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Puerto Rico debates regulation of short-term rentals

The Senate rejected House Bill 1557, leaving the STR sector without clear regulations.

Countries and cities throughout the world are struggling to define, regulate and tax short-term rentals (STRs), Puerto Rico included. Just last week, Puerto Rico’s Senate voted against House Bill 1557, which aimed at overseeing this booming sector of the tourism industry, prompting mixed reactions from groups representing hotels, small inns, STRs and residents.

A great point of contention is whether STRs constitute residential or commercial activity. But to make that determination, regulators need to agree on what STRs are and are not and address issues such as zoning and housing.

Short-term rental basics
A short-term rental, also known as transient rental and vacation rental, is a rental of any residential apartment, home unit or accessory building for a short period of time. STRs typically consist of furnished accommodations and stays of less than 30 days, but the maximum length can vary depending on the jurisdiction in which the rental is located.

It has been estimated that STRs represent a $140 billion global market and account for 20% of the global rental industry.

STRs are transforming the tourism industry, offering property owners and investors new income opportunities. However, the rapid growth of this market is prompting regulatory measures that aim to balance benefits and challenges.

A patchy regulatory landscape
STR regulations vary widely across cities and countries. They generally deal with aspects such as registration, licensing, zoning, taxes, building codes and safety requirements, as well as housing preservation and affordability, neighborhood disruptions, and operational rules regarding noise, parking and waste disposal.

Some jurisdictions make a distinction between STR properties in areas zoned as residential and commercial or multi-use areas. Some divide STRs based on whether the owner of the property is present or absent while the property is rented.

The U.S. and Canada lack national frameworks for STR regulations, which are primarily determined at the state and local levels, creating a complex patchwork of rules for property owners and travelers to navigate.

Similarly, the STR regulatory landscape in Europe, the U.K. and Asia is continually evolving, with different countries enforcing different regulations regarding registration, licensing, zoning, taxes and safety standards.

STRs: Residential or commercial?
Whether STRs are considered a residential or commercial activity depends on the jurisdiction, but many, like Puerto Rico, are struggling to reach a conclusion.

In Puerto Rico, most groups representing hotels and small inns agree that STRs should be regulated as a commercial activity, while booking companies and most property owners do not support this classification.

René Acosta, co-president of Viva Puerto Rico Short-Term Alliance, told News is my Business that, at least for now, STRs should remain defined as a residential, not commercial, activity.

“If a short-term rental in a residential area is set up as a small hotel, rents cars, offers massages, etc., then that’s commercial,” he said.

Changing the classification to commercial would not favor the sector, as it would prompt the exodus of thousands of STRs from the local market.

“If short-term rentals are changed to commercial, what’s going to happen with people who are renting their homes or apartments? They know, everybody knows, that they’re not going to be granted a commercial permit for a property located in a residential area, so they’re going to leave,” he said.

Viva believes that about half of local STRs would leave the market. 

“It wouldn’t be a disaster, but it would set tourism back because it would significantly affect inventory, prices, and people who stay in short-term rentals don’t necessarily want to go to a hotel,” he said, noting that many young travelers today prefer staying at STRs.

“More importantly, la Junta [Financial Oversight and Management Board for Puerto Rico] would never approve such a change because it would mean less room tax for tourism, which depends on that money, and less inventory,” he said. “And the governor has said he would veto such a measure.”

Acosta expressed disappointment that the Senate rejected HB 1557 because it was a start in the much-needed process of regulating the rapidly growing local STR sector.

“The bill had many good points, but its opponents focused on the commercial definition and ignored many helpful measures that, for example, would’ve given municipalities autonomy to regulate short-term rentals. Opponents can celebrate because the bill wasn’t approved, but we stayed the same, in status quo, with no regulations,” he said.

“We spent almost two years on that bill, and after hearings, changes, more hearings and changes, we have nothing,” he added.

“We want to solve this,” Acosta continued. “Maybe there’s a better way to define what’s commercial and what isn’t. We want to meet with every side to come up with a consensus for a solution that can work for everybody.”

Author Details
Author Details
G. Torres is a freelance journalist, writer and editor. She’s worked in business journalism for more than 25 years, including posts as a reporter and copy editor at Caribbean Business, business editor at the San Juan Star and oil markets editor at S&P Global Platts (previously a McGraw Hill company). She’s also worked in marketing on and off for decades, now freelancing for local marketing and communications agencies.

1 Comment

  1. Guillermo Toledo July 5, 2024

    It is a shame that our senate does not have the best interest for the puertorican people. Puerto Rico needs to see regulation on STR, they are becoming a hinderance to the population and only helping those with multiple properties, or property management like the governors son.


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