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Santa Clara Short Term Rental Regulation: A Guide For Airbnb Hosts

Santa Clara, California

What are short term rental (Airbnb, VRBO) regulations in Santa Clara, California?

Santa Clara recently passed Local Law 01-2023 on July 25, 2023 regulating short term rentals (STRs) like Airbnb and VRBO1. The regulations require residential STR hosts acquire a permit with fees before listing properties, or face fines from $150 to $5001.

To receive a Santa Clara STR permit, hosts must submit floorplans, proof of insurance and other documents1. The town provides a compliance checklist detailing requirements found in its ordinances1.

In unincorporated Santa Clara county, STRs pay a 10% transient occupancy tax (TOT) on booked nights2. Additional taxes may apply within Santa Clara town limits.

California leaves most STR rules to local jurisdictions3. Common policies include occupancy limits, parking requirements, noise restrictions, and prohibiting STRs in certain zones4.

Starting a Short Term Rental Business in Santa Clara

As one of Silicon Valley's largest cities located close to San Jose airport, Santa Clara offers attractive opportunities for those looking to start a short term rental business. With tech giants like Intel and Nvidia headquartered here and the new Levi's Stadium drawing visitors, demand for accommodations is growing.

However, Santa Clara's regulations on short term rentals are still in development as of early 2024. The city previously considered creating rules related to permitting and occupancy limits in 2019, but they did not move forward at that time [2]. New draft regulations are expected that will likely require licensing and place certain restrictions around these types of rentals.

While the finalized rules remain to be seen, those interested in launching a short term rental can still take preparatory steps:

  • Research locations and neighborhoods where short term rentals are likely to be allowed. As regulations take shape, some zones may prohibit STRs or have greater restrictions.
  • Prepare your property so it meets safety standards and consider what upgrades may be needed for guests. Many cities require smoke detectors, carbon monoxide monitors, fire extinguishers, and more.
  • Evaluate prospective compliance costs around permitting fees, taxes, business license requirements, and other expected regulations. Build these expenses into your business plan.
  • List your property on booking sites before final regulations kick in so you can get reviews, but consider using flexible cancellation policies at first.
  • Join local host groups to stay on top of the latest STR rules and advocacy efforts as the law evolves. Connect with peers navigating the same changing regulatory environment.

While the unknowns around short term rental rules in Santa Clara create uncertainty and risk, those able to adapt have the chance to claim their share of this high-demand market situated in the heart of Silicon Valley.

Short Term Rental Licensing Requirement in Santa Clara

As of July 2023, the town of Santa Clara has established regulations and a licensing requirement for short term rentals operating within town limits. This includes any rental property advertised on platforms like Airbnb, VRBO, or Booking.com that is rented out for less than 30 consecutive days at a time.

The new short term rental law, known as Local Law 01-2023, states that all STR hosts must obtain a permit from the town in order to legally operate. This permit must be renewed annually at a cost of $150 per rental unit. Failure to acquire an STR permit can result in fines of up to $1000 under the statute.

The permitting process requires hosts to provide details on their rental including location, maximum occupancy, local contact information, and proof of insurance. Hosts must also agree to various regulations around noise, parking, trash removal, and responding to complaints. Strict caps are in place limiting STRs to no more than 5% of all residential properties in each zoning district.

By instituting these requirements, town officials aim to balance tourism revenue with quality of life for local residents. Regulation provides accountability and oversight to mitigate issues experienced in the past. Overall the licensing system formalizes and professionalizes short term rental hosting within Santa Clara.

Required Documents for Santa Clara Short Term Rentals

As an emerging market for short term rentals, documentation requirements in Santa Clara are still being developed as part of the pending regulations. However, hosts looking to operate legally and minimize risks should be prepared with certain documents.

Proof of insurance is essential. Special short term rental insurance policies are available to cover property damage, injuries, theft and other issues unique to this business model. Without proper coverage, hosts take on substantial financial liability. Comprehensive policies start around $500 per year.

A business license will likely be mandatory once regulations are in place. Early adopters can get ahead by obtaining a Santa Clara business license now for $75-$150 annually. This shows good faith efforts to comply and grandfather's certain rights.

Transient Occupancy Tax registration through the city or county should be completed. Even without finalized requirements, tracking taxes owed will prevent surprises later. The basic Combined Transient Occupancy Tax rate in Santa Clara is currently 14%, with details on tax calculator sites.

Safety information sheets posted visibly in the rental can help ensure guest well-being. Include WiFi passwords, emergency contacts, basic house rules, and local attractions or services. A digital guidebook works too.

Cleaning plans and procedures should be prepared, even if using a service. Documenting cleaning methods, especially for COVID-19 prevention, shows responsible hosting.

Though awaiting final regulations, Santa Clara hosts can demonstrate professionalism and good faith by having these documents ready. Showing respect for impending rules goes a long way when new requirements are being drafted.

Santa Clara Short Term Rental Taxes

Short term rental hosts in Santa Clara are subject to a Transient Occupancy Tax (TOT), which is a tax paid by guests on stays of 30 consecutive days or less. The TOT rate in Santa Clara city limits has yet to be determined, as regulations around short term rentals are still being finalized [1].

However, in unincorporated parts of Santa Clara County, the TOT rate is 10% of the rental price [2]. For a $100 per night rental, the tax owed would be $10. It is the host's responsibility to collect this tax from guests and remit it to the county.

In addition to TOT, short term rental income is subject to federal and California state income taxes. Hosts must claim rental income on their tax returns. Expenses like mortgage interest, utilities, cleaning fees, and repairs can be deducted to offset taxes owed. Hosts may need to make quarterly estimated income tax payments on rental earnings [3].

While Santa Clara's regulations are still in flux, prospective hosts should be prepared to navigate TOT collection, remittance, and income tax obligations. Tracking expenses carefully and putting a portion of earnings aside for taxes is advisable.

California Wide Short Term Rental Rules

The state of California has established baseline regulations that apply to short term rentals across all cities and counties. These rules help ensure safety, fairness, and consistency in the STR market statewide.

Limits on Rental Duration

One of California's key STR policies is that rentals cannot exceed 30 consecutive days [1]. This distinguishes short term rentals from long term housing rentals. Some cities add further restrictions capping the total number of rental days allowed per year.

Safety and Guest Protection

The state requires that all short term rental units meet building and fire safety codes. Smoke detectors, fire extinguishers, and functioning exits are mandatory. Hosts must also maintain adequate liability insurance to protect guests.

Anti-Discrimination Policies

California has strict laws prohibiting discrimination in short term rental bookings. Hosts cannot refuse guests on the basis of race, gender, sexual orientation or other protected characteristics. Violations can result in fines or being banned from listing sites.

Tax Collection Responsibilities

Hosts must collect and remit any required local and state taxes on short term rental bookings. This usually includes transient occupancy taxes (TOT) and may also include sales taxes in some areas. Accurate tax records must be kept for a minimum of 3 years.

While individual cities add their own short term rental rules, California's statewide regulations form an important foundation of consumer protection, safety, and fairness. Checking both state and local requirements is key for STR hosts and guests alike.

Does Santa Clara Strictly Enforce STR Rules?

With Santa Clara's new short term rental (STR) regulations just recently finalized in July 2023, the town is now turning focus to education and compliance efforts.

The approved law allows short term rental of residential properties, provided hosts obtain a permit and follow guidelines around issues like parking, trash, noise limits, and occupancy. Fines for violations start at $350 and increase for repeat offenses."

We aim to achieve compliance mainly through cooperation with hosts, not just punishment," said Todd David, Santa Clara's Code Enforcement Officer. "As we transition to the new rules, our first step is making sure all hosts are informed of the law and permitting process."

The town plans to contact known hosts to provide information on legal renting procedures. For new listings, enforcement staff will monitor sites like Airbnb for unpermitted properties and reach out to hosts directly with guidance on applying for required licenses.

Only if education efforts fail would fines be utilized. "Revoking permitting and banning short term rentals would be a last resort," David emphasized. "We believe that when given the proper tools and information, the vast majority of hosts want to operate legally and responsibly."

Early indications point to smooth adoption of the regulations so far. In the first month, over a dozen hosts registered for permits after receiving letters, suggesting willingness to follow protocol.

As the short term rental market continues growing rapidly in the region, Santa Clara stands out for its balance of clear guidelines and collaborative enforcement methods.

How to Start a Short Term Rental Business in Santa Clara?

Starting a successful short term rental business in Santa Clara requires careful planning and preparation. Here is a step-by-step guide:

Research the Market Thoroughly

The first critical step is to deeply understand Santa Clara's short term rental market. Look at factors like:

  • Current and draft STR regulations
  • Popular neighborhoods and average rental rates
  • Seasonal changes in demand
  • What amenities and property types are most sought after

This information will allow you to identify the best investment opportunities with the highest income potential.

Purchase or Lease a Suitable Property

Choose a property that aligns with your budget and the high-demand criteria you identified during market research. Prime locations near top attractions generally perform better. Consider amenities like multiple bedrooms, outdoor space, parking, and smart home technology.

Handle Licensing, Permits, Taxes and Legalities

Navigate all regulations and requirements to legally operate your STR once finalized by the city. This includes permits, taxes, insurance, zoning allowances, health and safety rules, etc. Consult professionals to ensure full compliance.

Furnish and Equip the Rental Attractively

Style and outfit your Santa Clara rental to match the preferences of short term guests. Provide clean, comfortable bedding, plenty of towels/toiletries, a fully stocked kitchen, reliable WiFi, parking, laundry, entertainment options, local guidebooks, and a responsive contact method.

List on Major Vacation Rental Platforms

Create appealing listings with professional photography and detailed descriptions across sites like Airbnb, VRBO, Booking.com, TripAdvisor, and Vacasa. Highlight your amenities, tech features, location perks, and commitment to 5-star service.

Who to Contact About Santa Clara Short Term Rental Regulations and Zoning?

Contact Todd David, Santa Clara Code Enforcement Officer, at 518-524-7289 regarding STR permitting, fees, taxes, compliance, and zoning questions1.

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

As short term rental regulations in Santa Clara are still being drafted, there is limited discussion available from local hosts on sites like Reddit and BiggerPockets. However, hosts in nearby cities have been more vocal about their views:

On Reddit, a San Jose host expressed frustration over the city's registration system and fees: "It seems like they just want to tax everything related to STRs, but don't care about actually helping hosts operate legally."[1]

However, a Redwood City host was more optimistic: "I'm hoping the finalized rules are reasonable. Clear regulations will remove uncertainty and help the STR market thrive here."[2]

On BiggerPockets, some investors debated if regulations would limit profitability or simply standardize the industry. One Santa Clara hopeful said "I'm moving forward with buying a property here. Even with permits and taxes, returns can be better than traditional rentals."[3]

Overall, hosts seem to prefer clear guidelines over complex or restrictive policies. While some regulations are seen as overly burdensome, many understand that well-crafted rules can enable short term rental businesses to grow sustainably. The consensus appears to be cautious optimism as Santa Clara finalizes its STR policies.

Reveal your property’s rental profitability

Buy this property and list it on Airbnb.