SALE
Holiday Sale - Get up to 40% off Hostaway 🚀Holiday Sale - Get up to 40% off Hostaway!
Get Offer

Airbnb and Short-Term Rental Laws in Alabama

Airbnb and Short-Term Rental Laws in Alabama

In 2023, Alabama’s tourism industry reached a milestone, generating $24 billion from 31.4 million visitors, with Gulf Shores and Orange Beach alone drawing 8.3 million travelers. As this growth continues into 2024, the short-term rental market is set to expand further, driven by the rising demand for unique accommodations. Property owners have a prime opportunity to tap into this vibrant market, optimizing occupancy and income in these increasingly popular travel destinations.

This article breaks down Alabama's Airbnb and short-term rental laws, offering key insights and compliance tips for property owners. As Alabama's tourism grows, hosts have a prime chance to tap into a profitable and expanding market by understanding and following local regulations.

Download Your Free Copy of the Report Today

Overview of Short-Term Rentals in Alabama

Alabama’s short-term rental market is on the rise, fueled by the state’s growing attraction to travelers. Demand is climbing as more visitors, both local and international, seek unique stays, making this an exciting time for hosts.

AirDNA key metrics from August  2024 reflect positive trends, 

  • Birmingham: Annual Revenue: $9.5K

  • Gulf Shores: Annual Revenue: $44.3K

  • Montgomery: Annual Revenue: $11.6K

  • Huntsville: Annual Revenue: $10.8K

  • Tuscaloosa: Annual Revenue: $21.6K

  • Auburn: Annual Revenue: $22.4K

  • Mobile: Annual Revenue: $12K

  • Orange Beach: Annual Revenue: $45.5K

With rising demand, hosts can capitalize on peak seasons by maintaining compliance and focusing on guest satisfaction, ensuring success in this evolving market.

Understanding What Constitutes a Vacation Rental in Alabama

In Alabama, a vacation rental is defined as any residential property that is rented out for short periods, typically less than 180 consecutive days. This includes single-family homes, condos, apartments, and even individual rooms within a house. The transient nature of these rentals makes them subject to various state and local regulations.

Key Tax Obligations for Short-Term Rentals

Operating a short-term rental in Alabama involves several tax obligations. Here’s a breakdown of the taxes that apply in different cities across the state:

Lodging tax

State-level tax

Alabama imposes a state lodging tax of 4% on all short-term rental income.

Local lodging taxes

Each city or county can add additional lodging taxes on top of the state rate, 

  • Birmingham: Up to 17.5% combined tax (state, county, and city).

  • Gulf Shores: Approximately 15% combined tax.

  • Montgomery: 14% total tax.

  • Huntsville: 9% combined tax.

  • Tuscaloosa: 15% combined tax.

  • Auburn: 13% combined tax.

  • Mobile: 14% combined tax.

  • Orange Beach: 15% combined tax, similar to Gulf Shores.

Sales tax

A 4% state sales tax may apply depending on the city.

Local sales taxes

Additional local sales taxes range from 1% to 5%

  • Huntsville: Up to 9% combined.

  • Tuscaloosa: Up to 10% combined.

  • Auburn: 9% combined.

  • Mobile: Approximately 10% combined.

Tourism tax

  • Orange Beach: 2% tourism tax.

  • Gulf Shores: 2% tourism tax.

  • Tuscaloosa: Additional 1% tourism tax during peak seasons like university events.

Where You Can Legally Operate in Alabama According to Zoning Laws

Zoning laws dictate where short-term rentals are permitted and are essential to ensuring your rental is compliant. 

Here’s a city-by-city breakdown. 

Birmingham

Short-term rentals are allowed in specific residential zones but require a special use permit.

Gulf Shores and Orange Beach

Short-term rentals are permitted in designated areas with strict regulations, including noise, parking and occupancy limits.

Montgomery

Short-term rentals are generally permitted, though special use permits may be required in some areas.

Huntsville

Allowed in certain residential and mixed-use areas. Special permits are required in historic districts.

Tuscaloosa

Heavily regulated near the University of Alabama. Special approvals may be needed, especially in areas close to campus.

Auburn

Regulated near Auburn University with special use permits required in specific zones.

Mobile

Short-term rentals are allowed in most residential zones, but restrictions apply in historic districts. Properties in these areas may need special approval from the Historic Development Commission.

Alabama Short-Term Rental Fees

Operating a short-term rental in Alabama comes with various fees, which differ by city

Application and permit fees

  • Birmingham: $150 application fee, $100 annual renewal.

  • Gulf Shores: $500 application fee, $300 annual renewal.

  • Montgomery: $200 application fee, $100 annual renewal.

  • Huntsville: $200 application fee, $150 annual renewal.

  • Tuscaloosa: $250 application fee, $200 annual renewal.

  • Auburn: $300 application fee, $250 annual renewal.

  • Mobile: $150 application fee, $100 annual renewal.

Inspection fees

To ensure that short-term rental properties meet local safety and regulatory standards, inspection fees are required. Typically, these inspections cover fire safety, building codes and property compliance, allowing hosts to maintain legal operations and ensure a safe environment for guests.

  • Mobile: $75 for safety inspections.

  • Huntsville: $50 to $150 depending on the size of the property.

  • Tuscaloosa: $100 for safety inspections.

  • Auburn: $75 for safety inspections.

Renewal and ongoing compliance fees

To operate legally, you need to renew and maintain your short-term rental licenses, permits and inspections. This ensures your property meets local regulations and avoids fines.

  • Birmingham: $100 annual renewal.

  • Tuscaloosa: $250 annual renewal.

  • Huntsville: $150 annual renewal.

  • Auburn: $250 annual renewal.

  • Mobile: $100 annual renewal with additional fees for re-inspections if required.

Keeping Your Vacation Rental Legal in Alabama

A visual representation of the four categories of legal compliance for vacation rentals, emphasizing essential legal requirements.

Compliance with Alabama’s short-term rental regulations is essential to avoid fines and penalties. 

Key compliance requirements include, 

Licensing requirements

To operate legally, short-term rental properties in Alabama typically require a business license. Depending on your city or county, there may be specific licensing requirements, including application fees and annual renewals. To remain compliant and avoid penalties, you must have the proper licenses.

  • Birmingham: Requires a business license, costing $100 annually.

  • Montgomery: Business license required with fees ranging from $100 to $200 annually.

  • Huntsville: Business license required, starting at $100 annually.

  • Tuscaloosa: Business license required, typically $150 annually.

  • Auburn: Business license required, starting at $100 annually.

  • Mobile: Business license required, starting at $75 annually.

Health and safety regulations

In order to operate a short-term rental business legally and safely, it is important to adhere to health and safety regulations. Guest safety is ensured by these standards, which include fire safety and building codes.

  • Birmingham: Requires smoke detectors, carbon monoxide detectors and fire extinguishers, fines up to $500 for non-compliance.

  • Gulf Shores: Enforces fire safety inspections, fines up to $1,000.

  • Huntsville: Requires compliance with fire safety codes, fines up to $500.

  • Tuscaloosa: Mandates safety devices like smoke and carbon monoxide detectors, fines up to $1,000.

  • Auburn: Requires fire safety inspections, fines up to $500.

  • Mobile: Must comply with local fire codes, fines up to $500.

Occupancy limits

Occupancy limits in Alabama short-term rentals regulate the number of guests allowed based on the property’s size and local laws. These limits are necessaryfor ensuring safety, compliance with fire codes, and maintaining neighborhood standards.

  • Orange Beach: Two persons per bedroom plus two additional, fines $100 per day for violations.

  • Huntsville: Two adults per bedroom, fines $100 per day.

  • Tuscaloosa: Strict limits near the University of Alabama, fines $250 per day.

  • Auburn: Two adults per bedroom, fines $200 per day.

  • Mobile: Two adults per bedroom, fines $100 per day.

Noise and nuisance ordinances

Short-term rentals must operate harmoniously within the community by adhering to noise and nuisance ordinances. These regulations set acceptable noise levels and activity restrictions, particularly during quiet hours, to prevent disturbances and maintain neighborhood peace.

  • Gulf Shores: Quiet hours from 10 PM to 7 AM, fines ranging from $50 to $500.

  • Birmingham: Quiet hours enforced with fines starting at $100.

  • Huntsville: Quiet hours from 10 PM to 6 AM, fines starting at $100.

  • Tuscaloosa: Quiet hours from 10 PM to 7 AM, fines up to $300.

  • Auburn: Strict enforcement with fines starting at $150.

  • Mobile: Quiet hours from 10 PM to 6 AM, fines starting at $100.

Protecting Your Alabama Investment with Insurance

While not always legally required, having appropriate insurance is highly recommended for short-term rental properties in Alabama

Specialized insurance

Short-term rental insurance policies typically range from $500 to $2000 annually, depending on the property’s value and location.

Property and liability insurance

  1. Property Insurance

Additional coverage may be required for properties in coastal or historic areas.

2. Liability Insurance

Strongly recommended, with premiums starting at $300 annually.

Navigating Alabama’s Rental Laws for Hosting Success 

Successfully operating a short-term rental in Alabama involves navigating various state and local regulations. So, it's important to understand and comply with the specific tax obligations, zoning laws, fees and licensing requirements in your city to avoid penalties and keep your rental running smoothly. By staying informed and up-to-date on these rules, you can ensure a safe, legal and positive experience for your guests while protecting your investment.

Ready to find out how Hostaway can transform your business?