Effort to regulate short-term rentals will resume

Stakeholders and lawmakers say that they will renew efforts in the next legislative session to increase municipalities’ ability to restrict short-term rentals to increase the amount of long-term rental properties and for-sale residential properties.

This week at the League of Arizona Cities and Towns’ annual conference, Scottsdale put forward a proposal in the league’s resolutions committee to limit short-term rentals. The measure passed unanimously with support from the other cities and went to a final vote on Aug. 31.

Rep. Selina Bliss, R-Prescott, ran a bill last session that would do something similar, but it never made it to a committee hearing. She could very well be the league’s champion on this issue next session.

Bliss said she will bring the bill back next year – possibly with some new language – and will have bipartisan support.
Democrats in the Legislature and Gov. Katie Hobbs say they would support a proposal to give municipalities more regulatory power as it relates to density caps on STRs.

At a press conference last week, Hobbs was asked if she would support the league’s plan.

“I haven’t seen those proposals, so I can’t comment on the specific,” the governor said. “I think that going back to where cities could regulate the industry in their boundaries is something that I would support.”

Some cities like Sedona (which Bliss represents) and Scottsdale have high concentrations of STRs, much to the annoyance of residents who dislike the nuisance some renters can cause and worry that they are losing the housing supply to short-term visitors, when more permanent housing is needed.

“We’re displacing families from their homes because these are rentals now that were homes originally, hotels are sitting half occupied. This is all about affordable housing,” Bliss said.

As first reported at the time by The Arizona Republic, the league brokered a deal with Airbnb and Expedia agreeing not to lobby for changes to Senate Bill 1350.

Lobbyist Nick Ponder said that pushing for density caps was the one exception to that agreement.
Scottsdale put forward three proposals to the league: capping the number of STRs, limiting the density of STRs in certain areas, and creating spacing requirements between STRs.

Sedona resident Sean Smith is a member of the group Sedona Residents Unite urging the league to support Scottsdale’s plan. Smith said he doesn’t oppose STRs, but he wants some limits on them because of the effect they have on his community. “Three of the adjoining properties to my property are short-term rentals,” Smith said.

Apart from the fact that he says those homes are often used for parties and get trashed, make noise, use up all the parking, etc., Smith says his biggest personal interest in the matter is the housing supply. “It edges out long-term renters, which is what allows safety workers to live in Sedona. … You’re forcing surrounding cities to house those people and that puts a constraint on their housing situation,” he said.

The debate over private property rights is at the center of this discussion.

“Where are your private property rights? What if you don’t want a house with parties next door? Do you lose your rights?” Sen. Brian Fernandez, D-Yuma, asked.

Matthew Contorelli, senior director of externa; affairs for Arizona Realtors, said the same thing to explain his group’s opposition to the proposal. “We believe that there’s an impact to private property rights. … Say (you) own your house and your neighbor owns their house and they have one of the permits to own a short-term rental. What makes their right to use their house as a short-term rental greater than yours?”

The Arizona Realtors is one of several groups that have historically opposed limits to STRs, which they say are limits on private property rights. Contorelli also said the plans have never been clear in the details. “Cities could never tell us what their process was, if the designation would stay with the property or the owner,” he said.

Republican Liberty Caucus of Arizona also opposed Bliss’ bill last session. Lobbyist David Kahn offered the same explanation as Contorelli. “As a general rule, we’re opposed to regulation regulations, restricting what property owners can do with their properties. You know, short of some really compelling reason to do so,” he said.

Scottsdale lobbyist Barry Aarons said that opposing STR regulation doesn’t really protect private property rights.

“You want to build a hotel? Have at it, that’s OK, get the zoning, get the regulation, apply the appropriate taxes. You can own your own hotel, you can own your own four-bedroom hotel if you want to. But that’s not what this is about,” Aarons said. “You’re talking about people who are buying property solely for the purpose of renting it out as a commercial enterprise, possibly to the denigration of the property rights of the neighbors who actually own and reside in those homes. That’s not defending property rights at all. That is violating other people’s property rights for your own financial gain.”

In 2016, then-state lawmaker Debbie Lesko, now a congresswoman, sponsored Senate Bill 1350, which former Gov. Doug Ducey signed into law. That law said, “a city or town may not prohibit vacation rentals or short-term rentals, restrict the use of vacation rentals or short-term rentals or regulate vacation rentals or short-term rentals based solely on their classification, use or occupancy.” It has been the biggest protection for STRs in Arizona.

In 2020, three mayors asked the heads of Airbnb and Expedia – which owns Vrbo – to stop lobbying against reform to Senate Bill 1350 from 2016. Also, that year former Rep. Kate Brophy McGee ran legislation to put guardrails on STRs as Senate Bill 1554, but that bill died.

Brenda Barton – a former lawmaker who also represented Sedona – ran a bill two sessions ago to regulate STRs, which Bliss said is still one of her constituents’ priorities, so she ran the bill.

“These are rentals now that were homes originally, hotels are sitting half occupied. This is all about affordable housing,” she said.

When people operating STRs go to sell their home, Contorelli said they’re often worth much more because in some cities the designation of “short-term rental” stays with the property and not the owner.

He argues that the idea of regulating STRs leading to more affordable housing is false. “They speak to the inventory issue and the need for middle housing and housing supply. When you look at the median home price of houses that are used for short-term rentals, they’re above what we would consider affordable or missing middle it doesn’t solve any of the problems.”

Fernandez assisted with the original bill from Barton and said that he’ll support Bliss next session.

“There are always Republicans who are supportive of it, really the devil is in the details,” he said. According to Fernandez, Senate President Warren Petersen, R-Gilbert, does not support the legislation. “Brenda Barton was only one vote away from getting the majority of the majority in the House and we had all the Democrats. … Obviously, the people have changed in that chamber so we’re hopeful that they’ll be able to change it,” Fernandez said.

Last session, Bliss’ bill was scheduled to be heard in the Senate Government Committee, but Bliss said when she realized it wasn’t ready, she asked for it to be pulled from the agenda.

Bliss said she is reconfiguring the bill so it can get more support because it was harder to get, though than she anticipated and she’s having discussions with stakeholders and leadership.