Under the Short-Term Rental Regulation Act of 2018, all short-term and vacation rental properties operating in the District of Columbia must receive a business license and are subject to many requirements. This means that those renting out all or part of a property through booking sites like AirBnb, VRBO, or HomeAway need to act to comply with the law.
All existing operators have until June 9, 2022, to receive their license and comply with other requirements. Failure to obtain a license or follow requirements for licensed properties may result in financial penalties up to $1,000 per offense and revocation of the underlying rental license(s).
What are Short-Term and Vacation Rentals?
In D.C., a short-term rental offers part of a home for rent for up to 30 continuous days for a fee, and the owner is present in the home during the stay. Examples include offering rental of one bedroom in a home or a single bed in a home. There is no limit on the number of nights a licensed owner may operate a short-term rental.
Vacation rentals are a type of short-term rental where the owner is not present in the home. The entire home is rented for private or exclusive use. Licensed owners are limited to 90 nights of vacation rentals per calendar year. Licensed owners may apply for an exemption from the 90-night cap if their employer requires them to work outside of D.C. more than a total of 90 days a year or if they are outside of D.C. more than 90 days to receive medical care.
Who May Operate a Short-Term or Vacation Rental?
Short-term rentals may be operated only by an owner of property from their primary residence. To show that the property is a primary residence, the owner must be eligible to receive D.C.’s homestead property tax deduction for the property to be operated as a short-term rental. This means that only individuals can operate a short-term rental; properties owned by a corporation, LLC, or other entity are prohibited from operating a short-term rental in D.C. Further, renters are not permitted to operate a short-term or vacation rental.
It is also important to note that the owner must live in the primary portion of the property. An owner cannot live in the basement of a home and operate the remainder as a short-term rental.
Owners residing in a condominium, cooperative, or other property governed by a homeowner’s association may operate a short-term or vacation rental when permitted by the building’s governing rules and procedures.
Licensing Your Short-Term or Vacation Rental and Ongoing Requirements
Every short-term and vacation rental operating in D.C. must be licensed by the D.C. Department of Consumer and Regulatory Affairs (DCRA). DCRA issues the basic business license for a two-year term according to the type of rental. If an owner operates both a short-term rental and a vacation rental, the owner must receive two separate licenses. However, operating multiple short-term rentals from the same property at the same time requires only one license.
Applications for both licenses must be submitted online at https://dcra.munirevs.com/ and applicants must sign in with a free Access DC single sign-on account.
When applying online for either a short-term or vacation rental license, an eligible applicant must provide proof of liability insurance with minimum coverage of $250,000, a Certificate of Clean Hands in the property owner’s name issued by the D.C. Office of Tax and Revenue within the past 30 days, and, if applicable, a self-attestation that the homeowner’s association or other applicable governing body permits the rental.
No inspection is required to receive a short-term or vacation rental license. However, applicants must self-certify that the property complies with the D.C. Housing Code and Property Maintenance Code.
In addition, while a short-term or vacation rental is operating, the owner must provide and conspicuously post a 24-hour accessible number to access them or their representative in case of an emergency, conspicuously post the applicable license(s) inside of the rental property, maintain records of each booking for two years, clean between guests, maintain working smoke detectors outside of the rental sleeping area and on all habitable floors of the property, provide a working carbon monoxide detector on all habitable floors of the property, provide at least one easily-accessible and functional fire extinguisher, and provide unobstructed egress from the property. Owners cannot allow short-term or vacation renters use a D.C.-issued Visitor Parking Pass for on-street parking in permitted areas.
All operators of short-term or vacation rentals must register for a business tax account with the D.C. Office of Tax and Revenue by filing form FR-500 online.
In addition, an operator should consult with a tax professional to understand short-term rental related income and deductions. IRS Publication 527 provides guidance on these topics. Individual factors, such as number of days rented and services provided, all impact if and how short-term rental income is taxed.
While insurance purchased through a third-party booking site is generally sufficient to satisfy the requirements of D.C. law, operators should carefully evaluate the coverage offered by all potential policies against the risk. Operators should also consult their existing homeowner’s insurance policy to understand what is and is not covered.
In addition to complying with D.C. law, all operators should review the terms of service and requirements from third-party booking sites, such as AirBnB or VRBO, through which they list and rent properties. These third-party booking sites may require operators to maintain more insurance, provide more safety features, or otherwise go above and beyond D.C. requirements.
Additional information for nonprofits and small businesses is available at the D.C. Bar Pro Bono Center’s resource website: www.lawhelp.org/dc/NPSB.
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© D.C. Bar Pro Bono Center 2022
This communication is provided by the D.C. Bar Pro Bono Center solely for informational purposes, without any representation that it is accurate or complete. It does not constitute legal advice and should not be construed as such. It does not create an attorney-client relationship between the recipient and any other person, or an offer to create such a relationship. This communication contains information that is based, in whole or in part, on the laws of the District of Columbia and is current as of the date it is written. However, laws vary from state to state and may change from time to time. As a result, the information may not be appropriate for anyone operating outside the District of Columbia and may no longer be timely. Consult an attorney if you have questions regarding the contents of this communication.