What are Short-Term Rental (Airbnb, VRBO) Regulations in Delaware?

Short-term rentals through platforms like Airbnb and VRBO have surged in popularity across Delaware, from the bustling business hub of Wilmington to the serene beaches of Rehoboth. However, property owners looking to start a short-term rental business need to navigate a complex web of state and local regulations. These rules, often outlined in zoning codes, planning codes, ordinances, and discussed on real estate forums, aim to balance the economic benefits of tourism with preserving neighborhood character.

Starting a Short-Term Rental Business in Delaware

Before listing your property on Airbnb or VRBO, it's crucial to ensure compliance with state and local requirements. At the state level, Delaware imposes an 8% accommodations tax on all short-term rental transactions, which hosts must collect and remit to the Delaware Division of Revenue. Failure to register for tax collection can result in fines and penalties.

Most municipalities in Delaware also require hosts to obtain local permits or licenses to legally operate short-term rentals. Fees and requirements vary by location - Rehoboth Beach charges a $150 annual fee, while Lewes mandates a $100 rental license. Hosts should use the DELPROS online licensing portal to apply for these permits and upload necessary documents.

Zoning compliance is another critical consideration. Many Delaware towns have specific zoning laws that may restrict short-term rentals to certain areas or ban them outright. For example, in Wilmington, a proposed ordinance would limit owner-operators to just one short-term rental unit, effectively eliminating those with multiple properties. As Airbnb host Travis Fogelman noted, "This bill would effectively kill Airbnb in the city."

Short-term rentals must also adhere to county standards for fire safety, with functional smoke detectors, fire extinguishers, and appropriate egress. Regular fire marshal inspections are required, with additional rules for units with pools or hot tubs. Properties need to meet building and health codes, including standards for electrical, plumbing, and occupancy.

Short-Term Rental Licensing Requirement in Delaware

To legally operate a short-term rental in Delaware, property owners must adhere to specific licensing requirements as outlined by state and local authorities. Here's a detailed breakdown of the process based on information from official Delaware websites:

State-Level Requirements:

Register with the Delaware Division of Revenue to collect and remit the 8% state accommodations tax on rental transactions. This can be done online through the Division of Revenue's website.

There is no state-level short-term rental license required in Delaware. Licensing is handled at the local level by individual municipalities.

Local Licensing Requirements:

Most Delaware municipalities require hosts to obtain local permits or licenses to legally operate short-term rentals. Fees and requirements vary by location.

• In Rehoboth Beach, hosts must pay a $150 annual fee for a rental license.
• Lewes requires a $100 rental license and has specific ordinances differentiating between short-term and long-term rentals.
• In unincorporated New Castle County, all rental properties, including short-term rentals, must be registered with the Department of Land Use. Registration is free and must be updated every odd-numbered year by May 1st.

To apply for local permits and licenses, hosts should contact their municipal government offices or use online portals when available. For example:

1. In Lewes, applications can be submitted through the city's website.
2. New Castle County allows online registration or submission of a printable form via fax or email to the Department of Land Use.

Timeframe and Fees:

The processing time for short-term rental licenses varies by municipality, ranging from a few days to several weeks. Fees also differ, with some cities charging hundreds of dollars for annual licenses while others have more affordable fees.

It's crucial to secure all necessary licenses and permits before listing and operating a short-term rental. Failure to do so can result in fines, penalties, and legal action from local authorities.

Fines and Penalties:

Operating a short-term rental without proper licensing can lead to significant consequences. While specific fines vary by location, penalties can reach hundreds or even thousands of dollars per violation. Repeated offenses may result in steeper fines or complete bans on short-term rental activity.

To avoid costly penalties, it's essential for hosts to thoroughly research and comply with all state and local licensing requirements. Consulting with local officials and staying updated on any regulatory changes is crucial for running a successful and compliant short-term rental business in Delaware.

Required Documents for Delaware Short-Term Rentals

To legally operate a short-term rental in Delaware, hosts must obtain and maintain several key documents. Here's a comprehensive list of required paperwork, along with explanations of their purpose and where to obtain them:

Rental License: Most Delaware municipalities require a specific rental license for short-term rentals. This document ensures that your property meets local standards and regulations. Obtain this from your local city or town government office.

Tax Registration Certificate: Register with the Delaware Division of Revenue to collect and remit the 8% state accommodations tax. This certificate allows you to legally collect taxes from guests. Apply online through the Division of Revenue's website.

Fire Safety Certification: A document certifying that your property complies with state fire safety laws. This includes having functional fire extinguishers, smoke detectors, and proper escape routes. Schedule an inspection with your local fire marshal's office.

Building and Health Code Compliance Certificate: This verifies that your rental meets state standards for electrical, plumbing, and egress. Contact your local health department to schedule an inspection.

Zoning Compliance Letter: A document from your local zoning office confirming that short-term rentals are permitted in your property's zone. Request this from your municipal planning or zoning department.

Business License: Some Delaware municipalities require short-term rental operators to obtain a general business license. Check with your local government to see if this applies in your area.

Liability Insurance Policy: While not always legally required, many municipalities strongly recommend or mandate that hosts carry liability insurance for their short-term rental properties. Consult with a local insurance provider specializing in short-term rental coverage.

Property Deed or Lease Agreement: A copy of your property deed (if you own) or lease agreement (if you rent) may be required to prove your right to use the property as a short-term rental. Ensure you have this document on hand.

Local Permit Application: Some towns have specific short-term rental permit applications. For example, in Rehoboth Beach, you'll need to complete their rental permit application form, which can be obtained from the city's Building and Licensing Department.

Pool/Hot Tub Safety Certification: If your property includes a pool or hot tub, you may need additional certification proving compliance with safety regulations. Contact your local health department for specific requirements.

To submit these documents and complete the licensing process, most Delaware municipalities now use the DELPROS online licensing portal. This system allows you to upload required forms and track your application status.

Remember, requirements can vary significantly between different Delaware towns and cities. Always check with your local government offices for the most up-to-date and specific documentation needs for your area. Staying compliant with these requirements is crucial to avoid potential fines or penalties and to ensure the smooth operation of your short-term rental business in Delaware.

Delaware Short-Term Rental Taxes

As a short-term rental operator in Delaware, it's crucial to understand the various taxes that apply to your business. Failing to collect and remit these taxes can lead to penalties and legal issues. Here's a detailed breakdown of the taxes you need to be aware of:

1. State Lodging Tax: Delaware imposes an 8% state accommodations tax on all short-term rental transactions, including any cleaning fees or service fees. This tax is collected by the host and remitted to the Delaware Division of Revenue. Starting January 1, 2025, the state lodging tax rate will decrease to 4.5% based on recent legislation.
2. Local Lodging Taxes: In addition to the state tax, many Delaware municipalities charge their own local taxes on short-term rentals. These rates vary by location but can be as high as 7%. For example, Rehoboth Beach and Bethany Beach have a 7% local tax, while Dewey Beach charges 3%. Local taxes are collected by the host and remitted to the appropriate local tax authority.
3. County Lodging Tax: As of 2024, Delaware counties now have the authority to impose an additional lodging tax of up to 3% on short-term rentals in unincorporated areas. This means that if your rental is located outside of city limits, you may be subject to a county-level tax in addition to the state and local taxes.

To illustrate, a short-term rental in Rehoboth Beach would be subject to a total lodging tax of 11.5% (4.5% state tax + 7% local tax) starting in 2025. If Sussex County decides to implement the full 3% county tax, rentals in unincorporated areas of the county would have a total tax rate of 14.5% (4.5% state + 7% local + 3% county).

It's important to note that these lodging taxes are separate from state and federal income taxes. While income tax is paid annually on your total taxable income after deductions, lodging taxes are a percentage of the guest's stay cost and must be collected at the time of booking.

Tax Deductions and Write-Offs: To help offset the cost of taxes and maximize profits, short-term rental operators can take advantage of various tax deductions. Some common deductible expenses include:

1. Mortgage interest
2. Property taxes
3. Rental insurance premiums
4. Utilities (electricity, water, internet, etc.)
5. Cleaning and maintenance costs
6. Repairs and improvements
7. Supplies for guests (toiletries, linens, etc.)
8. Marketing and advertising fees
9. Platform service fees (Airbnb, Vrbo, etc.)
10. Depreciation of furniture and equipment

To claim these deductions, you must keep detailed records and receipts. If you use the rental property for personal use for more than 14 days per year, you can only deduct a portion of the expenses based on the percentage of rental use.

Navigating the world of short-term rental taxes in Delaware can be complex, but understanding your obligations is essential for running a successful and compliant business. Always consult with a tax professional to ensure you are collecting and remitting the correct taxes and maximizing your deductions.

Does Delaware Strictly Enforce STR Rules?

Delaware has a reputation for being relatively Airbnb-friendly compared to other states, with enforcement of short-term rental regulations varying across different municipalities. While rules and regulations do exist, the overall approach to enforcement tends to be less stringent than in some other jurisdictions, allowing hosts more flexibility in operating their short-term rentals.

Many hosts successfully operate short-term rentals in Delaware despite the existing rules. According to discussions on BiggerPockets and Reddit forums, enforcement of STR regulations is not as aggressive as in some other areas, particularly in beach towns where tourism is a significant economic driver.

One Delaware host on Reddit shared, "I've been running my Airbnb in Rehoboth Beach for three years now, and while I made sure to get all the necessary permits, I've never had any issues with strict enforcement. The city seems to understand the importance of short-term rentals to the local economy."

Another host on BiggerPockets noted, "Delaware's approach to STRs is pretty laid-back compared to what I've experienced in other states. As long as you're not causing problems for neighbors and you're paying your taxes, they generally leave you alone."

This relatively relaxed enforcement stance doesn't mean hosts can ignore regulations altogether. Delaware still requires rental properties to be registered and licensed, and hosts must collect and remit the appropriate taxes. However, the focus seems to be more on ensuring compliance rather than actively seeking out and penalizing non-compliant operators.

In Wilmington, for example, while new regulations have been proposed that would limit owner-operators to just one short-term rental unit, the current environment is still considered favorable for STR operators. Travis Fogelman, an Airbnb host with multiple units in the city, has been able to grow his business to 32 units, indicating a relatively permissive regulatory climate.

It's worth noting that enforcement can vary between different municipalities within Delaware. Coastal towns like Rehoboth Beach and Lewes may have more specific regulations due to their high tourist traffic, but even these areas are generally considered Airbnb-friendly compared to stricter jurisdictions in other states.

In conclusion, while Delaware does have rules and regulations governing short-term rentals, the state's approach to enforcement is generally more relaxed compared to many other U.S. locations. This environment has allowed many hosts to operate successful STR businesses throughout the state, contributing to Delaware's thriving tourism economy while navigating a relatively accommodating regulatory landscape.

How to Start a Short-Term Rental Business in Delaware

Starting a short-term rental business in Delaware can be a rewarding venture. Here's a comprehensive, step-by-step guide to help you get started:

Research Local Regulations

• Begin by thoroughly investigating the short-term rental regulations in your specific Delaware municipality. Each town or city may have different rules regarding zoning, licensing, and operational requirements. Contact your local government offices or visit their websites for the most up-to-date information. For example, Rehoboth Beach has different regulations than Wilmington or Dover.
• Tip: Join local real estate investment groups or online forums to connect with experienced hosts who can provide insights into navigating local regulations.

Choose Your Property

• Select a property that aligns with local zoning laws and has potential for high occupancy rates. Consider factors like proximity to attractions, amenities, and ease of access. Delaware's beach towns like Rehoboth and Lewes are popular for vacation rentals, while properties near business centers in Wilmington might attract corporate travelers.
• Tip: Analyze local market data to identify areas with high demand and potential for good returns on investment.

Secure Necessary Permits and Licenses

• Obtain all required permits and licenses from your local government. This typically includes a rental license and may also require a business license. Register with the Delaware Division of Revenue to collect and remit the state accommodations tax.
• Tip: Create a checklist of all required documents and set reminders for renewal dates to ensure ongoing compliance.

Prepare Your Property

• Ensure your property meets all safety standards, including fire safety requirements. Install smoke detectors, carbon monoxide detectors, and fire extinguishers. Consider hiring a professional inspector to identify any potential issues.
• Tip: Create a welcoming atmosphere by incorporating local Delaware themes or artwork into your decor.

Set Up Your Business Structure

• Decide on a business structure (LLC, sole proprietorship, etc.) and register your business with the Delaware Division of Corporations. Consider consulting with a lawyer or accountant to choose the best structure for your situation.
• Tip: An LLC can provide personal liability protection and potential tax benefits for your rental business.

Obtain Insurance

• Secure appropriate insurance coverage for your short-term rental. This should include property insurance and liability coverage. Some platforms like Airbnb offer host protection insurance, but it's often advisable to have your own comprehensive policy.
• Tip: Shop around and compare quotes from multiple insurance providers specializing in short-term rental coverage.

Set Up Your Finances

1. Open a separate bank account for your rental business to keep personal and business finances separate. Consider using accounting software to track income and expenses.
2. Tip: Set aside a portion of your rental income for taxes and unexpected expenses.

Create Your Listing

1. Choose a platform (or multiple platforms) to list your property. Take high-quality photos, write an engaging description, and set competitive prices based on local market rates.
2. Tip: Highlight unique features of your property and its location. For example, if you're near Rehoboth Beach, emphasize the proximity to the boardwalk or local attractions.

Develop an Operations Plan

1. Create a system for managing bookings, communicating with guests, and maintaining the property. Consider using property management software to streamline these processes.
2. Tip: Develop a comprehensive house manual with clear instructions for guests on how to use amenities and local recommendations.

Market Your Property

1. Promote your rental through social media, local tourism websites, and by partnering with local businesses. Consider creating a website for your rental to attract direct bookings.
2. Tip: Encourage satisfied guests to leave reviews, as positive feedback can significantly boost your visibility and bookings.

Stay Informed and Adapt

1. Keep up with changes in local regulations and market trends. Be prepared to adapt your business model as needed.
2. Tip: Attend local council meetings or join short-term rental associations to stay informed about potential regulatory changes.

By following these steps and staying committed to providing excellent guest experiences, you can build a successful short-term rental business in Delaware. Remember, success in this industry often comes from attention to detail, excellent customer service, and a willingness to continuously improve your offering.

Who to Contact in Delaware about Short-Term Rental Regulations and Zoning?

To navigate the complex landscape of short-term rental regulations in Delaware, it's essential to know who to contact for the most up-to-date and accurate information. Here are some key resources and contact points:

Delaware Division of Revenue: For questions about state-level taxes and registration requirements, contact the Delaware Division of Revenue. You can reach them by phone at (302) 577-8200 or visit their website at revenue.delaware.gov.

Local Government Offices: Since many short-term rental regulations are set at the municipal level, your local government offices are a crucial resource. Contact information varies by location:

• In Rehoboth Beach, contact the Building and Licensing Department at (302) 227-4504 or cityofrehoboth.com.
• For Lewes, reach out to City Hall at (302) 645-7777 or ci.lewes.de.us.
• In Wilmington, contact the Department of Licenses and Inspections at (302) 576-3030 or WilmingtonDE.gov/government/licenses-and-inspections.
• For unincorporated areas of New Castle County, contact the Department of Land Use at (302) 395-5400 or newcastlede.gov/landuse.
• Delaware Apartment Association: This organization provides resources and advocacy for rental property owners across the state. They can be reached at (302) 678-9644 or daaonline.org.
• Real Estate and Host Communities: Connecting with other short-term rental owners in Delaware can provide valuable insights and support. Some active communities include:
• The Bigger Pockets Delaware Real Estate Forum: biggerpockets.com/forums/state/delaware
• The Airbnb Subreddit: reddit.com/r/AirBnB
• Airbnb's official Community Center: community.withairbnb.com

By engaging with these resources and communities, short-term rental hosts in Delaware can stay informed about the latest regulatory developments, connect with peers, and access the support needed to run a successful and compliant rental business. Remember, regulations can change frequently, so it's important to stay proactive in your research and outreach.

What Do Airbnb Hosts in Delaware on Reddit and Bigger Pockets Think about Local Regulations?

Delaware hosts on popular real estate and short-term rental forums have shared their experiences and thoughts on navigating local regulations. Here are some insights from verified Delaware threads:

On Reddit, user Hungry-Ad-7120 shared their experience obtaining a short-term rental license in Delaware: "When the city the brother and I host in stated we needed a license, we went to the office to ask what we needed to file. There was a lot of disorganization at the government office about what paperwork was needed for an Airbnb. No one seemed to know, and we were told we'd need various permits and even host a town meeting. My brother had to go down and yell at a few people to get a clear answer. After some back and forth and a house inspection later, we finally got our license."

This highlights the sometimes confusing and frustrating process of complying with local regulations, even when hosts are making a good-faith effort.

In response, user GreatLife1985 noted the importance of registration requirements in their Delaware area: "Before the city we used to live in started the registration requirement, it was getting out of hand. We ran an Airbnb (in our home, basement apartment), but there were SO many bad players it was ruining it for everyone. Registration and taxes aren't perfect, but it is so much better now and the opposition to Airbnbs has died down considerably."

This suggests that while regulations can be burdensome, responsible hosts may see them as necessary for the long-term health of the short-term rental industry.

On the Bigger Pockets Delaware Real Estate Forum, hosts have discussed the impact of proposed regulations, particularly in Wilmington. Travis Fogelman, an Airbnb host with 32 units in the city, expressed alarm at a proposal to limit owner-operators to just one unit: "We're not replacing long-term rentals, we are complimenting them. This bill would effectively kill Airbnb in the city."

Fogelman's experience underscores the concerns of many hosts about overly restrictive regulations that could threaten the viability of their businesses.

Overall, the experiences shared by Delaware hosts on these forums paint a picture of a regulatory landscape that is often confusing, inconsistent, and potentially threatening to the short-term rental industry. However, they also show a community of hosts who are actively engaged in understanding and navigating these challenges, whether through compliance, advocacy, or finding creative solutions.

As Delaware's short-term rental market continues to evolve, the voices and experiences of these hosts will play a crucial role in shaping the industry's future.

Disclaimer: While we here at BNBCalc strive to keep all of our regulation guides updated and accurate with all the latest local laws, we still do not suggest using them as your sole or primary source for local regulations. We also do not recommend you rely on the third-party sources we link to or reference, and we are not responsible for any of the information on these third-party sites. These guides are for entertainment purposes only and only provide basic information and should not be considered as legal advice.

We highly recommend directly contacting the responsible parties for each area and hearing what their officials have to say. Ultimately, it's your responsibility as an investor to ensure you fully comply with the local laws, and it's best to speak with professionals before making an investment decision.