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State and Local Government Agencies: The CARES Act Can Fund Short-Term Rental Compliance—Here’s How

When the pandemic first hit the U.S., lockdowns began and markets slowed. And as stay-at-home orders went into effect, all non-essential travel was put on hold. The short-term rental (STR) market felt the immediate effects of this shift, seeing an 85% reduction in demand.

But in June, when parts of the country started to reopen, the STR market bounced back. This uptick was beneficial for STR hosts, of course, but created new concerns among local citizens who are worried that an influx of out-of-state travelers and renters will put their community at greater risk for COVID-19.

This reaction has created a new set of challenges for state and local governments. They have to ensure that renters and travelers are taking precautions, but in order to do so, local agencies need the ability to communicate with all of their STR hosts—those who are and are not registered—and understand who is offering rentals on STR platforms. Historically, though, local government agencies struggle with collecting information on and contacting all of their local, active short-term rental hosts.

“Many local governments still struggle to directly communicate with STR hosts about changing regulations and compliance with standard ordinances,” explained Ulrik Binzer, Founder of Host Compliance, now part of Granicus. “With businesses starting to open back up, and governments becoming more dependent on contact tracing, monitoring tourist activity in the STR market is crucial.”

STR compliance programs can help ease the burden of these challenges. Granicus’ Host Compliance connects agencies with registered and non-registered STR hosts to understand their activity and help them maintain compliance. And because ensuring regulatory and tax compliance in STR markets is especially important right now, during the COVID-19 pandemic, local governments can invest in STR compliance software using money from the CARES Act. But in order to obtain these funds, local governments need to understand how to locate and effectively implement the funds.

How to Locate and Use Available Federal Funds

Of the $2 trillion of federal aid and grant programs in the CARES Act, $150 billion was allocated to state, local and tribal governments. But the process for receiving these funds differs based on the population of the city or county.

Local governments in more urban, populous counties are automatically eligible for the federal funds and, after completing some paperwork, can begin using it. For agencies in these areas,  begin talking internally with government leaders. Find out how much money the county received, how it’s being allocated, and what the process is for submitting requests to receive it.

For agencies in counties with less than 500,000 residents, there are funds available, but the process is a bit different. The money was allocated to state-wide entities who are in charge of divvying up the funds. Agencies in smaller counties should reach out to their state governor’s office, finance office, or legislature to learn more about how the state plans to distribute the money.

“Look for more information about the timeline. How soon do we think this money is going to be spent? How soon do we think we can actually start purchasing items with this money? Do we get money based on a reimbursement? All of these questions are important once you start chatting internally and figure out how that money’s going to work,” explained Ashley Schultz, a senior grants development consultant at Grants Office.

Once the distribution framework is clear, these local agencies can begin the application process for the funds.

How a STR Compliance Program Helps With COVID-19 Relief

Funding from the CARES Act can only be used for costs incurred from COVID-19 response tactics and in the aftermath of the emergency. This second stipulation—unexpected costs that arose in the pandemic’s aftermath—is where agencies can find funding for a STR compliance program. There was no predicting that the STR market would explode and then complicate virus containment measures around the country, and local governments need financial aid to address these challenges. However, in order to obtain the funds, agencies have to clearly explain how compliance software for STRs will help with their community’s COVID-19 response efforts.

“Applicants have to focus on showing how your program is related to coronavirus, how you didn’t plan for it this year, and then how you have the ability to fully pay for the project by the end of the calendar year,” explained Schultz.

There are a number of ways this technology is helpful for COVID-19 recovery efforts, namely:

  • Communicate with STR hosts: Most local governments communicate with only a portion of their STR hosts—on average, only about 10% of hosts voluntarily register with their city or county. But software like Grancius’ Host Compliance can correct for these shortcomings: The solution identifies registered and non-registered STR listings, collects addresses and automates the sending of letters to help them register them, ensuring compliance and the communication of important information regarding community safety.
  • Supplement contact tracing efforts: Data from a STR compliance program can help improve state and local contact tracing programs. If someone with COVID-19 stays at a STR, contact tracers need to be able to quickly contact that individual and anyone else they came into contact with during their stay. With a STR compliance program in place, this information is automatically collected and readily available to contact tracers if necessary.
  • Produce more revenue: With state and local governments still struggling from the economic downturn caused by COVID-19, it’s especially important for agencies to make sure that local STR hosts are paying their fair share of fees and taxes. A STR compliance solution can effectively ensure tax compliance in any STR market—in fact,   Grancius has found that on average agencies see returns that are 5 to 20 times greater than their initial investment into compliance and monitoring software.

Using the CARES Act to fund STR compliance programs is not an uncomplicated process, but is possible. By learning more about a state’s allocation framework for the funds, the application process, and how to argue for the investment, state and local agencies can use solutions to oversee, protect and tax their STR markets.

For more information on how state and local governments and agencies can use coronavirus relief funding to address STR challenges, click here to watch a webinar.

And for an accurate count and breakdown of the short-term rentals in your community, book a complimentary assessment today. This information can be extremely useful in creating your proposal.