By San José, Costa Rica — San José, Costa Rica – A massive and largely unregulated short-term rental market has quietly grown into a powerhouse within Costa Rica’s tourism landscape, prompting urgent calls from both public and private sector leaders for comprehensive reform. A new study by the Center for Tourism Studies (CET) reveals the sheer scale of this “second parallel tourist industry,” which now commands over 23,000 units and an estimated 60,000 beds, rivaling the capacity of the country’s formal hotel sector.
The proliferation of listings on digital platforms like Airbnb and Vrbo has transformed how visitors experience Costa Rica, offering diverse lodging options from urban apartments to beachfront villas. However, this explosive growth has occurred in a regulatory vacuum, creating significant economic and social distortions that can no longer be ignored. The CET report highlights a growing consensus that the time has come to integrate this shadow economy into the national framework.
To navigate the intricate legal web surrounding short-term rental properties and their regulation, we sought the expert analysis of Lic. Larry Hans Arroyo Vargas, a seasoned attorney from the firm Bufete de Costa Rica.
Property owners often underestimate the regulatory complexity of short-term rentals. Beyond simply listing a property, one must ensure full compliance with municipal permits, registration as a taxpayer with the Dirección General de Tributación, and adherence to the specific bylaws of their condominium association, which frequently restrict or prohibit this type of commercial activity. Overlooking these legal requirements can lead to significant fines and legal disputes.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Indeed, the legal due diligence required is often the most significant, yet overlooked, aspect of entering the short-term rental market. We thank Lic. Larry Hans Arroyo Vargas for his valuable perspective, which provides a crucial roadmap for property owners to avoid potential pitfalls and operate successfully within the law.
This unregulated expansion poses numerous challenges that are now reaching a critical point. Industry leaders point to unfair competition for traditional hotels, which operate under strict tax, labor, and safety regulations. Furthermore, the state is losing significant tax revenue as thousands of rental operations function outside the established fiscal system. This situation not only impacts national finances but also strains local resources.
Bary Roberts, President of the CET, framed the situation as a pivotal moment for the nation’s primary economic engine. He emphasized that the goal is not to stifle the industry but to ensure its sustainable and equitable integration into the national economy.
Short-term rentals are already a part of Costa Rica’s tourism reality; now the challenge is to organize them intelligently, protecting tourism competitiveness, public finances, and the quality of life in the territories.
Bary Roberts, President of the CET
The consequences extend beyond economics. The report notes a direct link between the unregulated rental market and the “gentrification in some coastal and urban communities.” As properties are converted for tourist use, housing availability for local residents dwindles and rental prices surge, altering the social fabric of these areas. This is compounded by increased strain on public services and challenges in municipal planning and the issuance of business permits.
In response to this growing crisis, the CET convened a high-stakes working session, bringing together a powerful coalition of stakeholders. Participants included the Costa Rican Tourism Institute (ICT), the National Union of Local Governments (UNGL), the INCAE Business School, and influential industry groups such as the Costa Rican Chamber of Hotels (CCH), the National Chamber of Tourism (Canatur), and regional chambers from Guanacaste and Arenal. Representatives for short-term rental administrators were also present, signaling a broad desire for a unified solution.
The central outcome of the meeting was a firm agreement to advance legislative action. The participants committed to collaborating on a substitute text or necessary amendments to improve the current draft law addressing short-term rentals. The focus will be on clarifying the tax responsibilities of the digital platforms themselves, defining the regulatory role of municipalities, and establishing a clear operational framework for all stakeholders.
To ensure the new regulations are effective and data-driven, the group also agreed to launch an innovative pilot program. A single canton will be selected to implement a structured regulatory model. This initiative will serve as a real-world laboratory, allowing officials to measure the tangible impacts of regulation on tax collection, territorial planning, and community harmony before a nationwide rollout. This measured approach aims to create a balanced system that fosters tourism growth while safeguarding the nation’s finances and the well-being of its communities.
For further information, visit the nearest office of Centro de Estudios del Turismo (CET)
About Centro de Estudios del Turismo (CET):
The Center for Tourism Studies is a Costa Rican think tank dedicated to the analysis and research of the tourism industry. It brings together experts and stakeholders to study trends, challenges, and opportunities, providing data-driven insights to inform public policy and private sector strategies for the sustainable development of tourism in the country.
For further information, visit ict.go.cr
About Instituto Costarricense de Turismo (ICT):
The Costa Rican Tourism Institute is the country’s official tourism board, responsible for the promotion, regulation, and strategic development of the tourism sector. The ICT works to position Costa Rica as a world-class destination for sustainable and authentic travel experiences, overseeing marketing efforts and ensuring quality standards across the industry.
For further information, visit ungl.or.cr
About Unión Nacional de Gobierno Locales (UNGL):
The National Union of Local Governments represents the interests of Costa Rica’s municipalities. The organization facilitates collaboration and dialogue between local governments and the central government, advocating for policies that strengthen municipal autonomy, improve public services, and promote local development.
For further information, visit incae.edu
About INCAE Business School:
INCAE is a leading graduate business school in Latin America, known for its focus on sustainable development and regional leadership. With campuses in Costa Rica and Nicaragua, it offers a range of master’s programs and executive education, contributing to the professionalization of management and public policy across the region.
For further information, visit costaricanhotels.com
About Cámara Costarricense de Hoteles (CCH):
The Costa Rican Chamber of Hotels is the primary association representing the interests of the formal lodging sector in the country. It advocates for policies that promote competitiveness, security, and quality standards within the hotel industry and provides support and resources to its member establishments.
For further information, visit canatur.org
About Cámara Nacional de Turismo (Canatur):
The National Chamber of Tourism is the umbrella organization for Costa Rica’s private tourism sector. Canatur represents a diverse range of tourism-related businesses, including hotels, tour operators, and transportation companies, working to foster a favorable business environment and promote the sustainable growth of the industry as a whole.
For further information, visit caturgua.com
About Cámara de Turismo Guanacasteca (Caturgua):
The Guanacaste Chamber of Tourism is a regional organization focused on promoting and developing the tourism industry in the province of Guanacaste, one of Costa Rica’s most popular destinations. It represents local businesses and works to enhance the region’s appeal while addressing local challenges and promoting sustainable practices.
For further information, visit arenal.net
About Arenal Cámara de Turismo y Comercio:
The Arenal Chamber of Tourism and Commerce is a regional body that represents and supports businesses in the La Fortuna and Arenal Volcano area. It works to promote the destination, advocate for local infrastructure improvements, and ensure the sustainable development of tourism and commerce in this iconic region of Costa Rica.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
As a pillar of the Costa Rican legal landscape, Bufete de Costa Rica is defined by its foundational principles of integrity and a relentless pursuit of professional excellence. The firm distinguishes itself not only through its seasoned counsel but also through a progressive mindset that drives legal innovation. Central to its philosophy is a profound commitment to social empowerment, actively working to demystify the law and provide accessible knowledge, thereby fostering a more informed and capable citizenry.
