The short-term rental landscape in Seattle has changed significantly in the past few months. Several pieces of legislation, the culmination of two years of discussions, have been passed in the last months of 2017. These regulations aim to return units to the long-term housing market and stem the growth of short-term rentals within city limits. As the short-term rental market has continued to grow rapidly in the city, the Seattle City Council has raised concerns over affordable housing and the disproportionate effect this growth has had on minority and low-income residents.

In November, Seattle City Council passed CB 119082, which establishes a tax for short-term rental operators. Those who rent out entire units will be taxed at a rate of $14 per night, and those who rent out part of a unit, such as a spare room, will be taxed at a rate of $8 per night. This is a departure from the original proposed tax of $10 per night for all rentals.

The council passed another regulation in December, CB 119082, which outlined the general requirements for short-term rental operators as well as exemptions for some existing short term rentals. Property owners who operated short-term rentals prior to September 30, 2017 in the Down Town Urban Center and in certain buildings in the First Hill and Capitol Hill Urban Center will be able to grandfather in all existing units, plus their primary residence and one additional unit. Operators outside of the exempt area described above who operated units prior to September 20, 2017 will be able to maintain a license for two units, and will be able to add their primary residence as a short-term rental after one year of operations. All property owners looking to enter the short-term rental market will be able to obtain a license for two units: their primary residence as well as one additional unit. This exempt area is much smaller than was originally proposed. The graphics below, from the Seattle City Council, illustrate the caps described above as well as the exempt area for existing operators.

Below is a breakdown of the important points in these new regulations:

• Regulations are effective January 1, 2019.
• Anyone who wants to operate short-term rentals must obtain permits for every unit they rent and have a business license.
• The city will tax short-term rentals at two rates:
  • $14/night for an entire unit rental
  • $8/night for a partial unit rental (ex. a spare bedroom)
• New operators will be able to list two properties for short-term rental:
  • Their primary residence
  • One additional unit
• Property owners who operated short-term rentals prior to September 30, 2017 will be grandfathered into the new system with the following location-based exemptions:
  • Operators in the Down Town Urban Center and certain buildings in the First Hill and Capitol Hill Urban Center will be able to maintain all properties lawfully operated prior to 09/30/17, plus their primary residence and one additional unit.
  • Operators outside of this geographic area may maintain two units lawfully operated prior to 09/30/17, and can add their primary residence after one year.

While Mayor Jenny Durkan has signed the latest legislation creating a regulatory framework for short-term rentals in Seattle, she expressed concern over the complexity of the regulations and tax structure, as well as the administrative burden this legislation will create for the Department of Finance and Administrative Services. She suggests in this letter that the regulations be revisited in 2018, which means more changes could be on the horizon for Seattle’s short-term rental community.