Here’s some key considerations you should know
Summer is coming, and in DC, many homeowners turn their attention to generating revenue from their primary DC residence while they are away for the summer. Due to the way some D.C. employers enable staff to work remotely and permit longer vacation schedules in the summer months, many owners can find extra income annually by considering short-term rentals. Here are a few key things you should know before getting started.
In 2021 the D.C. Department of Consumer and Regulatory Affairs announced it was “finally ready to start implementing and enforcing ” a law passed 3 years earlier for short-term rentals (AirBnB, VRBO, etc.) According to DCist, the agency started accepting license applications for short-term rentals on Jan. 10 last year and started enforcing the law’s provisions in April 2022.
According to Martin Austermuhle’s “D.C. to Start Restricting Airbnb and Other Short-Term Rentals”1 he wrote for DCist, “The law applies specifically to short-term rentals, those lasting less than 30 days at a time. Under the new law, any D.C. homeowner who wants to rent out a bedroom, basement, or entire home on Airbnb or any other platform has to get a short-term rental license from DCRA. (The two-year license costs $104.50.)”
Charlotte Perry, the owner of LUXbnb, a property manager specializing in furnished short-term rentals in DC for over 15 years, is a trusted partner to Columbia Property Management. She shared her expertise and guidance with me on short-term rentals. Her business, LUXbnb, punches above its weight in the D.C. area, bringing owners greater opportunity to realize the gains they hope to make. She brings deep insight into what you can expect if you were to go down this path with your property.
Companies like hers function like any other property manager might. LUXbnb collects the rents, “hotel” taxes, security deposits, departure cleaning, and any other applicable fees on behalf of the owner. They manage turnover between guests including cleaning and any needed repairs. And at the end of each month, they release the rental income earned less the management fee and any repair costs or new purchases.
Charlotte clarified the new regulations for us as they are a source of confusion to most owners. In the District, if the owner resides at the house during the rental, s/he can host short-term renters all year long. However, if, like many of LUXbnb’s clients, the owner is renting their property while they are gone during the summer or otherwise absent, they can do so for a total of 90 nights per calendar year. Any rentals beyond these 90 nights of short-term rentals, must be for at least 31 nights. If an owner is vacating their primary residence for work purposes–for example for an overseas assignment with the State Department–the 90-night cap is waived. And the property can be rented short-term without limits. Investment properties are no longer eligible to host short-term rentals in the District, such properties now have a 31-night minimum length of stay. Charlotte shared that the mid-length stay market of one to six months is the fastest-growing segment of the furnished rental market, but that’s another story.
Did you know all short-term rental hosts in DC are required to obtain a Short-term Rental License?
According to the Office of Short-term Rental Licensing, “In order to operate a short-term or vacation rental in the District, the property must be owned by an individual, and serve as a homeowner’s primary residence – with the owner being eligible to receive the Homestead Tax Deduction. ”
To be eligible for such a license the home must be your primary residence and owner-occupied. You will need to provide DC’s Office of Short-term Rental Licensing (DLCP) the following:
- Specify whether you currently have a Homestead Exemption on the property.
- Proof of your liability insurance with a minimum of $250,000 in coverage. (See below for more details).
- A Certificate of Clean Hands issued within the last 30 days in the property owners name must be obtained from the Office of Tax and Revenue.
- The owner, or “host,” must attest to the habitability of the property.
- If the rental is a co-op, condo, or if the property is in a community where there is a homeowners’ association, the owner must attest that the bylaws, house rules, or other governing documents of the homeowner/condo/ cooperative governing board or association allow short-term and/or vacation rentals, do not prohibit owners from operating short-term rentals and/or vacation rentals, or that they have received written permission from the association to operate a short-term and/or vacation rental at the address.
Once you have successfully registered with DLCP, you will be enabled with a license. You will then upload this Short-term Rental License number into your property profile on both Airbnb and VRBO. Those sites will then provide bookings for “under-31-nights” on your property.
By working with an experienced rental property manager, like LUXbnb, specializing in furnished temporary stays, you can ensure that you’re operating your short-term rental legally and safely. Better yet, you can avoid any penalties or fines that could result from non-compliance with District regulations.
Some factors you might want to consider on your journey to short-term rental success:
You’ll want to have a cleaning service at-the-ready and available to work seven days-a-week so that you can have the property guest-ready any time it is not rented out. Or maybe you’ll want a service to clean prior to arrivals and directly after departures, so you can quickly turn around the property for further rental.
Do you want to allow pets in your home while you’re away? If so, you might want to add an automatic post-stay pet cleaning fee to cover the expense of any extra cleaning, damage, or accidents.
Charlotte’s company manages damage by holding a security deposit on every rental. The cost to the guest is $39 per rental. This insurance is a safe-guard for the guest, property owner and her company, of course. This insurance policy “allows for the equitable transfer of the risk of a loss, from one entity to another – in this case the insurance company. It is a simple way for all parties involved to mitigate risk, and most importantly, provides peace-of-mind.”
As you saw above, the District requires all owners to possess a liability insurance policy with a minimum of $250,000 in coverage to gain a license in the District. A variety of companies can help, according to the Motley Fool’s “The Ascent” newsletter2, but some do this faster and better than others. And they even recommend ones that are best for Airbnb and VRBO rental owners. The Ascent’s best homeowners insurance for short-term rentals include the following:
- Allstate Insurance: Best for possessing a large network of agents
- Proper Insurance: Best for Airbnb and VRBO owners
- Nationwide Insurance Best for bundling policies
- Farmers Insurance: Best for vacation rentals
- Steadily Insurance: Best for getting coverage quickly
- Safely Insurance: Best for fast claims processing
Should you have further questions or seek to explore the option of short or mid-term rentals, do not hesitate to contact Charlotte Perry directly at 202-341-8799 or Charlotte@LUXbnb.com.
1Austermuhle, Martin. “D.C. to Start Restricting Airbnb and Other Short-Term Rentals.” DCist. Jan. 5, 2022.
2Chang, David. “the Best Homeowners Insurance for Short Term Rentals in 2023.” Motley Fool Ascent. March 17, 2023
Scott Bloom, Owner and Senior Property Manager,
Columbia Property Management
Bloom founded Columbia Property Management in 2012. CPM’s goal is to provide a powerful, personal level of service to our clients. We focus on smaller landlords, professionally managing their assets, so they can succeed by investing in rental real estate.
Scott is an active member in multiple professional organizations including the National Association of Residential Property Managers (NARPM) and serves on the property management committee of Greater Capital Area Association of REALTORS® (GCAAR).
For more information and resources, go to www.ColumbiaPM.com