The Neighborhood Protection and Housing Affordability Act aims to regulate short-term rentals in exclusively residential zones by prohibiting their rental unless specifically authorized by municipal zoning ordinances. The bill allows municipalities to designate areas within residential districts where short-term rentals can occur, provided that these areas do not exceed 25 percent of the municipality's total land area. It also establishes that individuals cannot offer transient accommodations in areas zoned exclusively for residential purposes unless permitted by local ordinances.

Violations of this act will incur civil penalties, starting at $250 for a first offense and escalating to $1,000 for subsequent offenses. The collected fines will be directed to the municipality, allowing them to cover enforcement costs and support affordable housing initiatives. The bill emphasizes the need for local governments to manage the impact of short-term rentals on housing availability and affordability, reflecting concerns raised by various stakeholders regarding the growing short-term rental market's effects on long-term housing options.