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Madison Short Term Rental Regulation: A Guide For Airbnb Hosts

Madison, Wisconsin

Starting a Short Term Rental Business in Madison

Short-term rentals (STRs) like Airbnb and VRBO have become increasingly popular in Madison, Wisconsin in recent years as a way for property owners to earn extra income and for travelers to find unique accommodations. However, the city has enacted regulations to ensure STRs operate safely and don't negatively impact neighborhoods.

Before starting an STR business in Madison, it's important to understand the licensing requirements, taxes, zoning restrictions, and operating rules. The city wants to balance allowing STRs with preserving housing stock and maintaining neighborhood character.

Madison's STR market has grown significantly, with over 1,000 active listings as of 2022. The most popular areas for STRs are downtown near the Capitol and University of Wisconsin, as well as near parks and lakes. Renting out your home short-term can be profitable, with average daily rates around $150, but it's crucial to comply with regulations to avoid fines and legal issues.

Some Madison residents have raised concerns about the growth of STRs, worried about their impact on housing affordability and quality of life. In response, the city has aimed to craft STR policies that allow them to operate while mitigating potential downsides. By obtaining proper permits, paying taxes, and being a responsible host, you can run a successful STR business in Madison.

Short Term Rental Licensing Requirement in Madison

All short-term rentals in Madison, defined as stays of less than 30 consecutive days, must obtain a Tourist Rooming House license from Public Health Madison & Dane County (PHMDC) prior to operating. This requirement applies whether you rent out your entire home or just a room, and whether you use a platform like Airbnb or VRBO or book guests directly.

The licensing process aims to ensure STRs meet health and safety standards. A pre-inspection is required for new licenses, and a health inspection occurs annually to check for compliance with regulations like fire safety, cleanliness, and guest registry maintenance. Licenses must be renewed each year.

The STR licensing year in Madison runs from July 1 to June 30. PHMDC accepts license applications year-round, but it's best to apply at least 30 days before you intend to start renting to allow time for processing and the pre-inspection.

Failure to obtain an STR license can result in fines of up to $1,000 per day of illegal operation. The city actively looks for unlicensed STRs and will issue citations, so it's not worth the risk of operating without a license.

Some Airbnb and VRBO hosts in Madison have complained that the licensing process is overly complex and burdensome for small-scale operators. However, city officials argue the regulations are necessary to ensure a safe experience for guests and protect neighborhood character.

To make the process smoother, PHMDC provides STR licensing guides and checklists on its website. You can also contact the department with questions. While getting licensed takes some effort, it's a critical step to operating legally in Madison.

Required Documents for Madison Short Term Rentals

To apply for a Tourist Rooming House license, you must submit the following to Public Health Madison & Dane County:

  • A completed license application, which you can fill out online or print and mail in. The application asks for details about your STR property, contact information, and operation plans.
  • Proof of a Wisconsin Seller's Permit, which you obtain from the Wisconsin Department of Revenue. There is a $20 fee for this permit, which allows you to collect sales tax from guests.
  • Proof of registration with the City of Madison Treasurer for room tax collection. You must register your STR property online and pay a $2 fee. This allows you to collect and remit the 10% city room tax on stays less than 30 days.
  • Payment of the $535 Tourist Rooming House license fee, which includes a one-time $375 pre-inspection fee. You can pay by credit card online or mail a check. The annual license renewal fee in subsequent years is $160.
  • A completed self-inspection checklist, where you verify your STR meets health and safety standards like working smoke detectors, fire extinguishers, and carbon monoxide detectors. A public health inspector will then conduct an on-site pre-inspection before issuing your license.
  • If you are a tenant renting out your unit as an STR, you must provide written permission from your landlord. The city requires this to ensure tenants aren't violating their lease terms.
  • It's important to submit all required documents and payment to avoid delays in processing your STR license application. PHMDC staff may contact you if anything is missing or incomplete.
  • Once you've met all the licensing requirements and passed the pre-inspection, PHMDC will issue your Tourist Rooming House license, which you must display in your STR unit. You're then legally permitted to begin hosting short-term guests.

Some Madison STR operators have found the documentation requirements extensive. However, the city provides clear instructions and resources to help. Ensuring you have all necessary permits and registrations sets you up for success and avoids potential penalties down the road.

Madison Short Term Rental Taxes

In addition to obtaining a license, short-term rentals in Madison are subject to the following taxes:

  • Wisconsin sales tax of 5.5% (5% state + 0.5% county) on stays less than 30 days, unless your taxable sales are under $1000 annually. You must collect this tax from guests and remit it to the Wisconsin Department of Revenue.
  • City of Madison room tax of 10% on stays less than 30 days. You must collect this tax from guests and remit it to the City Treasurer's office monthly, along with a room tax return form.
  • If you use Airbnb to book guests, the platform collects and remits both the sales tax and room tax on your behalf, so you don't have to worry about those steps.
  • However, if you use other platforms like VRBO or direct booking, you are responsible for collecting and submitting the taxes yourself.It's crucial to maintain good records of your STR income and tax payments, as the city may audit you to ensure compliance. Failure to properly collect and remit taxes can result in fines and legal penalties.
  • Some Madison STR hosts have found the tax collection process confusing, especially when using multiple booking platforms. The City Treasurer's office provides guides and resources on their website to help, and you can contact them with questions.

Paying taxes is a key part of operating a legal and responsible STR business in Madison. By staying on top of tax requirements, you contribute to important city services and avoid potential legal issues.

Madison-wide Short Term Rental Rules

In addition to licensing and tax requirements, Madison has several key regulations all STRs must follow:

  • The STR must be the host's primary residence, defined as the place they live for more than half the year. This is to prevent investors from buying up housing stock solely for STR use.
  • In multi-unit buildings like apartments and condos, STRs are only allowed in the specific unit the host lives in. You can't rent out multiple units in the same building short-term.
  • When the host is off-site during the rental, STRs are limited to a total of 30 days per licensing year. There's no limit on rental days if the host is on-site in another part of the property during the stay.
  • If you are a tenant, you must have express written permission from your landlord to operate an STR. Violating your lease terms can lead to eviction.
  • Your STR must meet all building code and zoning requirements for your property type and neighborhood. For example, some areas of Madison don't allow STRs in accessory dwelling units like basement apartments.
  • You must provide guests with a copy of your STR license and any house rules, and maintain a guest registry with names and dates of stay. This is for safety and accountability.
  • You're responsible for ensuring guests follow noise, parking, and trash ordinances, and you must provide a local contact available 24/7 to address any issues that arise.

These rules aim to balance allowing STRs to operate while protecting permanent housing supply and neighborhood livability. Some Madison residents and officials have pushed for stricter regulations like banning off-site STRs entirely, but so far the city has opted for a more moderate approach.

As an STR host, it's your responsibility to understand and follow all applicable rules. Violations can lead to fines, license suspension or revocation, and even criminal charges in extreme cases.

If you have questions about the regulations, you can contact the city's zoning department or consult the STR FAQ on the PHMDC website. Staying compliant helps ensure a positive experience for you, your guests, and your neighbors.

Does Madison strictly enforce STR rules?

Based on discussions in real estate investing forums and local media reports, Madison takes STR compliance relatively seriously compared to some other cities. The city has systems in place to identify and investigate potential violations.

The Public Health department, zoning department, and police department all play a role in STR enforcement. They respond to complaints from neighbors, conduct proactive audits of STR listings, and issue citations for violations like operating without a license or exceeding rental day limits.

In recent years, Madison has stepped up enforcement efforts, with officials stating they want to ensure a level playing field for all STR operators. In 2021, the city issued over 50 citations for STR violations, with fines ranging from a few hundred to several thousand dollars.

However, some Madison STR hosts argue the city's enforcement is inconsistent and overly punitive. They say minor infractions like forgetting to display a license can lead to steep fines, while more serious violations go unaddressed.It's likely that some unpermitted STRs still operate under the radar in Madison, as the city has limited resources to proactively find and shut down every illegal listing. But the risk of getting caught and facing penalties is real, and the city does make STR enforcement a priority.

Compared to some larger cities with less stringent rules, Madison falls somewhere in the middle in terms of STR friendliness. The regulations are not as strict as places like Santa Monica or New York that have essentially banned STRs, but they are more comprehensive than cities with little to no oversight.

If you want to operate an STR in Madison, your best bet is to fully understand the rules and follow them closely. Work with city officials to get licensed and address any issues that arise. With responsible management, STRs can be a good business opportunity in Madison's strong tourism market.

How to Start a Short Term Rental Business in Madison

If you're interested in starting an STR business in Madison, here are the key steps:

  • Confirm your property is eligible for STR use under Madison's zoning rules. Check with the city zoning department to ensure STRs are allowed in your area and building type.
  • Obtain a Wisconsin Seller's Permit from the Department of Revenue. This allows you to collect sales tax from guests. Apply online and pay the $20 fee.
  • Register with the City of Madison Treasurer for room tax collection. Create an account on their online portal and pay the $2 fee.
  • Apply for a Tourist Rooming House license with Public Health Madison & Dane County. Submit the application, pay the $535 fee, and schedule your pre-inspection.
  • Prepare your space according to health and safety standards. Make sure you have working smoke and carbon monoxide detectors, fire extinguishers, and clean, code-compliant accommodations.
  • Purchase appropriate insurance for your STR and establish house rules for guests. Consider requiring a security deposit to cover potential damages.
  • Create a listing on Airbnb, VRBO, and/or other STR platforms. Take high-quality photos, write a detailed description, and set competitive rates.
  • Begin hosting guests and ensure you collect and remit all required taxes. Maintain good communication with guests and address any issues promptly.

Starting an STR can be a lot of work upfront, but it can also be a rewarding way to earn extra income and meet travelers from around the world. The key is to do your research, follow the rules, and provide a great experience for guests.

If you run into roadblocks or have questions along the way, don't hesitate to reach out to city departments or other STR hosts for guidance. The Madison STR community is active online and can be a helpful resource.

Who to contact in Madison about Short Term Rental Regulations and Zoning?

If you have questions about STR regulations or zoning in Madison, here are the key city departments to contact:

1. Zoning: City of Madison Zoning

  • Phone: (608) 266-4551
  • Email: zoning@cityofmadison.com
  • Website: https://www.cityofmadison.com/development-services-center/zoning

The zoning department can help you determine if your property is eligible for STR use and answer questions about building codes and occupancy requirements.

Licensing: Public Health Madison & Dane County

  • Phone: (608) 242-6515
  • Email: health@publichealthmdc.com
  • Website: https://publichealthmdc.com/environmental-health/licensing-and-permits/tourist-rooming-house

PHMDC handles STR licensing and health inspections. They can guide you through the Tourist Rooming House application process and answer questions about health and safety standards.

In addition to these city departments, consider joining local STR host groups on platforms like Facebook or Meetup. These groups can provide valuable insights into navigating Madison's STR landscape and connect you with experienced hosts.

It's important to establish positive relationships with city officials and fellow STR operators. They can be great resources as you launch and grow your business. Don't be afraid to ask questions and seek guidance to ensure you're operating legally and responsibly.

What do Airbnb hosts in Madison on Reddit and Bigger Pockets think about local regulations?

On real estate investing forums like Bigger Pockets and Reddit, Madison STR hosts have shared their experiences and opinions on the city's regulations. Here's a sample of what they've said:

  • "Madison is pretty strict on Airbnb from what I've heard. They require permits and do crack down on people without them. I considered buying a property there to rent on Airbnb but decided it wasn't worth the hassle." (Reddit)This comment suggests Madison actively enforces its STR licensing requirements, and some investors find the regulations too burdensome.
  • "I operate an Airbnb in Madison. The licensing process was kind of a pain but the city is reasonable overall with their STR rules compared to some other places. As long as you dot your i's and cross your t's, you can make it work." (Bigger Pockets)This host found getting licensed challenging but not impossible. They feel Madison's STR regulations are manageable compared to stricter cities.
  • "You definitely need to get your ducks in a row with the city to Airbnb in Madison. But it's doable if you follow the process and keep good records. I've been doing it for 3 years now and haven't had any major issues with the city." (Bigger Pockets)This experienced host emphasizes the importance of compliance and organization in running a successful STR in Madison. They've found the city to be workable if you play by the rules.
  • "I wish Madison would ease up on some of the STR restrictions, like the 30 day cap for off-site hosts. But I get they're trying to balance tourism with housing needs. Overall it's not a terrible place to Airbnb if you're willing to jump through the hoops." (Reddit)This host finds some of Madison's STR regulations, like the annual rental day limit, overly restrictive. However, they understand the rationale behind the rules and believe the city is a decent STR market for rule-followers.

Reveal your property’s rental profitability

Buy this property and list it on Airbnb.