Guide to Texas Short-Term Rental Regulations

The short-term rental business in Texas is booming as the number of properties available continues to grow. Visitors find themselves attracted to the state’s vibrant cities, rich culture, and expansive natural areas. While Texas advocates for the use of short-term rentals, there are still restrictions in place. Owners and managers have to stay updated with local and state laws to remain compliant. To help you navigate these complexities, we’ve created a guide to the short-term rental regulations in Texas and its most population destinations. Disclaimer: Our guide is intended for informational purposes only and doesn’t constitute legal advice. For guidance on specific cases, please consult a property lawyer. 

Short-term rental regulations in Texas

According to the State of Texas, a short-term rental is any residence you rent out for 30 days or less. A residence means any single-family dwelling such as a house, apartment, co-operative, or time-share. Texas has very few regulations at the state level. Aside from taxes, the most notable policy is that counties and cities can’t ban or overly restrict the use of short-term rentals. Municipalities have to prove that any prohibitions are in the interest of their residents before they enforce them. There is currently some tension between Texas State and the individual cities. While the state wants to encourage the use of short-term rentals, local governments want to restrict them further. If you operate multiple properties, you may need to obtain a Texas business license. Find the form to start your application here.

Tax requirements for Texas short-term rentals

If you manage or own short-term rental properties in Texas, you must pay income and hotel occupancy taxes on them. Texas doesn’t have state income tax so you’ll be subject to federal requirements instead. The IRS states that individuals have to make estimated quarterly payments if they expect to earn over $1000 a year from their property. Despite the name, ‘hotel occupancy tax’ applies to any building you lease for 30 consecutive days or less. Note that you must provide an area where people can sleep and charge at least $15 per night to count as a hotel here. Owners and managers are responsible for collecting this money from guests and paying the state government. The Texas Comptroller’s office handles all these fees. However, before you can start collecting payments, you have to apply for a hotel tax permit from their main office. Texas State has set hotel occupancy tax at 6% of the total you charge guests. Counties and cities may also impose levies on hotels. It’s best to check with local offices to see whether you owe any payments and get the current rates.

Popular Texan destinations with short-term rental regulations

In Texas, short-term rental regulations are usually decided at the municipal level. That’s why we’ll explore some of the laws and guidelines for the state’s most visited cities in this section.

Houston

If you’re looking for a sure thing, AirDNA recently ranked Houston as the third best place to invest in short-term rental properties. The city always attracts high levels of tourists and there are currently no restrictions. However, Houston city officials are in talks with residents about short-term rental regulations. Although they’ve reached no decisions yet, they’re considering whether to introduce zoning laws and minimum lengths of stay.

Dallas

Potential investors will be happy to know that Dallas allows the use of short-term rentals. The world-famous city attracts over 22 million people every year. Before you can start operating short-term rentals, you have to register through Code Compliance, undergo an inspection, and pay the fees. You also have to abide by the following rules:

• Maximum of three guests per bedroom
• Maximum of 12 guests in total
• Minimum of two nights stay
• No noise disturbances between 10 PM and 7 AM

Dallas has zoning laws but these are undergoing revisions. Officials tried to ban short-term rentals from some residential areas but the state blocked them. They expect to reach a resolution in mid-2024.

Austin

The short-term rental industry is thriving in Austin with an estimated 11,000 properties available. However, the rules are more complex than in many other Texan cities. Austin has three types of short-term rental licenses:

• Type 1 – Owner occupied: The rental must be your primary residence. If you only lease part of the building, it must contain a sleeping area and bathroom. Owners must provide proof they live at the property most of the time.

• Type 2 – Non-owner occupied: The rental can be your secondary residence but it can’t be part of a multifamily property.

• Type 3 – Owner and non-owner occupied: The rental is typically part of a multifamily property (but not a duplex). You must include details about the number of buildings and units per building in your application.

To obtain a license, you need the following:

• Certification from the owner (if that’s not you)
• The property address
• The owner’s contact details
• Proof of health insurance
• Evidence you’re up to date on taxes

City officials may request extra information if they’re not satisfied with your application. Once you’ve been approved, the license is valid for a year. You have to update your details if there are any changes to your property in the meantime.

San Antonio

Although less well-known than places like Houston and Dallas, San Antonio still receives its fair share of visitors. Hospitality is one of the biggest industries in this southern city. San Antonio requires short-term rental operators to obtain a permit. Staying up to date with licensing and taxes is crucial as many business owners fail to do so which has led to a wave of complaints. Officials estimate as many as 30% of short-term rentals don’t have valid permits. There are two types of short-term rental permits in San Antonio: owner and non-owner-occupied. Both permits cost $300 and last up to three years. The main difference between the two types is that non-owner occupied can’t lease a portion of a building, only the full property.

El Paso

El Paso recently debated whether to regulate short-term rentals but decided against it. You can operate your business there without a license or paying city taxes. As tourism levels are rising in El Paso, this makes it a great option for investors.

Fort Worth

The historic city of Fort Worth brings in many tourists with its heritage trails and important landmarks. However, a lot of the city is off-limits to short-term rentals as the local government recently banned them from residential neighborhoods. The good news is that Fort Worth only requires a one-time license application. If you’re considering running a short-term rental out of a commercial or industrial zone, you’ll have less paperwork to deal with than other locations.

Arlington

Although Arlington neighbors Fort Worth, the city has more relaxed short-term rental regulations. You can have the choice of several residential and non-residential zones. If you’re considering a specific location in Arlington, you check your eligibility using the interactive map. The application process for a permit can be demanding. Arlington requires:

• Proof of a city registration account (to pay the hotel occupancy tax)
• A plan of the building including any parking spaces
• Evidence of at least $1 million in insurance
• Your proposed rules for guests
• The owner’s authorization (if applicable)

Arlington also imposes restrictions on how you and guests use the property. Some of the most noteworthy rules are:

• Maximum two guests per bedroom
• No more than 12 guests in total
• No conversions allowed to the property
• Outside gatherings prohibited between 10 PM and 9 AM

Arlington offers a lot of online resources to help property owners and managers. For example, you can download an inspection checklist and an authorization letter template.

Plano

The city of Plano currently has a total ban on the use of short-term rentals while they consider how to enforce regulations. Officials have requested feedback from residents and property managers on which policies they should adopt.

Longview

Halfway between Dallas and Texas state lines, Longview is the perfect stop-off point for travelers. Guests can also take advantage of the big parks and nature trails. Longview allows short-term rentals throughout most of the city. However, the hotel occupancy tax is higher than some other locations at 9%.

Little Elm

Little Elm is full of promise as the local government plans to attract more businesses and developments. Due to the nearby attractions and laws, it looks to become a tourist hub in the next few years. Short-term rental regulations are relatively light. Little Elm doesn’t restrict them but requires you to get a license, pay fees, and follow their standards. The main rules are:

• No more than two guests per bedroom
• A maximum of ten people in the property
• Only five cars or less can use the parking spaces (as well as the owner’s)
• Outdoor music and parties are prohibited

You can download a poster with the Little Elm regulations to hang inside your property here.

Resources

• Texas State: Bill No. 2551
• IRS: Basics of estimated taxes for individuals
• Comptroller Texas: Hotel Occupancy Tax FAQs
• City of Houston: Short-term rentals
• Dallas City Hall: Short term rentals home
• Austin: Code compliance guide to short-term rentals
• San Antonio: Article XXIL – Short term rentals
• El Paso Texas: Short term rentals
• Fort Worth: Short term rentals
• Arlington: Short term rentals
• Longview: Unified development code
• Little Elm: Short term rental regulation