Short-term rental platforms like Airbnb have completely changed the way we think about travel and property ownership. For travelers, they offer unique, flexible lodging options. For property owners, they create new income streams. But this booming industry hasn’t come without its challenges. From zoning disputes to HOA restrictions, tax compliance issues, and discrimination claims, short-term rentals have sparked a wave of legal battles that are reshaping the real estate and hospitality industries.
For business litigation attorneys and real estate professionals, staying on top of these legal developments is critical. Whether you’re representing a property owner, advising an HOA, or helping municipalities draft regulations, understanding the key legal issues in this space can make all the difference.
Please note this blog post should be used for learning and illustrative purposes. It is not a substitute for consultation with an attorney with expertise in this area. If you have questions about a specific legal issue, we always recommend that you consult an attorney to discuss the particulars of your case.
Zoning Challenges: Residential vs. Commercial Use
One of the biggest flashpoints in short-term rental disputes is zoning. Cities and towns across the country are grappling with whether short-term rentals belong in residential neighborhoods. On one side are municipalities trying to preserve housing stock and neighborhood character; on the other are property owners arguing that these restrictions infringe on their rights.
Take Eager v. Peasley (2017) as an example. In this Michigan case, the court ruled that short-term rentals violated residential zoning laws because they were considered a commercial use. The court explained that even though the activity involved residential living (like sleeping and eating), renting out a home for short stays was fundamentally a business activity.
But not all courts see it this way. In 2024, the Connecticut Supreme Court ruled that short-term rentals didn’t violate residential zoning laws because the term “residence” could include temporary stays. The court emphasized that if a zoning ordinance doesn’t specifically define what “residential use” means, it shouldn’t be interpreted too narrowly.
What’s clear is that zoning battles over short-term rentals are far from settled—and outcomes can vary widely depending on local laws and how courts interpret them.
HOA Restrictions: Preserving Community Standards
Homeowner associations (HOAs) have also jumped into the fray when it comes to regulating short-term rentals. These disputes often boil down to how HOA covenants are written and whether they explicitly address short-term rental activity.
In one Colorado case, a court found that an HOA couldn’t enforce a ban on short-term rentals because its governing documents didn’t clearly prohibit them. This decision highlights an important point: if HOAs want to restrict short-term rentals, their rules need to be crystal clear.
On the flip side, courts have upheld HOA restrictions when covenants explicitly ban short-term rentals. For example, some communities argue that allowing transient guests undermines neighborhood stability and increases noise or safety concerns.
For attorneys representing HOAs or property owners, the lesson is simple: governing documents matter. Ambiguities can lead to costly legal battles—and potentially unfavorable outcomes.
Municipal Regulations: Airbnb vs. Local Governments
Cities have been cracking down on short-term rentals with increasingly complex regulations—and platforms like Airbnb have been pushing back.
New York City’s Local Law 18
New York City’s Local Law 18 is one of the most aggressive examples of municipal regulation targeting short-term rentals. The law requires hosts to register with the city before listing their properties on platforms like Airbnb and prohibits platforms from processing payments for unregistered listings. Airbnb challenged this law in court, arguing it was too restrictive, but the court sided with the city. The ruling emphasized New York’s need to regulate short-term rentals to address housing shortages and ensure compliance with local laws.
New Orleans Lawsuit
In New Orleans, Airbnb filed a lawsuit challenging new rules requiring platforms to verify that all listings comply with local laws before processing bookings. Airbnb argued that enforcement should be the government’s responsibility—not theirs—but this case is still working its way through the courts.
These cases illustrate a growing trend: municipalities are holding platforms like Airbnb accountable for ensuring compliance with local regulations. For attorneys advising cities or property owners, understanding how these rules are enforced (and challenged) is becoming increasingly important.
Tax Compliance: A Growing Financial Risk
Taxes are another hot-button issue in the short-term rental world. Governments at every level—local, state, and even international—are cracking down on tax compliance for both hosts and platforms.
In Italy, for example, Airbnb faced allegations of failing to collect a 21% tax on landlords’ rental income. The platform ultimately settled for €576 million in 2023—a stark reminder of how costly non-compliance can be.
In the U.S., many cities now require short-term rental operators to collect occupancy taxes similar to those imposed on hotels. For hosts who don’t comply—or platforms that fail to enforce these rules—the financial penalties can be significant.
Attorneys advising clients in this space should stress the importance of understanding local tax obligations before listing properties or processing bookings.
Discrimination and Accessibility: Are Platforms Public Accommodations?
The rise of digital platforms like Airbnb has raised new questions about discrimination laws—particularly whether these platforms qualify as “public accommodations” under anti-discrimination statutes.
In Hogan v. Airbnb, Inc., an Illinois case, the Human Rights Commission ruled that Airbnb isn’t considered a public accommodation under state law because it operates as an online platform rather than a physical space. This decision suggests that traditional anti-discrimination protections may not directly apply to digital platforms—although this remains an unsettled area of law.
At the same time, individual hosts must still comply with federal anti-discrimination laws under the Fair Housing Act (FHA). Attorneys should counsel clients—especially property owners—on their obligations under FHA guidelines to avoid potential lawsuits related to discriminatory practices.
Arbitration Clauses: Enforceability in User Agreements
Airbnb has also faced legal challenges over its arbitration clauses—provisions in its user agreements that require disputes to be resolved outside of court.
In Airbnb, Inc. v. Doe, Florida’s Supreme Court upheld Airbnb’s motion to compel arbitration based on its terms of service. The court found that users agreed to arbitration when they signed up for the platform—even if they didn’t read every word of the agreement.
For attorneys representing clients involved in disputes with platforms like Airbnb, understanding how arbitration clauses work (and when they’re enforceable) is critical when advising on litigation strategies or negotiating settlements.
Emerging Trends: What’s Next for Short-Term Rentals?
The legal landscape around short-term rentals continues to evolve rapidly—and new challenges are already emerging:
- AI-Driven Pricing Algorithms: Platforms like Airbnb use artificial intelligence (AI) for dynamic pricing—but these algorithms could lead to disputes over fairness or transparency.
- Environmental Regulations: Cities may impose stricter rules related to waste management or energy efficiency for properties used as short-term rentals.
- Cross-Border Tax Compliance: As platforms expand globally, hosts may face complex international tax obligations requiring careful navigation.
Attorneys who stay ahead of these trends will be better positioned to help their clients navigate what’s next in this ever-changing industry.
Practical Tips for Stakeholders
For Attorneys
- Stay updated on legislative changes and court rulings affecting short-term rentals.
- Draft clear agreements for HOAs or municipalities to minimize ambiguities.
- Advise clients on their rights under zoning laws and HOA covenants.
For Property Owners
- Ensure compliance with local regulations and tax obligations before listing properties.
- Review platform terms carefully to understand dispute resolution processes.
- Consult an attorney if facing challenges from neighbors or HOAs.
For Municipalities
- Balance regulatory goals with property owners’ rights when drafting ordinances.
- Collaborate with platforms like Airbnb to streamline enforcement mechanisms.
- Consider public input when implementing new restrictions or registration requirements.
Conclusion
Short-term rentals have transformed how we think about travel and real estate—but they’ve also introduced significant legal challenges. From zoning battles and HOA disputes to tax compliance issues and discrimination claims, navigating this complex landscape requires careful planning and expert guidance.
If you’re facing legal challenges related to short-term rentals—whether you’re a property owner, HOA member, or municipality—our experienced business litigation attorneys can help you protect your interests and find solutions tailored to your needs. Contact us today for a consultation!
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Resources
Airbnb, Inc. v. Doe, No. SC20-1167 (Fla. Mar. 31, 2022). Retrieved from https://law.justia.com/cases/florida/supreme-court/2022/sc20-1167.html
Eager v. Peasley, 322 Mich. App. 174, 911 N.W.2d 470 (2017). Retrieved from https://micondolaw.com/2023/08/01/michigan-court-of-appeals-holds-that-short-term-rentals-violate-residential-use-restrictions/
Hogan v. Airbnb, Inc., Illinois Human Rights Commission (2023). Retrieved from https://hsplegal.com/the-hogan-v-airbnb-case-challenging-discrimination-in-the-digital-era/
New Orleans City Council. (2023). Short Term Rental Administration and Enforcement. Retrieved from https://council.nola.gov/committees/short-term-rentals/
Pine Orchard Association Zoning Regulations, Branford, CT. (2018). Retrieved from https://www.jud.ct.gov/external/supapp/Cases/AROcr/CR349/CR349.42.pdf
Selden v. Airbnb, Inc., No. 16-2474 (D.C. Cir. 2021). Retrieved from https://caselaw.findlaw.com/court/us-dc-circuit/2137922.html
South Lake Tahoe Property Owners Group v. City of South Lake Tahoe, El Dorado County Superior Court (2025). Retrieved from https://www.sfchronicle.com/tahoe/article/south-lake-tahoe-vacation-rental-ruling-20222614.php
Touch Stay. (2024). Airbnb regulations by state: a comprehensive guide for hosts. Retrieved from https://touchstay.com/blog/airbnb-regulations-by-state