Short-Term Rental Regulation May Again Be Changing in The City of St. Louis

On November 5, residents of the City of St. Louis will have the opportunity to vote on a new tax on short-term rentals (STRs). Proposition S, if passed, would require people who stay in an STR to pay an additional 3% per night on top of existing lodging taxes. The revenue raised would go toward building affordable housing units in the city and toward other expenses, such as providing attorneys for renters in eviction proceedings.

Why Is This Proposition Being Brought to Voters?

This proposition is intended to address concerns about STRs affecting housing affordability. In fact, a St. Louis City alderman had this to say about Proposition S:

As we’ve seen a proliferation of short-term rentals, we’ve also seen rents and mortgage rates also climb as a result of that. . . . This [Prop S] is kind of a drop in the bucket to try and offset some of that.

Concerns about the effect of STRs on the housing market are not unreasonable, as some studies have indicated that STRs drive up housing costs by decreasing the supply of owner-occupied housing stock and long-term rental units. However, other studies have found that STRs bring increased tax revenue, supplemental income, residential renovation, business growth, and tourism to underdeveloped areas.

The City’s Previous Efforts on Short-Term Rentals

Last year, concerns with STRs arose following numerous horror stories of out-of-control parties. A slew of regulations (some reasonable and some harmful) were enacted through Board Bills 33 and 34, on which my colleague David Stokes and I testified.

Here is a list of the regulations added to STRs in the City of St. Louis last year:

• Annually, STR Agents must acquire an STR permit, with a $150 fee.
• Minimum stay of 2 nights.
• No STRs in a place benefited by tax-increment financing or tax abatements.
• In structures between 5 and 23 units, no more than 25% of units can be STRs.
• In structures with 24+ units, no more than 12.5% of units can be STRs.
• No single owner can receive a permit for more than 4 units.
• The owner must be a natural person.
• An STR Agent must be physically present at the address within one hour if required.
• Three-strikes rule for bad conduct within 24 months (suspension can last for one year).

Adding a new tax on top of the numerous regulations from Board Bills 33 and 34 is likely to make things more difficult for the STR industry, which could in turn make it harder for the city to bring in substantial tax revenue from STRs. Alleviating rising housing costs is a worthy goal, but is this approach the right solution? It also raises the question of whether STRs should be taxed more than hotels in the City of St. Louis. These are issues for voters to consider as they decide on Proposition S.