How to comply with Philly’s new Airbnb, limited lodging laws

The short-term rental boom, first started by Airbnb more than 10 years ago, disrupted the vacation and hotel renting industry across the globe. However, in cities like Philadelphia, that disruption led to residents being concerned that short-term rentals were driving up local rents, limiting the availability of long-term residential rentals, attracting an influx of tourists and creating excessive noise.

Starting Jan. 1, in an effort to strike balance between tourism and community, the city imposed regulations on short-term rentals.

Before regulations, these rentals operated mostly unsupervised in the city, where city hall wasn’t able to collect taxes or check safety codes. Properties could even be put up on these rental sites without the homeowner’s knowledge — as was the case with one South Philly resident this previous Christmas, who came home to find someone had listed the family home to a renter.

The city is regulating the industry so that short-term rental operators need two licenses and a zoning permit in order to legally operate in the city (which will cost them a few hundred dollars). Online platforms will also require these rental operators to confirm that their rental is licensed. Additionally, all operators need to pay the city’s Hotel Room Rental Tax, but in most cases, booking agents and online platforms will work the tax into their fees and pay the Hotel tax on the operator’s behalf.

» READ MORE: On Jan. 1, Philly will start enforcing new rules for Airbnb and other short-term rentals

Although these regulations are part of a new bill introduced by city council in 2021, many of these rules have been in place since 2015 — they were rarely enforced until now.

If you’re an established Airbnb operator or are thinking about getting into the short-term rental game, here’s what you need to know to keep your business up to code. (Keep in mind, this entire process can take a few weeks.)

In Philadelphia, you are legally allowed to rent out your property, or a room in it, for 30 days or less — the city defines this as a short-term rental. These are the types of rentals you see on apps like Airbnb, Vrbo, or Booking.com. However, in order to do so, you need licensing, permits and a city business tax account to effectively make your short-term rental an above-board business.

There are two categories of short-term rentals and each have their own licenses and permits.

No matter what category a host falls under, they’re going to need a Philadelphia Business Income and Receipts Tax (BIRT) account and a Commercial Activity License. Both are free to get and the first requirements for any individual or company to operate a business in Philadelphia. With a BIRT account, you need to pay 5.99% to the city on taxable net income.

Completing these steps is like registering your business with the city, but you still need to get more specific licenses and permits to start operating.

» READ MORE: Starting a business? Here’s how to get a business license in Pennsylvania.

How to open a city business tax account: Hosts can open a tax account at tax-services.phila.gov. You can also download and fill out a paper form with mailing instructions. You’ll need your tax account number when applying for a Commercial Activity License.

How to get a Commercial Activity License: Hosts can apply for this license at eclipse.phila.gov. If you need help applying for the license, schedule a virtual appointment. You can also schedule an appointment to apply in-person at the Permit and License Center at 1401 John F. Kennedy Blvd. on weekdays from 8 a.m. to 3:30 p.m., by calling 311 or scheduling an appointment online. This license is renewed each year.

If a host lives at the property they’re renting out for 30 days or less, then the city considers this a limited lodging rental.

After getting a BIRT account and Commercial Activity License, Limited Lodging rentals are required to get:

A host can only apply for a Limited Lodging License until after they get a zoning permit approved for Limited Lodging use.

If a host or booking agent doesn’t live at the property they’re renting out for 30 days or less, then the city considers this a rental property.

After getting a BIRT account and Commercial Activity License, these short-term rentals are required to get:

A host can only apply for a Rental License until after they get a zoning permit approved for Visitor Accommodation use.

For starters, short-term rental operators need to cease operations until they get the necessary licensing and permits or they’ll be violating regulations.

The city will be enforcing these rules by working with booking agents and online platforms like Airbnb that list short-term rentals, to periodically communicate and check whether rentals listed on their sites are operating legally. Basically, if you are still advertising or listing a short-term rental without proper licensing and permits, you may get reported to the city by a booking agent or online platform.

If you’re caught violating the rules, L&I will issue a Site Violation Notice (SVN) to the property owner, which can come with some hefty fines.

Another sore point for short-term rental operators is that in order to get this documentation, the rental property needs to be up to code, which may cost money depending on the state of the property.

Before you can get licensing and permits for a property:

If a zoning permit is denied: Applying for a zoning permit isn’t one-and-done — it can be denied. Hosts then have to appeal the decision in less than 30 days, which can cost up to $300. Hosts also need to present their appeal at a public Zoning Board of Adjustment hearing. More information on appealing zoning decisions can be found online.

Hotel Tax: All short-term rental operators now have to pay the city’s Hotel Room Tax as well, which is 8.5% of the total amount paid by the guest. These taxes need to be paid on the 15th of each month using your BIRT account. However, in most cases, online platforms will work the tax into their fees and pay the Hotel tax on the operator’s behalf, according to a city spokesperson.

Insurance: Getting a property insured for short-term renting is not required by the city to operate legally, but insurance is a good safety net in case accidents happen. Regular homeowner’s insurance probably won’t cover short-term renting, so you may need additional coverage or a new type of coverage. Airbnb also offers hosts insurance through them.

Guest rules: People renting the property are only allowed to have guests between the hours of 8 a.m. and midnight. Additionally, only three people (including the owner and renters) can occupy the property at a time, unless they’re related.