Proposed law would put restrictions on vacation rental homes

State lawmakers are moving to curb some of the abuses that were created when they agreed three years ago to let people rent out their own homes for overnight guests.

HB 2672 would prohibit homeowners from allowing properties to be used for special events. Rep. John Kavanagh, R-Fountain Hills, said that will put an end to “party houses” where a home in a residential neighborhood suddenly becomes the site for dozens and dozens of guests.

But lawmakers balked at putting an actual limit on the number of people who can stay in a home.

Isela Blanc

More significant, the legislation still allows what Rep. Isela Blanc, D-Tempe, calls “money-grubbing capital investors” to buy up multiple homes and condos in a neighborhood solely to make them available on platforms like Airbnb. Blanc said this practice not only alters the character of existing neighborhoods but dries up the supply of affordable housing for people who live in the community.

Kavanaugh said he agrees with what Blanc sought to do. But he feared that such a provision would incur the wrath of those investors and those who work with them, condemning the entire proposal to failure.

Rep. Jay Lawrence, R-Scottsdale, also a foe of what he said are abuses of vacation rentals for party houses, put a finer point on the politics of it all.

“Let me point out that real estate agents are a very powerful entity within this body,” he said.

And then there’s the fact that the industry has an ally in Gov. Doug Ducey who signed the 2016 legislation in the first place.

That law overruled any existing or future city ordinances that limit short-term rentals, leaving cities with the power to regulate only things like noise and parking rules.

In a ceremonial bill signing that year engineered by Airbnb, Ducey touted the change as good for visitors seeking alternatives to hotels and resorts, and for homeowners who can make some money.

But even back in 2016 Kavanagh was complaining that the law covers more than those renting out a bedroom or their home. There is no limit on the number of properties an investor could buy and days a home could be rented out to successive guests — all in the same residential area — potentially turning an area into a vacation rental zone.

Asked at the time whether that could change the character of neighborhoods, Ducey responded, “I’m not going to answer these hypotheticals.”

And what does the governor think now? An aide to Ducey said his boss does not comment on pending legislation.

John Kavanagh

But Kavanagh said these questions are no longer hypotheticals. So he wants to rein in what other lawmakers and the governor let loose.

As originally crafted, HB 2672 would have limited rentals to no more than two people per bedroom, plus an additional two. So for a four-bedroom home, the maximum guests could be 10.

That, he said, drew opposition from owners of bigger homes who insisted there was plenty of space for more people to bed down.

Also gone is language that would have allowed local governments to limit the number of guests — people other than the renters — who could be on the property after 10 p.m.

And a proposal to have properties monitored electronically to determine the number of occupants and the noise level fell out after privacy objections.

What’s left is a requirement for property owners to provide a phone number that local authorities can reach if there are complaints at any time of the day.

But the biggest element that survived prohibits vacation rentals from being used for non-residential purposes, like special events, retail operations, restaurants or banquet space. That, said Kavanagh, should eliminate the parties that create many of the complaints of neighbors.

Blanc said Kavanagh is on the right track, telling colleagues that what now exists isn’t what lawmakers were told in 2016.

“What originally was sold as a way for empty-nesters and other owner-occupants to make extra money by renting a spare bedroom to a foreign tourist has become a multi-billion dollar industry that heavily caters to large groups and special events where entire homes are rented out and treated like bars and concert halls,” she said.

But Blanc said the bill doesn’t go far enough. She suggested that cities be permitted to limit these rentals to houses where the owner is the resident or the house is a second home.

“However, if you are just a capital investor coming in and changing the neighborhood completely by buying up as many homes as possible so you can continue to profit by calling yourself an Airbnb business, then you should be treated as a hotel,” she said.

And then there’s what Blanc said is the problem of the disappearance of affordable housing.

“These are large, money-grubbing capital investors who are using property rights in the state of Arizona as a way to have billions and billions of dollars go into their pocketbooks,” she said.

Kavanagh said that he actually considered what Blanc proposed. But he said he was dissuaded after meeting with some of the large commercial operators who he said are “very professional people that want to run good operations.”

Anyway, he said, adding that language would likely sink the entire bill.

But Kavanagh said there may be a way of addressing this in the future by giving cities the right to use their zoning laws to limit the number of vacation rentals within a particular area.