For those who have been operating an Airbnb or Vrbo in Philly, the new Philadelphia Airbnb license effective April 1st might seem like a bad April Fools’ joke. Alas, City Council isn’t laughing: the city is instituting a new license for “limited lodging,” which means a Philly Airbnb license is now required to legally rent out your space on an app.
Airbnb licenses aren’t new: short-term rentals are often contentious in any city with a sizable tourism economy (be happy we’re not Barcelona!). Whether residents are complaining about noise and litter, city officials want to get some tax dollars, or old-timers are worried about tourists in their neighborhoods, it’s only a matter of time before a city of Philly’s size slaps a permit on Airbnb (or Vrbo) operations. Other towns have required an Airbnb license for years – it’s just new to us in 2022.
The new Philly Airbnb licensing law, which passed in June 2021, requires Airbnb/Vrbo/etc. operators to obtain a “Limited Lodging Operator License” from the Department of Licenses & Inspections (L&I). Now, there have been some laws on the books regarding room and house rentals for a while, so this new law doesn’t change everything about vacation rentals in Philly. Instead, the newly-enacted Philadelphia Airbnb Licensing rules do four important things:
- Require all vacation rental properties to be properly zoned
- Require all booking apps/businesses to be registered with the City
- Require all people who rent out space through Airbnb or another booking app to obtain a Philadelphia Airbnb license or Rental License
- Require everyone using Airbnb or Vrbo or whatever to register as a Philly business and pay the City’s existing Hotel Tax
Let’s break these down:
All Properties or Spaces Used as an Airbnb Must Be Properly Zoned
This is part of the regulation that’s been around for a while: even before the Philadelphia Airbnb license was created, it was still illegal to use a unit as an Airbnb if the property wasn’t zoned for that activity. You must register the use of the place before you start renting it out on Vrbo or Booking.com or Arbnb.
There are two types of zoning in question:
- Zoning that allows you to use your own home as a vacation rental
- Zoning that allows you to use any property you own or rent, even if you don’t live there, as a vacation rental
Zoning that allows you to use your own place as a vacation rental
This is what most people think of when they think of Airbnb: you have a place, and when you’re not there (or maybe if you have a guest room) you use an app to let people stay for a fee. While some jurisdictions refer to these arrangements as short-term rentals (STRs) or vacation rentals, the Philadelphia Code calls this Limited Lodging, which is more fun, because it’s alliterative (like Permit Philly)!
The same ordinance law that created the Philadelphia Airbnb license defines Limited Lodging as “the accessory use of a dwelling unit for temporary rental for occupancy for dwelling, sleeping or lodging.” But what, you ask, does “temporary” mean? The law is happy to help! It says that for a rental use to count as Limited Lodging, the space can be rented for no more than 30 days at a time. (There used to also be a rule that you couldn’t rent out the space more than 180 days a year, but that’s been repealed in the new law.)
Now, limited lodging is an accessory use. This means that you can only obtain a zoning permit allowing this use if the property is also zoned for residential dwelling – either as a single-family home, a duplex, or an apartment building of 3+ units (you’d just be renting out a single unit in that case).
There’s another big caveat: in almost everywhere in the city, you can register a place you rent and live in as Limited Lodging and proceed to get a Philadelphia Airbnb license. However, in the Tenth Councilmanic District (in the far Northeast), the primary resident must also be the owner of the property in order to qualify for use as Limited Lodging and obtain a Limited Lodging Operator License. No renters allowed to make use of Airbnb in the Tenth! (We don’t know why; just take it up with Brian O’Neil. Maybe a renter hurt his feelings.)
So of course, now you’re wondering: what if I want to rent out like four apartments that I don’t live at on Airbnb? Lucky for you, there is another way!
Zoning that allows you to use any property you own or rent, even if you don’t live there, as a vacation rental
If you want to use a space you don’t live in as an Airbnb, you can, provided you register for use as “Visitor Accommodations.”
If you’ve heard of this before, you’re thinking: isn’t that a hotel? And you’re right! This is the City of Philadelphia’s official zoning language for hotels and motels. It’s also, as of April 1st 2022, the official zoning language for Airbnbs operated by someone who doesn’t live in the joint. (It’s possible this part of the law is an acknowledgement that small hotels often use Airbnb to book these days.)
Now, crucially, you do not need the new Philly Airbnb license (the “Limited Lodging Operator” license) if you are renting out a place for under 30 days at a time and do not live there. Instead, you need a Rental License, and you have to specify that you are renting your space as a hotel.
This probably seems like a great deal, but remember: visitor accommodation is not an accessory use, and visitor accommodation is not allowed everywhere in the City. That means you have to either accept limits on where you can operate your Airbnb empire, or you can try for a variance and face potentially uncooperative neighbors. This is the trade-off under the new law: you don’t need the new license to operate a hotel-like Airbnb, but you do need proper zoning permits, which can be difficult to acquire – and then after all that, you need a rental license.
(If you need a variance or are not sure what uses are allowed at your property, contact Permit Philly!)
All Rental Apps Must be Registered with the City of Philadelphia
This is the rule that probably has the least effect on most people. This is the responsibility of Airbnb and Vrbo corporate: they are required to be registered with the City and to pay operating fees to work in Philly. This license is called a – deep breath – “Limited Lodging and Hotels Booking Agent License.” It basically means that your vacation rental company has to pay to let others play in Philadelphia.
The major thing that you, the operator of an Airbnb, have to do, is make sure you only use established, registered businesses to book stays for travelers. When a new app pops on the market – or if you and your friends want to launch your own – make sure it’s registered with Licenses and Inspections, or you’ll be shut down and fined for letting people book your room through it.
As for Airbnb and their competitors: they have to pay up! The initial fee for a Limited Lodging and Hotels Booking Agent License is $7,000 with an annual renewal fee of $5,000.
All Airbnb or Vrbo Hosts Must Obtain either a Philly Airbnb License or a Rental License as a Hotel
Again, the official name for the new Airbnb license is the “Limited Lodging Operator License.” (Because, you know, it’s for officially-zoned Limited Lodging.) And again, if you are renting out a place you don’t live in, you have to register your property for Visitor Accommodations but you don’t need this new Airbnb license. Instead, you need the existing Philadelphia Rental License (and make sure that you note that you’re a hotel in the application).
So for the Limited Lodging people (those who Airbnb their own residence), get ready to submit the following in application for a Limited Lodging Operator License:
- Limited Lodging Operator License fee of $150 (paid every year you operate)
- Ownership Information:
- New owners must submit a recorded deed or settlement sheet as proof of ownership if the property was recently sold
- If that owner is a company, you have to provide the name and address of an individual with more than 49% ownership interest in the property or the two individuals with the largest interest
- Tenants must provide a copy of their lease agreement
- Proof that your property complies with lead safety certification requirements
- For large homes (specifically, over 5 bedrooms), a Certificate of Occupancy is required
The Limited Lodging Operator License also requires operators to maintain the following records for a period of one year:
- Proof that the property remained a primary residence during the time it was rented out
- The dates the home was rented to short-term guests
- The total number of guests
The person running their home Airbnb or Vrbo must also make sure their guests know the following rules, mandated by the new law:
- Guests can’t check in or out before 8 a.m. or after midnight
- Guests have to keep up with trash disposal, and the owner of the Airbnb has to provide trash collection bins
- Excessive noise is prohibited and can be penalized with fines (and “excessive noise” is real vague, so make sure your neighbors are cool!)
- Renters must be provided with contact information for the owner or the owner’s representative. (This means that if you run a dangerous Airbnb out of your apartment, you can expect your landlord to hear about it.)
Okay, got all that? There’s more! The short-term rental also has to comply with basic rules found elsewhere in the Philadelphia Code, like making sure smoke alarms are installed and that no more than three unrelated people rent the home being used as an Airbnb. The property owners or renters hosting the Airbnb/Vrbo/whatever also can’t add signs to the property or refit it as a hotel. The license is just for people who want to let people pay to stay in their room for a bit, not people who want to start a small hotel chain.
Once you have everything together, you can submit the Airbnb (Limited Lodging Operator) license through the regular channels: in person at the Municipal Services Building or through eCLIPSE, the City’s online permitting system.
Now for the Visitor Accommodation crowd (those who do not live at the property they’re renting out on Airbnb): you need to have many of the same documents outlined above, like…
- Ownership information
- Proof that you comply with lead safety regulations
- Proof of proper zoning
Additionally, you need a Rental License, which requires:
- A $56/unit rental license fee (paid each year you operate)
- A Certificate of Occupancy
If that seems too easy, don’t worry! The City needs its cut of operations, too:
Every Person or Company Using Airbnb, Vrbo, etc. Must Register as a Philadelphia Business and Pay the City’s Hotel Tax (and Other Fun Taxes!)
Whether you need the new Limited Lodging Operator License or a Rental License (as a hotel) to operate your Airbnb, you need to pay taxes on your business. This means you need to have a Commercial Activity License and a Philadelphia Tax ID on file with the City of Philadelphia. You’ll be paying the Net Profits Tax, the Business Income and Receipts tax, and – if you have employees – the notorious Wage Tax.
It also means that in addition to paying your taxes as a business operator in Philly like any other business, you also have to pay the City’s 8.5% Hotel Tax on any fees your guests pay to you.
If you are using Airbnb, this will be taken care of by the app itself: the fees will be automatically added to whatever you charge. However, for any other apps – or if you want to try to book some rooms without Airbnb – you’ll want to make sure that this fee is collected. Check out the Hotel Tax reference page on the City’s website for more information.
If You Still Have Questions about the Airbnb License…
If you have an Airbnb, would like to start renting a place, or are curious about the related permits, please give us a call at (267)744-4200 or send us a message at firstname.lastname@example.org. We can get your Philly Airbnb license and get you booking guests in no time.