Short-term rentals near Fredericksburg: permits, zoning, and hotel tax

Inside Fredericksburg city limits: the permit

The City of Fredericksburg requires a short-term rental permit for stays of less than 30 days within city limits. The City's FAQ cites Zoning Ordinance §20.222 for the requirement.

Inspections come with the permit. The City's FAQ lists an inspection:

• Before it issues a new permit
• When a permit transfers to a new owner
• After complaints
• After structural changes to the unit
• Every year at renewal

Build the rental to pass that first inspection. Ask the City for its inspection checklist while the plans are still on paper, since changes cost less before the walls go up.

How the application works

Ordinance 2023-18 requires a separate permit application for each rental, with a nonrefundable application fee set in the City's fee schedule. The City's FAQ links one online application for new permits, renewals, and transfers. Once the City notifies you that the application has reached the inspection phase, you have 30 days to schedule the inspection. A permit runs for one year, and you apply to renew it before it expires.

You also name a 24-hour contact. That person has 30 minutes to answer a call about the rental, and one hour to resolve the issue or reach the property when City staff or police ask. The permit posted inside the unit shows the permit number, maximum occupancy, the 24-hour contact's name and phone number, and the expiration date. Every listing has to show the City permit number, occupancy maximum, parking capacity, host rules, and a street-view image of the front of the property.

Occupancy is limited to two persons per bedroom plus two, with a cap of 12 unless the owner obtains a special exception to raise the maximum (Ordinance 2023-18, Sec. 20-222(b)).

What the inspection looks for

Section 20-222(d) of the ordinance sets the life-safety items:

• Working smoke alarms on each floor and in each bedroom, plus one in the hallway when bedrooms share a corridor
• At least one working carbon monoxide detector on each floor if the unit has natural gas, propane, or an attached garage
• A 2A:10B:C fire extinguisher on each floor, inspected every year and tagged by a third-party inspector
• At least one egress opening from each bedroom directly to the outdoors

A room that fails these items cannot count toward occupancy or appear in a listing as a bedroom.

Which rental type a guest house falls under

Sec. 20-220 of the ordinance defines four rental types: accessory (STR-ADU), B&B, facility, and unoccupied. A rental in a lawful guest house on the same lot as the owner's homestead is an accessory rental. The owner proves the main house is a homestead with a current homestead exemption filed with the Gillespie Central Appraisal District. The alternative is a sworn affidavit that the 24-hour contact lives there. A rental that qualifies as neither accessory nor B&B counts as unoccupied. The zoning ordinance's definition adds that the guest house shall not exceed the size of the primary structure.

Zoning decides where a rental can go

The City adopted its current short-term rental ordinance with an effective date of January 1, 2024. Under it, the tract's zoning matters most:

• Condominium rentals. The City's own sources describe these differently. The City's summary memo on the ordinance says no new STR-condominium uses, while the City's permit FAQ says the commercial districts require a conditional use permit for them. Confirm with the City's Development Services department before planning one.
• Special exceptions. Requests for exceptions go to the Zoning Board of Adjustments.
• Transfers. Where short-term rentals are allowed by right, a new owner submits a complete permit application before operating the rental. Where they are no longer allowed by right, the new owner must apply within the period set by the nonconforming-use rules in zoning Sec. 6.110, or the rental use has to stop.

The City's own pages describe limits by zoning district. None of the three City sources reviewed for this guide (the FAQ, the short-term rental page, and the ordinance memo) mentions a cap on the number of permits per district. If you read elsewhere that the City caps permits by zone, ask the City.

For a barndominium project inside the city, R1 or R2 zoning takes a new unoccupied rental off the table. Ask the City what that means for a guest house on the same lot as the home you live in.

In the ETJ: no City permit

The City's FAQ says short-term rentals in the ETJ "are not required to obtain a permit to operate." The ETJ is the unincorporated area around the city where the City still exercises some authority. The County's development brochure sends ETJ questions to City Development Services, which can tell you whether a given tract falls inside it.

Two things still apply in the ETJ: hotel tax, and whatever the deed restrictions say.

Farther out, beyond the ETJ

Outside the city and its ETJ, the City permit does not apply. Two other rules still shape a rental. The county's 7% hotel tax goes to the Gillespie County Treasurer, and the County's hotel tax page asks lodging operators to send the Treasurer a contact registration form. Gillespie County also requires approved wastewater disposal in all areas of the county, regardless of acreage. A guest house with its own bathroom adds wastewater, so size the septic system for both buildings before you apply. The septic and floodplain permits guide covers that process.

Hotel occupancy tax: who gets paid

• The total is 13%: 6% state and 7% local.
• Inside the city or its ETJ, the City assesses the 7% local tax, and it is due and payable to the City of Fredericksburg.
• Elsewhere in Gillespie County, outside the city and its ETJ, the county's 7% applies.

An unincorporated tract that sits inside the ETJ owes the local tax to the City, not the county, even though the City requires no rental permit there. Register with the right office before your first booking.

Registering and filing

Inside the city, the ordinance tells you to contact the City finance department before you submit the permit application. The City collects its hotel tax quarterly, with returns due April 30, July 31, October 31, and January 31. File a zero-dollar return for a quarter with no bookings. Late City tax accrues 4.25% interest, and the City adds a 15% penalty once the tax is a full quarter late.

Booking platforms change part of this. The City says reservation services like Airbnb and VRBO do not remit City hotel tax for their hosts, though they usually remit the state tax under their own taxpayer number. The Comptroller's FAQ agrees on the state side. An owner who rents only through a platform that collects state tax doesn't collect it, and should check with the city and county about local tax.

Take direct bookings and you need your own state account. The Comptroller says to send Form AP-102 to a field office. Monthly state returns are due on the 20th of the following month. Filers who qualify for quarterly reporting file on the 20th after each quarter ends.

Deed restrictions and HOA rules

Before you buy, pull the recorded deed restrictions and any HOA documents and look for:

• Language limiting the lot to single-family residential use
• A minimum lease term
• Limits on a second dwelling or guest house
• An architectural review step for new buildings

If the wording is unclear, a real estate attorney can read it for you.

Questions for an insurance agent

Ask the agent before you build, while the answers can still change the plan:

• Does a homeowners policy cover the guest house when guests pay to stay, or do I need a short-term rental or commercial policy?
• What liability limits make sense for paying guests, and does the policy cover a pool, hot tub, or deck?
• Does the policy replace lost rental income after a covered loss?
• How does a booking platform's host protection program interact with my policy?
• Does a steel building or a separate shop on the same lot change the coverage or the premium?

Designing a guest house for rental use

If the rules allow a rental on your tract, a few design choices make it easier to run:

• A separate entrance and a separate HVAC system, so you can shut the unit down between guests
• Bedrooms of at least 70 square feet with a closet that opens off the room, the size the City's zoning definition uses for a rental bedroom, each with an egress opening to the outdoors
• A guest house no larger than the main house, if the lot is inside the city and the rental is meant to qualify as an accessory rental
• Gas or propane appliances vented outside, with carbon monoxide detectors on each floor
• Parking on an improved surface, since the ordinance bars guests from parking on unimproved ground
• A porch facing the view, away from the main house, for privacy on both sides

Inside the city, the posted host rules have to list quiet hours of 10 p.m. to 7 a.m. in residential zones and the exterior lighting limits under the City's Dark Sky rules. Ask the City which porch and yard fixtures meet those rules before you order them.

Before you buy or build

• Read the recorded deed restrictions.
• Ask the City for its permit inspection checklist before you finalize the plans.
• Confirm whether the tract is in the city, the ETJ, or the county, since that decides the permit and who collects hotel tax.
• Talk to an insurance agent before construction starts.