Are short-term rental hosts ready for a technologically powered compliance crackdown in 2023?

Technological development has been rippling through the short-term rental (STR) space in recent years, with hosts embracing new developments to help monitor noise, check occupancy and otherwise streamline operations—but they’re not the only ones looking at new tech. A tidal wave of change is coming soon for non-compliant hosts, and they’d do well to prepare before it hits.

Based on recent trends, 2023 is likely to be the year that government adoption of technology to automate auditing short-term rental compliance in their jurisdictions hits its stride. Spurred on by regional controversies over short-term rentals, cities such as Forth Worth and Galveston, Texas; and more than 20 others have already started looking into contracting data-mining solutions powered by artificial intelligence to identify and monitor non-compliant properties. Hosts that have been operating underground for years, comfortable and complacent from an absence of frequent inspections, may soon find their operations crashing down under an artificial intelligence (AI)-driven compliance sweep.

Automated audits
Here’s how it works: the AI-solutions begin by using data-mining techniques to scrape information from AirBnB, Vrbo and other publicly available booking services for short-term rentals to create a unified list of active properties in a given jurisdiction. Then, this list is compared against information held by the tax authorities, the jurisdiction’s website and others to make sure everything is in order. Are the addresses properly labeled as STRs? Do taxes show as being rightfully remitted? Are all the permits and licenses in order? If not, the property can be automatically flagged for further investigation.

These data-mining methods stand to be a complete game changer for compliance enforcement. Assessments that would have taken a full team of inspectors weeks of grueling tedium can now be done passively with little to no involvement from any humans—allowing even smaller municipalities to skip right to the economically stimulating step of enforcement.

Exponential evolution
The general expectation is that this approach is going to scale rapidly in 2023—quite simply because the economic impact of such streamlined compliance crackdowns will likely prove irresistible to most municipalities. A recent study of Airbnb and Vrbo listings in Los Angeles by McGill University urban planning professor David Wachsmuth found noncompliance to be at a worrying 45 percent in the city. This amounts to roughly $300 million in fines that the city could have collected throughout 2022 due to violations, but it brought in less than $40,000 in fines over a similar period.

Considering the current state of the economy hampering many trusted sources of income, jurisdictions are bound to be open to considering any solution that provides such a considerable revenue stream. Those that are successful with it—whether from a financial or compliance standpoint—will likely create a ripple effect out to others facing similar problems.

To read the complete article, visit American City & County.