In fiscal year 2024–25, the City of Red Lodge counted 31 new short-term rental registrations. Twelve of them weren't new rentals. They were existing short-term rentals that had sold, and each buyer had to register again because the business registration doesn't transfer to a new owner.

That is the main fact for anyone shopping Red Lodge with nightly rental income in mind. A listing can show years of bookings, a furnished interior and a strong review history. None of that gives you the right to keep renting it. Under Ordinance 963, registrations "are assigned to the owner and the dwelling unit," they're non-transferable, and they "do not convey to a new owner if there is a change in ownership." On closing day, the seller's registration ends. Yours starts as an application.

Four ways a registration ends

The ordinance was amended on second reading on February 10, 2026. It treats a registration as something the owner has to keep active, and the house doesn't hold it. A registration ends in four ways:

1. A sale. Ownership changes, the registration lapses, and the buyer applies as a new business.
2. A missed renewal. If renewal isn't finished by September 1, the certificate is terminated automatically, and the owner or operator has to apply for a new one.
3. A quiet year. A registration that goes unused for 365 consecutive days is revoked. The city measures use by whether resort tax was remitted. There's one exemption: the home was a long-term rental for the past fiscal year, the owner can show a written lease, and inspections and fees are current.
4. Revocation for cause. Losing any required permit or license revokes the registration, and the business then has to reapply. The city's compliance page adds that it may revoke a certificate at any time if the regulations aren't followed.

The third rule matters for second-home buyers. Say you plan to rent the house some summers and keep it for family use in others. A year with no remitted resort tax costs you the registration. Moving your existing permit to a different Red Lodge property doesn't work either, because the ordinance bars it.

The cap has room, and has for three years

The 2023 debate centered on the cap. The original Ordinance 963 passed August 23, 2023, and limited short-term rentals to 20% of residences. In June 2023, Red Lodge Reservations owner Chelsea Toupin, who managed 19 rentals then, argued in a KTVQ report that the cap threatened property rights and a tourism-dependent economy. Mayor Kristen Cogswell described the goal as guardrails and a balance between visitor lodging and full-time residents.

The city's own counts show the cap hasn't come close to filling.

The limit is recalculated every year from the dwelling count, so it rises as Red Lodge builds. The 2026 count from the Red Lodge Fire Department included units built or under construction. Registrations have stayed near 200 the whole time. The city's 2025 review also found that at least six short-term rentals had converted to long-term rentals. One project in the pipeline could add to the count. In September 2026, the Planning Board approved design review for the Landmark Building, a 35-unit condominium project on Oakes Avenue North between 9th and 10th Streets. That was design review, not a full construction approval.

So the rule most likely to stop a buyer is transferability, and the cap is unlikely to come into play anytime soon. Each buyer of a former rental joins the same count as someone who has never rented a night. A waiting list only starts if the limit is reached.

The 2026 amendment changed which pool you apply to

Room under the cap depends on which kind of registration you hold. The amendment created five types and redrew the pools:

• Exempt from the cap: Owner Occupied, where the owner stays at the home during the rental; Onsite Managed, where a manager is on the premises the whole time guests are there; and Temporary, where it's the owner's principal residence and it's listed for no more than 60 days a year.
• 55% of the cap: Professionally Managed. The manager must be registered with the city and licensed by the State of Montana as a property manager, and an owner can qualify by holding that license.
• 45% of the cap: The amended ordinance makes this share available to General, or self-managed, rentals.

The city's own documents describe that 45% pool in two different ways. Under the 2023 wording, it was open to all non-exempt types, managed rentals included. The amended ordinance text assigns it to General rentals. But the August 10, 2026 staff report setting this year's limit still calls its 182 certificates "available to all property types," including professionally managed ones. As of that date, the managed pool held 106 certificates with 116 open, and the 45% pool held 98 with 84 open. In the December 2025 review, the counts were 84 managed and 122 in the other pool. The total barely moved. One possible explanation is that managed rentals were reclassified after the amendment, but the city documents don't say so.

For a buyer, it's worth asking the city which pool a given management plan would fall under before you count on a certificate. If you switch an exempt registration into the managed or general category, it becomes subject to the limit. If you change property managers, you have 30 days to tell the city. One more restriction is easy to miss. A moderately priced home bought with city financial support, such as down payment assistance, can't be a short-term rental until the city's lien is released and that release is recorded with the Carbon County Clerk and Recorder.

The property tax treatment changes too

Once the house becomes a nightly rental, the state treats it differently for property tax. Montana's 2025 property tax package, HB 231 and SB 542, sets tiered rates for tax year 2026 on primary residences and qualifying long-term rentals: 0.76% on the first $378,000 of market value, 0.90% on the portion up to $756,000, 1.10% up to $1,511,999, and 1.90% above that. Short-term rentals and second homes pay a flat 1.90%.

Here's how that works on a home with a $600,000 market value. As a qualifying primary residence, its taxable value comes to about $4,871. As a short-term rental, it's $11,400, roughly 2.3 times higher. Local mill levies are applied to taxable value, so the actual bill depends on the parcel. A single-family home counts as a long-term rental when it's rented in stays of at least 28 days for at least seven months of the year to tenants who live there. An owner who lives in the home at least seven months can rent it for the other months and may still qualify as a principal residence. The Department of Revenue's enrollment window for 2027 runs May 4, 2026 through March 1, 2027.

The law faces a court challenge. A group of legislators sued, arguing SB 542 was passed unconstitutionally. The latest reporting found, from June 2026, said the case was pending in Gallatin County District Court. In a Daily Montanan report, the plaintiffs' lawyer said they weren't seeking to claw back benefits already paid.

Guest stays carry their own taxes. According to the Montana Department of Revenue, the state charges 8% on accommodations: a 4% lodging facility use tax plus a 4% lodging facility sales tax. Stays of 30 continuous days or more to the same guest are exempt. Red Lodge adds a 4% resort tax. That's the original 3% plus a 1% infrastructure tax voters approved in 2020. According to the City of Red Lodge, booking platforms collect the resort tax, but the host has to remit it to the city through its STR portal. Those remittances are also how the city decides a registration is in use. The city charges $250 for a new registration and $250 a year to renew.

None of this is tax advice. A Montana tax professional can run the numbers for a specific property.

The income mostly comes in summer

Resort tax receipts give a rough picture of the money involved. In fiscal year 2024–25, Red Lodge collected $195,004 in resort tax from short-term rentals. July through September brought in $78,296 of that, about 40%. October through December was the lowest quarter at $31,298. At a 4% rate, those receipts imply roughly $4.9 million in taxable stays citywide. Spread across the 208 registrations counted in 2025, that averages around $23,000 per registration. Treat that as an estimate only. It mixes large homes with small condos and full-year operators with part-year ones.

Over the same period, the city's complaint hotline received five calls in 2024 and five in 2025, covering fireworks, guest counts, noise, trash, off-leash dogs and outdoor lights.

Frequently Asked Questions

Can I buy a house that is already a short-term rental and keep renting it right away? You'll need your own registration. Applications must include the required inspection reports, the full fees, and either an EIN or a Montana Lodging Facility Sales and Use Tax Permit.

Does an HOA or my lender get a say? They can. The ordinance makes the owner responsible for confirming that short-term renting is allowed under insurance and mortgage contracts and HOA covenants. A city registration doesn't override any of those.

Could the 20% limit change? The council has to review the ordinance every year and present it to the public. The last two reviews were presented in December 2024 and December 2025.

If you're looking at a Red Lodge property with rental income in mind, Huskey Real Estate Group can help you check the questions that matter before you make an offer: whether the home's current registration is active, which pool your management plan would put you in, and how HOA covenants treat nightly stays. Schedule a consultation and we'll go through it with you.