Over the last ten years, there has been an enormous increase in the use of online rental marketplaces such as Airbnb and HomeAway, which allow people to list their house, apartment, or other residential dwelling for rent as a short-term accommodation. In Pennsylvania and Delaware, state and municipal governments are examining the implications of the proliferation of these transitory residents. Some municipalities permit (and tax) short-term rentals of residential dwellings, whereas other municipalities prohibit them. For this reason, anyone seeking to rent out a residential dwelling on a short-term basis should thoroughly understand how their municipality defines and regulates this type of rental.
In municipalities that permit short-term rentals of residential dwellings, such rentals are often still subject to any number of procedures and restrictions. For example, Philadelphia only allows such short-term rentals if the rentals are arranged by a “booking agent,” which is defined to include platforms like Airbnb and HomeAway. Any overnight rentals of residential dwellings are subject to the city’s 8.5% hotel tax. Additionally, the primary resident of a dwelling must obtain a use permit if he or she rents the dwelling for more than 90 days per year; however, a dwelling cannot be used for short-term rentals for more than 180 days total per year or more than 30 consecutive days per year. If the lessor is not the primary resident of the property, the lessor must obtain a rental license. Municipalities are not the only entities seeking to regulate and tax short-term rentals: in June 2017, a bill was introduced in the Delaware House of Representatives that would extend the state’s 8% lodging tax to short-term rentals of rooms, entire dwelling units, and campgrounds.
Although Pennsylvania law permits municipalities to prohibit these short-term rentals, the Commonwealth Court of Pennsylvania has held that they cannot do so unless their zoning ordinances comprehend and expressly prohibit this new and distinct form of commercial accommodation. In one case, the owner of a single-family home in Pocono Township’s residential zoning district used her home as her primary residence and rented out the entire home during weekends by listing it on HomeAway. The zoning hearing board determined that her rentals constituted a “lodge” use, which was prohibited in the zoning district. The owner appealed to the court of common pleas, which affirmed. The Commonwealth Court reversed, holding that the township could not bar the owner’s rental of her home where the zoning ordinance’s definition of “single-family dwelling” did not prohibit the activity. Additionally, the Court noted that the activity did not fit the definition of “lodge” or any other use that was prohibited in the zoning district.
Similarly, the owners of a single-family home located in a residential zoning district of Stroud Township listed the property on Airbnb for short-term rental. The zoning hearing board determined that the rental activity was a prohibited “tourist home” use and thus violated the zoning ordinance. The court of common pleas affirmed the zoning hearing board. On appeal, the Commonwealth Court reversed, holding that the zoning ordinance’s definition of “single-family dwelling” did not prohibit the owners’ rental activity and that the activity did not fit the definition of the prohibited “tourist home” use.
These cases show that those wishing to use their residential dwelling for short-term rentals must check the applicable zoning regulations. They must understand whether the zoning ordinance expressly bars short-term rentals in their zoning district. They should also understand how the zoning ordinance defines other types of commercial accommodations prohibited in the zoning district – and be prepared to differentiate their rentals from those prohibited types of accommodations.
The opinions expressed in this article are for general information purposes only and are not intended to provide specific legal advice. Matthew M. McKeon can be reached at 610.840.0225 or [email protected].