Short-Term Rental Preemption Laws and 2026 Pricing Risk

In March 2026, Idaho and Indiana both signed laws stripping cities of the power to cap, license-restrict, or ban short-term rentals outright. Seven months later, in October 2026, the city of Birmingham, Michigan did exactly the opposite: it voted unanimously to permanently ban rentals under 30 days, with existing licenses honored only until April 2027. Both states had the same underlying pressure, noise complaints, party houses, housing-supply anxiety, but only one of them could act on it with a full ban. The difference was a single piece of paper sitting in a state capitol, not in city hall.

That gap is the subject of this guide. Short-term rental operators have spent the last few years pricing demand risk: seasonality, compression, booking pace. Regulatory risk has mostly been treated as a background hum, something to monitor rather than something to price. 2026's wave of state preemption laws, running alongside a parallel wave of outright local bans, makes that treatment obsolete. The state a property sits in now materially changes how durable its income is, and durability has a price. This article works through what the new laws actually do, where cities can still act unilaterally, and the arithmetic for turning that difference into a number you can put in an offer or a rate.

What Is STR State Preemption?

Short-term rental state preemption is a state law that overrides a city or county's authority to restrict short-term rentals below a baseline the state sets. Once a state preempts the issue, a local government can no longer cap the number of rentals, require owner-occupancy, or ban them outright, even if the city council votes to do so. Idaho's HB 583 and Indiana's HEA 1210, both effective July 1, 2026, are the two newest and most sweeping examples.

Preemption does not mean zero local authority. Idaho's law, confirmed by Avalara's MyLodgeTax compliance team, still lets cities enforce zoning, building codes, noise, parking, nuisance, and curfew ordinances, and allows safety rules such as smoke alarms, fire extinguishers, carbon monoxide detectors on every floor, and removable escape ladders for upper-floor sleeping rooms, provided those rules treat a short-term rental the same as any other residential dwelling. What a preempted city loses is the ability to say no to short-term rentals as a category. What it keeps is the ability to regulate how any residential property, short-term rental or not, behaves.

In the hotel accounts and STR portfolios we manage, the practical effect shows up first in financing conversations. A lender or a partner asking about regulatory risk in Boise, Idaho gets a one-sentence answer now: the state already settled it. The same question in a market without preemption requires a city-by-city, year-by-year answer, because the local council retains the authority to change its mind.

Preemption also changes who has to sue whom. Before a state law exists, a host who wants to fight a local ban has to challenge that specific ordinance in court, case by case, the way the owners in Lava Hot Springs, Idaho did before the state's Supreme Court ruled in their favor in May 2025. After a preemption law passes, the burden flips: it is the city that would need to challenge the state law itself to regain the authority it lost, a far harder and more expensive fight, and one no Idaho or Indiana city has attempted since July 2026. That shift from "operator sues city" to "city would have to sue state" is most of what makes preemption durable rather than a temporary political mood.

Bottom line: preemption converts short-term rental legality from a local political question into a settled state-level fact, which is precisely what changes its price.

Preemption Laws by State in 2026

Preemption laws by state in 2026 fall into two generations: a handful of states that settled the question a decade or more ago, and a fresh wave, led by Idaho and Indiana, that passed in the first half of this year. AirROI's 2026 regulatory tracking counts at least six states with some form of short-term rental preemption on the books, including Arizona (2016), Florida (2011), Tennessee, and Alabama (2024), alongside the two new 2026 laws.

Indiana's House Enrolled Act 1210, signed by Governor Mike Braun on March 12, 2026 and effective July 1, bars cities and counties from capping the number of residential rental properties, a category that covers both long-term and short-term rentals. Cities that had already adopted STR ordinances before January 1, 2018 are exempt from the override, and cities can still require registration, inspections, and safety standards as long as those rules don't function as a disguised cap. A 2018 state law separately caps local STR permit fees at $150, so Indiana's new protection sits on top of an existing fee ceiling rather than replacing it.

Idaho's HB 583, signed by Governor Brad Little and also effective July 1, 2026, goes further on the list of things a city cannot require: no owner-occupancy mandate, no professional-management mandate, no extra insurance beyond what any homeowner carries, no usage reporting, no added parking, no structural modifications, no inspections beyond standard housing code, no caps on rental days, no neighbor-notice requirements, and no STR-specific fees or taxes. Arizona and Ohio both have near-identical preemption bills moving through their 2026 legislative sessions, per Rental Scale-Up's coverage, which would extend this same list to two more states if either passes.

The 2026 laws are also noticeably broader than the older ones. Arizona's 2016 statute and Florida's 2011 statute mainly stop a city from banning short-term rentals outright; neither one reaches into homeowners association governance the way Indiana's HEA 1210 does, and neither spells out a specific list of barred local requirements as long as Idaho's. That drafting difference tells you something about the legislative mood: the newer wave of preemption bills is written by lawmakers who have already watched a decade of cities find workarounds to older, narrower preemption language, and are closing those gaps in advance rather than waiting for the next lawsuit.

Bottom line: six-plus states now treat an outright short-term rental ban as legally off the table for any city within their borders, and two more states are voting on whether to join them before the end of 2026.

What Idaho's HB 583 Protects

Idaho's HB 583 protects a host's right to operate a short-term rental anywhere residential use is already allowed, stripping cities of every tool short of standard zoning and safety enforcement. The law passed the Senate 23-12 and took effect July 1, 2026, making Idaho one of the most protective states in the country for existing STR operators.

The law traces directly to a specific local fight. In May 2025, the Idaho Supreme Court unanimously struck down a Lava Hot Springs ordinance that had banned non-owner-occupied short-term rentals in residential zones, in a town where, by some estimates, roughly 30% of housing was already listed as a short-term rental against a permanent population under 400 residents. HB 583 takes that single court ruling and writes it into state law for every city and county in Idaho, closing off the possibility that a different town could pass a similar ban and win in court.

What a city keeps under HB 583 is real but narrow: it can still classify short-term rentals as "non-transient residential use," enforce ordinary noise, parking, traffic, and nuisance rules, and require the same health and safety standards it applies to any other residential dwelling, plus the specific fire and carbon-monoxide protections listed in the statute. What it cannot do is treat a short-term rental as a different, more suspect category of housing subject to its own permitting gate.

The law also bars cities and counties from levying any tax or fee specific to operating a short-term rental marketplace, on top of the ban on STR-specific licensing fees. For a buyer comparing Boise against a non-preempted market with similar fundamentals, that removes an entire category of future-cost uncertainty: a city cannot introduce a new short-term rental tax next year the way it could introduce a new sales or lodging surcharge in a state without this protection. In the portfolios we manage across Idaho's ski and college-town markets, that stability is usually the first thing an out-of-state buyer's lender asks about, and HB 583 is now a one-line answer to it.

Bottom line: an Idaho host's regulatory risk in 2026 is close to the safety-code floor, not the political-mood ceiling that governs an unprotected market.

What Indiana's HEA 1210 Protects

Indiana's HEA 1210 protects a host from any cap on the number of rental properties a city or county allows, whether that cap targets short-term or long-term rentals, with the law passing 91-3 in the House and 48-0 in the Senate before taking effect July 1, 2026. The near-unanimous vote matters as a signal: this was not a narrow, contested policy call, it was a near-consensus override.

The clearest test case is Carmel and Fishers, two Indianapolis suburbs that had each limited short-term rentals to 10% of homes within a subdivision. Because both ordinances predate January 1, 2026, the cities get until January 1, 2028 to bring them into compliance, rather than an immediate reset. Carmel's older bed-and-breakfast definition, which had separately captured short-term rentals under its 2017 ordinance, is retroactively excluded from the STR definition by HEA 1210, which effectively voids that piece of Carmel's local rulebook outright. Carmel dropped a pending lawsuit against a short-term rental operator in April 2026, a direct, visible consequence of the state law landing on top of a local enforcement action already underway.

HOAs are the one place Indiana's law adds a different kind of protection: after July 1, 2026, only homestead owners, meaning residents who live in the property as their primary residence, can vote on rental restrictions or serve on an HOA board that imposes them, with an exception for developers who still own lots inside the association. An investor-owner who rents out every unit they hold in a subdivision can no longer out-vote their way into a rental ban, and cannot be out-voted into one by a board stacked with non-resident landlords either.

HEA 1210 stacks on top of an existing 2018 state law that caps local short-term rental permit fees at $150, so Indiana hosts were already shielded from fee-based deterrence before this year's law closed the cap loophole. A host in a state without that fee ceiling still needs the break-even math for a permit cap, since a $150 ceiling is the exception, not the rule, once you leave Indiana. For the Indianapolis metro specifically, the practical read is that Carmel and Fishers remain the two markets where a buyer needs to track a real compliance date, January 1, 2028, while every other Indiana city is already at the post-HEA 1210 baseline. A buyer underwriting a Carmel property today should treat 2028 the way a lease-renewal date gets treated in commercial real estate: a known, calendared event, not an open-ended risk.

Bottom line: Indiana now treats a rental cap the same way it treats a short-term rental ban, as a local overreach the state will not honor, with a grace period rather than an instant reset for ordinances already on the books.

Where City Bans Are Still Winning

City bans are still winning everywhere a state has not preempted the question, and Birmingham, Michigan is the clearest 2026 example. The city commission voted unanimously in October 2026 to permanently bar any rental under 30 days, amending both its zoning ordinance and code of ordinances to make 30 consecutive days the hard floor for any advertised listing.

The timeline matters as much as the outcome. An April 11, 2026 party at a short-term rental ended in gunfire and three arrests. The city commission responded on April 27 with a six-month moratorium, stopping all new STR licenses. A viral pool party in June, technically a separate pool rental rather than a short-term rental stay, kept the political pressure on even though the city's own citation in that case was for a zoning and noise violation, not an STR rule. By October, the moratorium became a permanent ban, with existing licenses honored only until they expire in April 2027. A local realtor representing the Greater Metropolitan Association of Realtors argued publicly that a blanket ban wouldn't fix the underlying disturbance problem, and lost that argument on a unanimous vote.

Michigan is not an accident of inaction. State lawmakers have debated a preemption bill, HB 4722, for multiple sessions, and Bridge Michigan has reported it repeatedly stalling over local-control objections from municipal groups, without ever reaching a floor vote. Every city in Michigan currently has the same authority Birmingham just used, and nothing at the state level stands in the way of another one using it.

The counter-trend runs well beyond Michigan. Sacramento has moved toward a primary-residence-only rule for short-term rentals. New York City's Local Law 18 has produced a reported $72 million in fines and an estimated 75% drop in active listings since enforcement began. Barcelona is phasing out tourist-apartment licenses entirely. The EU's Regulation 2024/1028, effective May 20, 2026, now requires a registration number on every short-term rental listing across the bloc. None of these jurisdictions have a preemption law shielding hosts, and all of them have moved to restrict rather than protect.

Bottom line: the same complaint that produced a settled state law in Idaho produced a permanent citywide ban in Michigan, and the only variable that explains the difference is which state the property sits in.

How to Price the Ban Risk Into Rates

Pricing the ban risk into rates means converting the probability of a forced shutdown into an expected dollar cost, then treating that cost as a discount on the purchase price or a required premium on the nightly rate while the property can still operate. The framework below is illustrative modeling built for this article, not a quoted statistic, and it is designed to be rebuilt with a buyer's own numbers.

Take two identical three-bedroom short-term rental properties, each purchased for $420,000, each carrying a $220 average daily rate and 58% occupancy. Gross booking revenue for either property is $220 x 0.58 x 365, or $46,585 a year. After Airbnb's 15.5% host-side fee, net host revenue is $46,585 x 0.845, or $39,364. Subtract $9,600 a year in fixed operating costs, insurance, utilities, and non-cleaning maintenance, and net operating income from short-term rental use is $29,764.

Property A sits in Boise, Idaho, protected by HB 583. Property B sits in a Michigan lakefront town where the city council has an active ban proposal on its agenda, the same stage Birmingham occupied roughly six months before its April 2026 moratorium. If Property B's city follows Birmingham's path and bans short-term rentals, the owner's fallback is a 30-plus day furnished or unfurnished rental at $2,450 a month, or $29,400 a year gross, against roughly $3,600 a year in lower operating costs, for a long-term-rental NOI of $25,800. The gap between short-term and long-term NOI is $3,964 a year, forever, once the ban takes effect. Capitalized at a 7% cap rate, a reasonable rate for this property class, that perpetual loss is worth $3,964 divided by 0.07, or $56,629 in present value.

The last input is the probability that Property B's city actually pulls the trigger within the underwriting period. An ordinary market with no moratorium and no pending vote carries a low background risk, in the low single digits annually. A city that has already escalated to an active moratorium, Birmingham's position for six months before its ban, should be treated as carrying a materially higher risk, in the judgment of the revenue strategists we work with, something in the 25% to 40% range within the following twelve months rather than the background rate. At the midpoint, 30%, expected cost is 0.30 x $56,629, or $16,989, which is roughly 4% of the $420,000 purchase price. This is a variation on the same logic behind the RevPAR floor math for oversupplied markets: both frameworks capitalize a recurring annual loss into a single number you can negotiate against today, rather than absorbing it one disappointing month at a time.

Read against a purchase decision, that table says the discount only becomes material once a market has visibly escalated. A property in a quiet market with no moratorium doesn't need a special discount; a property in a market that just passed a six-month moratorium, Birmingham's exact position in spring 2026, needs a buyer to either negotiate roughly 4% off the asking price or build a $17,000 contingency into their underwriting before closing.

Bottom line: once a city has escalated to an active moratorium or ban vote, the expected cost of that risk is large enough to change an offer, not just a footnote to mention in diligence.

This framework does not apply evenly everywhere. A buyer who will occupy the property as a primary residence regardless of its rental status has no ban exposure to price, since the fallback use is the same as the intended use. A market with a preemption law already in force, Idaho and Indiana chief among them in 2026, should use the bottom row of risk, not the top, because the state has already removed the city's ability to act. And a deal where short-term rental income is a minor share of total returns, a vacation home bought primarily for personal use with occasional rental income, doesn't carry enough exposure for the math to move the decision either way.

Is Your STR Market Protected?

A short-term rental market is protected when the state it sits in has passed a preemption law and exposed when the city retains full authority and has shown any sign of moving against short-term rentals. Checking which category a market falls into takes three questions, run in order, because each one can override the answer to the question before it:

• Does the state preempt local short-term rental bans, and if so, does the preemption law cover the specific restriction in question (a cap, a fee, an occupancy mandate) or only an outright ban?
• Has the city passed, or formally proposed, a moratorium, licensing freeze, or new cap in the last twelve months, regardless of what the state law says about the city's authority to enforce it?
• Does the city's own zoning or municipal code already classify short-term rentals as a distinct use category, separate from ordinary residential rental, which is usually the first sign a future restriction is being drafted?

A market can pass the first question and still fail the third: a preempted state does not stop a city from writing a short-term rental ordinance, it only stops that ordinance from functioning as a ban or a cap. Watching the third signal early is how an operator sees a Pennsylvania-style registration bill coming before it reaches a floor vote.

AirROI's 2026 market data gives a sense of how differently this plays out even among preempted markets. Indianapolis carries 3,615 active listings at 42% occupancy and a $217 average daily rate; Carmel, protected but grandfathered into its old cap until 2028, has just 87 listings at 49% occupancy and a $279 rate. Boise shows 1,596 listings at 54% occupancy and $185 ADR, the highest occupancy in the data set the research for this article reviewed. Ketchum and Sun Valley, Idaho's higher-end ski markets, run far lower occupancy, 37% and 33% respectively, against the highest rates in the set, $531 and $475, with booking lead times AirROI puts at 73 to 78 days, long enough that a regulatory change would be visible to guests well before it took effect.

Philadelphia, Pittsburgh, and the Poconos sit in Pennsylvania, a state with no preemption and a registration bill still sitting in committee. Philadelphia's 5,766 listings run 44% occupancy at a $181 rate; Pittsburgh's 2,653 listings run 47% occupancy at $207; the Poconos, at 1,130 listings, carry the highest rate of the three at $378 against 38% occupancy. None of these three markets has passed a ban, and none of them has a state shield either, which is exactly the uncertain middle ground this article's pricing framework is built for.

Bottom line: the honest answer to "is my market protected" requires checking the state law first and the city's own recent agenda second, because either one alone can mislead.

When Should You Exit or Pivot?

An operator should consider exiting or pivoting away from short-term rental use once the expected cost of regulatory risk, calculated against their own numbers, exceeds what a rate increase or a short remaining holding period can absorb. In practice that threshold arrives well before a ban is finalized, because the market usually reprices the risk before the vote does.

Three signals, read together, say the decision window is closing. First, the city has already passed any restriction, a moratorium, a licensing freeze, a new cap, rather than merely discussing one; Birmingham's six months between moratorium and ban is close to the fastest end of what we've seen across the portfolios we manage, and three months is not an unreasonable planning assumption for a city that has already stopped issuing new licenses. Second, the existing-license grace period is short enough that a sale or conversion can't be completed inside it; Birmingham gave operators until April 2027, roughly eighteen months from the original moratorium, which is a workable but not generous window to sell, refinance, or convert. Third, the fallback use, long-term rental or a sale, closes most of the income gap rather than almost none of it; a property where long-term rent covers 85% of short-term net income is a far easier pivot than one where it covers 50%.

Pivoting to a mid-term furnished rental, typically 30 or more nights at a time, is usually the first move worth modeling before a straight conversion to a 12-month lease, because it often recovers more of the gap than a standard lease while staying inside most new 30-day-minimum ordinances, Birmingham's included. Run the net-RevPAR math for a mid-term pivot first, since it already accounts for the turnover and vacancy differences between the two models. The same net-revenue comparison used earlier in this guide, gross revenue minus the fee structure minus operating costs, applies directly; only the monthly rate assumption changes.

Run the comparison before deciding which path to take, not after. Using the Property B numbers from the pricing section, a mid-term furnished rental at $3,100 a month closes most of the $3,964 annual gap against long-term NOI, while a standard 12-month lease at $2,450 a month leaves the full gap open. A buyer or existing owner who models both before a ban vote happens can commit to the mid-term path early, list the unit for 30-plus-night stays while still legally operating short-term, and arrive at the compliance deadline with an established rental history instead of a cold start.

Bottom line: the signal to start planning an exit is the city's first restrictive vote, not its final one, because the window between the two is where the best options still exist.

Frequently Asked Questions

Conclusion

The 2026 split between Idaho and Indiana's new preemption laws and Michigan's Birmingham ban is not a one-time news story, it's a preview of how uneven short-term rental regulation is going to stay. The states that preempted the issue early, and the two that just joined them, have converted a volatile local political question into a settled fact an operator can underwrite around. Everywhere else, the city council's next agenda is still the real regulator, and pricing that risk honestly, rather than ignoring it until a vote happens, is what separates a host who sees a ban coming from one who reads about it after the fact. If your portfolio spans more than one of these jurisdictions, talk to a revenue strategist about building the regulatory check into your pricing and forecasting before the next vote, not after it.