety inspections, special use permits, fees ranging from trivial to prohibitive, and in more than one instance, the number of rental days allowed per year.
Let’s take a look at a few examples of commonly enacted local STR regulations.
Non-Owner Occupied Rentals
This may be the most common regulation for towns that have or are considering restrictions on Short Term Rentals. Owners living full-time in the town may continue to operate their STR with few barriers beyond health and safety regulations, while out of town investors must abide by a set of laws that feature limits on the number of permits issued.
This was the main thrust of the recently passed law in the Town of Shandaken. There are 150 permits available to non-resident owners, which were quickly gobbled up by existing rentals. New investors looking to start up a rental business in the popular hamlets of Phoenicia, Big Indian, Mount Tremper and Chichester face stiff competition for these existing permits. If you are fortunate enough to secure one, the Town law features nearly 8 pages of health, safety and building code requirements, like fire safety inspections and compliance, the posting of a “good neighbor” flier to discourage renters’ bad behavior, and filing to-scale floor plans of each rental with the town.
Limited Number of Permits
Woodstock led the way in Ulster County for establishing limits on the number of Short Term Rentals, and they now have a notorious waiting list that can scare off all but the most patient STR investors. Different towns have varying schedules for assessing the number of existing rentals and releasing new permits, so you might find yourself waiting for longer than expected if you don’t have a plan in place before closing.
Woodstock’s law allows for a total number of 285 permits. Each year, any permits that lapse are released to the waiting list of applicants, but there is no guarantee that any new permits will hit the market. If you are lucky enough to buy a home with an existing permit, there is an application window to keep that permit active. This can create even more competition among buyers for homes with permits in place.
Some municipalities’ laws have more gray areas. The Town of Olive’s law, passed in 2022, calls for a numerical limit, but that number isn’t hard and fast. During a call with town representatives, the author found that 22 permits had been issued last year, and an additional four are being considered for 2023. But when pressed, the town employee the author spoke to was unable to share a hard cap on permits, or an annual schedule for new releases, despite language in the law referencing such a limit.
In addition to capping permit issuance, rentals in the Town of Olive may only be occupied up to 180 days per year, making the maximum possible occupancy just 50%, and likely changing the whole calculus for the investment.
In contrast to this strict regulation, the Sullivan County Town of Callicoon does require certification, but has no limit on the number of STRs that can operate. Owners must submit an application, have an inspection of the premises, and pay an annual fee. (See permit application here.)
A few Catskills short-term rentals
Top: Little River, a rental in Eldred, NY. Photo: Kelsey Ann Rose From left to right:
Primary Home Only
Towns like Hurley have adopted the onerous rule that you may only rent out your primary residence, or rooms within it, with the owner on premise during the rental period. Hurley is even stricter than some other municipalities in that no campers, yurts, tents, or unapproved non-residential structures are allowed, even with the owner on site.
Other popular towns with variations on this rule are sought-after Hudson and Red Hook. Primary residents only can rent their homes for a maximum of a somewhat shocking 60 days per year in Hudson, and 120 days per year in Red Hook, although unlike Hurley, you need not live on the premises. You must, however, have a local contact registered with the town in case of emergency. If you want to dive even deeper, qualifying factors for primary residence vary between towns. Hudson is especially generous, allowing for owners who spend just 50 days upstate to consider themselves residents, while most towns require 6 months or more.
Use of ADUs
With the rise of prefab cabins, tiny homes, and glamping sites, many property owners consider adding an ADU (Additional Dwelling Unit) to their existing property. These can be a great way to capitalize on your extra land, or to add capacity to an existing rental. However, certain towns like Kingston forbid the use of ADUs as Short Term Rentals outright. However, if you’re located in Kingston, you can apply with the building department to use an ADU as a long term rental, and still add income and value to your property.
Special Use Permit / Zoning Board Approval
For some towns, like the town of Lloyd in Ulster County, a special use permit is required to get your STR up and running, and this means applying to the local Zoning Board. The process in securing such a permit could be another barrier to would-be investors.
First, you must purchase the property before beginning the special use permit application process. Then upon application, your neighbors will be notified of your plans. Whether that be a large renovation that calls for a footprint change, or a plan to operate as an Airbnb, your future neighbors will have the opportunity to weigh in and make public comments on your plans. It’s possible to get that permit granted, but consider if you want to place the fate of your business in your neighbors’ hands.
You may be enticed by the reputation of low-regulation Sullivan County, but even these towns are moving up the curve. The Town of Highland passed a new law in 2022 requiring a site plan approval through the zoning board, inspection, and a sizable $500 annual fee for a permit.
While this article is by no means a comprehensive list of each and every town’s regulations on Short Term Rental, it goes to show that buyers must be informed and prepared to navigate a wide variety of possible pitfalls along the way to starting their rental business. While Zillow and other platforms are great for browsing properties, there is frequent misinformation in online listings where rental potential is touted, in spite of strict laws and even no permit availability.
Rental income has undeniable appeal. We’ve all seen the stories of entrepreneurs quitting their day jobs to manage ever growing vacation rental empires in exotic locations. Maybe some Airbnb income would allow you to subsidize your plans for an upstate home, and help you actually buy that cabin in the woods or historic farmhouse that you daydream about in between Zoom meetings. However, savvy buyers should prepare themselves to navigate an ever-changing regulatory environment.
Resources
Here is a list of several towns addressed in this article, the hamlets within each town, and links to Town websites for further information.
*Hamlets listed are entirely or partly within the corresponding township.
Town of Shandaken (Mount Pleasant, Mount Tremper, Phoenicia, Woodland Valley, Chichester, Shandaken, Allaben, Bushnellsville, Big Indian, Oliverea, Pine Hill, and Highmount)
Town of Callicoon (Callicoon Center, Jeffersonville, North Branch, Youngsville and Fosterdale)
Town of Woodstock (Bearsville, Shady, Zena, Willow, Wittenberg and Lake Hill)
Town of Olive (Ashokan, Boiceville, Krumville, Olivebridge, Samsonville, Shokan and West Shokan)
Town of Hurley (Old Hurley, West Hurley and Glenford)
Town of Red Hook (Annandale on Hudson, Barrytown, Upper Red Hook, Village of Tivoli, Village of Red Hook)
Town of Lloyd (Centerville, Clintondale Station, Elting Corners and Highland)
Town of Highland (Barryville, Eldred, Highland Lake, Minisink Ford and Yulan)
Harry McNamara is a real estate salesperson with Country House Realty.