Short-Term Rental Regulation Roundup 2026

Short-term rental rules moved in two directions at once in 2026. Idaho and Indiana stopped cities and counties from banning or capping rentals, while Maui began phasing out thousands of vacation rentals in apartment zones, Houston started requiring a registration certificate, and Dallas is still defending its ban in court. If the rules in your market are moving against you, the question becomes whether to sell, and how to keep the gain working through a 1031 exchange.

Two states took local bans and caps off the table

Idaho’s House Bill 583 was signed on March 16, 2026 and took effect July 1, 2026. It rewrites section 67-6539 of the Idaho Code so that no county or city may “enact or enforce any ordinance that has the express or practical effect of prohibiting any type of short-term rentals.” A local government may require only listed safety items such as smoke alarms, a fire extinguisher and carbon monoxide detector on each floor, escape ladders, residential occupancy limits and an emergency handout. It forbids, by name, limits on rental days, caps on the number of rentals, owner-occupancy requirements and conditional use permits in residential zones, and states that “no county or city shall require a license, fee, permit, certification, or registration to operate a short-term rental.” Source: Idaho H0583 (2026).

Indiana’s House Enrolled Act 1210 added a new section 36-1-20-3.6 to the Indiana Code, effective July 1, 2026. A city or county “may not adopt or enforce an ordinance, resolution, regulation, policy, or rule that prohibits or restricts an owner of a privately owned residential property from using the property as a rental property” or that “has the effect” of doing so. Generally applicable health and safety rules, building and fire codes, occupancy standards and registration or inspection requirements survive, “provided the requirements do not operate to impose a cap or limit.” A unit with a non-complying rule adopted before January 1, 2026 has until January 1, 2028 to comply, and a unit that adopted a short-term rental ordinance before January 1, 2018 under the state’s 2018 framework is exempt. Source: HEA 1210, section 229.

Both join states that already preempt local bans. Arizona’s section 9-500.39 says “a city or town may not prohibit vacation rentals or short-term rentals,” while allowing a local permit with a fee capped at the actual cost or $250, whichever is less. Florida’s section 509.032(7) provides that a local law “may not prohibit vacation rentals or regulate the duration or frequency of rental,” except for ordinances adopted on or before June 1, 2011.

Where the rules tightened: Maui, New York City and Houston

Hawaii’s 2024 Act on Senate Bill 2919 amended section 46-4 of the Hawaii Revised Statutes to add “the time, place, manner, and duration in which uses of land and structures may take place” to the counties’ zoning powers, and stated the purpose of clarifying that “uses that include the provision of transient accommodations are not considered residential uses and may be phased out or amortized by the counties.” Source: SB2919 CD1.

Maui County used that authority. The Council approved Bill 9 on second and final reading on December 15, 2025 by a 5-3 vote and the Mayor signed it the same day. The ordinance ends transient vacation rental use in the A-1 and A-2 apartment districts, with implementation in 2029 for West Maui and 2031 for the rest of the county. The county’s Department of Finance had counted about 6,208 units on the so-called Minatoya list operating as short-term rentals as of May 29, 2024. Sources: Maui County press release and Council press release.

Under New York City’s Local Law 18, short-term rentals “are only legal if the host is living in the same unit or apartment with the guests,” there is a limit of two guests not counting children under four, and hosts “are not allowed to rent out an entire apartment or home for fewer than 30 days.” Hosts must register with the Office of Special Enforcement. Source: NYC OSE, What is Local Law 18.

Houston adopted its first short-term rental ordinance on April 16, 2025, effective 12:01 a.m. on January 1, 2026. Every short-term rental inside the city limits needs its own certificate of registration, valid for one year, with a $275 fee, and the application requires proof of hotel occupancy tax registration or remittance. Source: City of Houston Short-Term Rental Ordinance.

Where it is in court: Dallas

Dallas adopted two short-term rental ordinances in 2023, including a ban in single-family residential zoning. A Dallas County district court enjoined them on December 6, 2023, and on July 18, 2025 the Fifth Court of Appeals, on rehearing, affirmed the injunction in all respects but one individual plaintiff, concluding the owners were likely to prevail on their due-course-of-law arguments. The city petitioned the Texas Supreme Court on October 16, 2025; the case page shows no decision yet, and the ban is not being enforced in the meantime. Sources: case page, No. 05-23-01309-CV and the opinion on rehearing.

What a phase-out means for the sale decision

A short-term rental that loses its permitted use becomes a long-term rental, a second home or a sale. Section 1031 lets you sell property “held for productive use in a trade or business or for investment” and defer the gain if you buy like-kind real property through a qualified intermediary within the statutory windows: identification within 45 days of the transfer and receipt within 180 days or the due date of your return, whichever is earlier (26 U.S.C. section 1031). Personal use affects whether it qualifies; see vacation and short-term rental use in a 1031.

Hypothetical, round numbers: you sell a vacation rental for $900,000 with a $400,000 adjusted basis, a $500,000 gain. Reinvest everything through an intermediary into replacement property of equal or greater value and nothing is recognized this year; take $100,000 of cash at closing and gain is recognized up to $100,000 under section 1031(b). Run your own numbers with your CPA.

Many owners in these markets do not want another building under rules that may change again. A Delaware Statutory Trust interest is treated as real property for section 1031, carries no management duty, and can be identified by name within the 45 days. The full exit path, including what to do with furniture and personal property, is in our guide to exiting short-term rentals through a 1031, and the property-type page on exchanging a short-term rental covers the recapture and allocation questions.

What to do now

1. Pull the ordinance or statute for your city and county and write down the operative dates.
2. Count personal-use days and rental days for the last two years with your CPA, since that history decides whether the property is held for investment.
3. If you decide to sell, engage a qualified intermediary before you sign a contract, so the assignment and notice are in place at closing. See what the intermediary needs to open an exchange.
4. Request a proposal that shows the replacement options against your timeline and debt.

Sources

• Idaho House Bill 583 (2026), Legislature of the State of Idaho
• Indiana House Enrolled Act 1210 (2026), section 229
• Arizona Revised Statutes section 9-500.39
• Florida Statutes section 509.032
• Hawaii SB2919 CD1 (2024)
• County of Maui, Mayor signs Bill 9 into law
• Maui County Council, Final reading brings approval to Bill 9
• NYC Office of Special Enforcement, What is Local Law 18
• City of Houston, Short-Term Rental Ordinance (adopted April 16, 2025)
• Texas Fifth Court of Appeals, City of Dallas v. Dallas Short-Term Rental Alliance, No. 05-23-01309-CV, case page
• Texas Fifth Court of Appeals, memorandum opinion on rehearing, July 18, 2025
• 26 U.S.C. section 1031