The growing problem of unlicensed vacation rentals in Florida is costing the state millions per year in lost revenue and threatening the safety of both renters and their neighbors, according to a new report from Florida TaxWatch.
The nonpartisan, nonprofit taxpayer research organization released the new report, “Unlicensed Vacation Rentals: An Analysis of Florida’s Tourism-Driven Economy,” on Jan. 16, calling the unlicensed short-term rentals in the state a “burgeoning issue” that is having an outsized effect on the state economy.
“Although illegal, unlicensed vacation rentals can be found throughout the state,” the report states. “Unlicensed vacation rentals avoid the costs associated with licensure, including licensing fees, balcony inspections and safety training for housekeeping and reception staff. This not only puts the renter at risk but also creates a cost advantage over competing, legitimate businesses.”
Among the key findings in the study is that during an average day in November of last year, unlicensed Florida vacation rentals on available listings numbered 25,457, or 19% of all vacation rental listings during that month.
The TaxWatch study also pointed out that research from the University of Central Florida found 27% of unlicensed vacation bookings took place outside of major hosting platforms. Such listings would not be accounted for in the TaxWatch study.
Based on nightly averages during November 2023, TaxWatch estimated the amount of tax funds lost. “The loss of registration costs, which are required once per year, would be between $1.8 million and $6.9 million,” the report states.
The Florida Alliance for Vacation Rentals, whose members are licensed and comply with Florida law, said one problem with the current licensing system is the hodgepodge of tax policies in effect in the state and Florida counties.
“They have cut tax-collect-and-remit agreements with some platforms (not the 400-plus), but not every platform that advertises rentals,” Denis Hanks, the alliance’s executive director, said in an email to the Florida Record. “Some opt in, some don’t. Some counties have tax agreements and some don’t. Operators simply get confused sometimes. No consistent tax policy exists for vacation rentals.”
A tax system to ensure full compliance on licensing and taxes could be easily implemented by state officials, according to Hanks.
“If a proposed state bill simply mandated that every vacation rental listing or advertisement contains a state license number or tax ID number, it would follow suit with what all other industries do to track compliance,” he said. “State licensed home inspectors, Realtors, etc., all post a license number on advertisements to identify compliance.”
Hanks emphasized some vacation-rental operators are not professional property managers but mom-and-pop operators looking to supplement their incomes.
“FAVR has been raising this issue for years, but state bills want to focus on 26-page solutions and not the simple one-page solution to this problem,” he said. “The average person wants to be operating correctly, but they can’t if no one educates them and sets them on the right path from the beginning, or simplifies the process.”
The report also points out that private vacation rentals have become a more common alternative to traditional hotels and motels in Florida in recent years.
“At the end of fiscal year 2021-22, Florida had about 174,000 condos and dwellings licensed for use as vacation rental units, a growth of 33% compared to five years prior,” the report says.