Short Term Rentals in Bisbee
July 14, 2019
In response to growing concern about the impact of Short Term Rentals (STRs) in Arizona, several pieces of legislation passed in the past three years have imposed additional regulations. These regs offer possible avenues for understanding ownership of STRs and allow better enforcement of STRs.
In this paper I have enumerated problems with SRTs in Bisbee, the AZ legislative background of STRs, policy implications of legislation, and suggestions about how the City could proceed. There are some resources of how other municipalities have dealt with the burgeoning problems of the hospitality ‘sharing’ market. For more information searching for articles on SRTs and air b&b will give you thousands of hits about how some communities have dealt with housing disruption.
Short Term Rentals Intro
A new category of hospitality management has sprung up in the past eight years. Know as Short Term Rentals (STR) they have rapidly grown and have provoked challenges to the existing lodging industry.
They are marketed through online businesses mainly Airbnb, VRBO (vacation rentals by owner) and Homeaway. The later two are owned by travel giant Expedia. These businesses provide various marketing services and listing opportunities for individuals wishing to share their property.
Once listed, there is info about the property including amenities, layout, pictures, and general location. There is the information about the host and contact info. The specific address is not included until the property is rented. That info is then sent to the customer along with directions.
Typically a customer signing up for a short term rental pay a base price determined by the owner, a listing fee, a cleaning fee, and applicable taxes. In Bisbee those taxes, known as TPT (transaction privilege tax) includes the bed tax, are 12.05%. The total amount is collected by the online business and then dispersed back to the individuals, and the State. Contrary to some opinions all Bisbee STRs pay the appropriate tax because it is included in the rental price.
STRs in Bisbee
There has been significant consternation about the impact of Short Term Rentals (STR) in Bisbee, particularly Old Bisbee.
The areas of concern about STRs seem to be; taxes, neighborhood degradation, payment for city services, parking, and withdrawal of rental housing resulting in a restriction of availability and increased price of long term rentals.
Conversely STRs have filled an overnight rental need. Two major motel properties no longer offer overnight rentals. This has brought the number of existing traditional overnight rental rooms to well under 200 (a precise number would be helpful). Without increasing capacity, events and marketing that attract overnight visitors could be constrained.
At any one time there are about 55-70 “entire place” listings, which usually mean spaces with separate entrances as listed on Airbnb. When I checked for Sept 26-30 there were 73 listings (although there are a few listings on VRBO that are not on Airbnb, the majority are.) When I checked for dates in November there were 85. Sometimes included are traditional lodging outlets that also list their rooms on the site. Those properties include Castle Rock, Copper Queen, Canyon Rose, Gardens at Mile High, Objective Limited, Jonquil Motel.
In January 2017 Anthony Schagel sent me a study he did of Airbnb and VRBO. He had gone through the listings and noted the name of the listing host, and general location. Although 2 ½ years old it is a valuable place to see where listings occur. I have that available for anyone if desired.
The vast majority of these listings are in OB with a few in Warren, none in San Jose, and a few on the outskirts of the city.
These listings house about 90-150 people. When traditional lodging is included, overnight housing in Bisbee is available for about 400-550 people.
In 2016 the state of Arizona and Airbnb reached a voluntary agreement that Airbnb would begin collecting taxes on behalf of the listings on their site. In exchange for tax collection by the online company, there was an agreement by the State that no municipality could prohibit the establishment of any short term rental.
That voluntary agreement was codified by SB 1350 that stopped local government from prohibiting homeowners from renting their homes on platforms like Airbnb and VRBO. The bill narrowed the scope of permissible short-term rental regulations.
Since that time however, numerous problems have cropped up regarding lax regulation of the short term rental market. These problems, such as paying for city services, identifying owners and scofflaws, degradation of neighborhoods, stopping events in neighborhoods, abuse of the rental platform and others, have formed the basis for the two pieces of important legislation.
State legislation has been implemented to define what municipalities can and can’t do to regulate STRs. The legislation has brought some coherence to regulations although there remain several gray areas.
On April 11, 2018, Arizona enacted Senate Bill 1382 that codified the voluntary agreement. It requires any online lodging marketing business operating in Arizona [including Airbnb, Home Away and VRBO)] to remit all state and local taxes. This clarification means that the individual property owners do not need to individually collect and pay any additional taxes. The online services would be responsible for collecting these taxes from any renters and making payments to the state and local authorities. It was effective January 1, 2019.
SB 1382 was a partial response to Sedona regulating STRs and likely because the State challenged Sedona’s regulations in 2017. Shortly after 1382 was passed, the AG ruled that:
Short terms/overnight rentals do not have to have a business license
In May 2018, Arizona AG, Mark Brnovich, in a ruling on Sedona city regulatiosn of STRs, determined that requiring a business license violates State law. A.R.S 41-194.01 (B) Since they were found in violation they had to remove the offending regulations or face a significant fine. (This was initiated under the same coercive state regulation that was used against Bisbee when the city had to remove the plastic bag ban ordinance or face penalties)
The pertinent sections as below state that municipalities:
1. Cannot prohibit short term rentals, they must be allowed; and
2. That no licensing requirements can be imposed specifically on short term rentals.
They also spell out what authority a city does have.
ARS 9-500.39 (https://www.azleg.gov/viewdocument/?docName=https://www.azleg.gov/ars/9/00500-39.htm)
How municipalities can regulates short term rentals. Some limited authority is given to cities.
· Can regulate for protection of healh and safety ( fire codes, sanitation, traffic, and designation of point of contact
· Can be subject to residential use and zoning ordinances if in the same manner of other property
· Prohibits specified uses such as housing sex offender, selling illegal drugs or adult oriented businesses
ARS 9-1304 specifically prohibits a municipality from imposing a residential rental licensing requirement for rental or property owners
However, in response to continuing problems with STRs throughout the state, Gov. Duecy in May, 2019 signed HB 2672 that added additional regs to further clarify what cities can and have to do about short term rentals.
Some of the major provisions are:
1. Cannot operate at STR without a TPT license
2. Requires a TPT license number to be listed on every listing for the STR.
3. STR must provide the name of a contact person for the property to the municipality.
4. Location cannot be used for an event (wedding, party, restaurant, banquet) that would otherwise require a license.
5. Penalties for an owner to not comply with regs 1sr $200 and $1000 for 2nd.
6. Additional penalties for not paying fines.
7. Allows disclosure of TPT (Transaction Privilege Tax) info for legitimate business purposes to appropriate persons (not the public nor elected officials)(TPT is proprietary information) if the appropriate regs are not followed.
Policy Implications of State Legislation
IDENTIFICATION OF OWNERSHIP...Although STRs do not have to have a business license they must have a Transaction Privilege Tax number displayed on their advertising and listings. (HB 2672) This gives the City treasurer, but not the public, the identity of the owner of the STR. TPT is considered proprietary info is not available to the general public in specificity. It is, however, aggregated by ADOR for research use.) It also is an enforcement tool that the City can use to demand listings be removed for non-compliance.
PROPERTY TAX... Those who use their properties as short-term rentals pay property taxes like any other homeowner, unless the properties are not used as the owner's primary residence. Then they fall into a different property-tax class.
USE OF ZONING...STRs may be prohibited or curtailed in certain neighborhoods. For instance some cities have prohibited more than two STRs in one block. Or have prohibited absentee ownership. There is a list of possible zoning remedies included in the Resource section
TAX COLLECTIONS...Now that three or more short-term rental websites are registered with the state, ADOR can release sales-tax collection information, specific to the industry. That should occur beginning 2020.
SUGGESTIONS for PROCEEDING in BISBEE
The following suggestions are designed to bring coherence to STR regulation and give the city a firm foundation for action. They would also alleviate some of the stress caused by STRs.
Assign one person in the treasurer’s office 15-20 hours a week for six months, to track STRs. The goal is to have a data base of addresses, ownership, and contact information for all SRTs in Bisbee.
As part of their job this person would also monitor listing sites for STRs for violation of TPT listings and make complaints to the listing companies for failure to list TPT.
Work with realtors to ensure clear communication to prospective buyers about what applicable regulations are regarding STRs.
Convene a 3-4 person committee for three months to research specific problems with SRTs, and make recommendations to the City Council.
The committee would be tasked with collecting complaint information from residents, reading State legislation, Bisbee zoning codes, and City charter and then suggesting applicable remedies.
Establish a hot line or contact point specifically to listen and act on complaints and to gather data on STR problems.
Utilize public pronouncements to notify owners of SRTs that they must include, as per state law, their TPT number on their listings. If not visible, a complaint will be filed by the city.
Adopt and promote clear policies explain regulations. Ensure that all realtors are contacted as well as to the general public.
These may be helpful in developing STR oversight
Standards for Short Term Rental Zoning
In any event, the zoning ordinance is likely to set forth standards for short term rental zoning. Topics regulated might include:
Posting or availability at the town hall of one or even two local contact persons who will be responsible for handling any problems that arise with the property. We think this is the most important regulation, and one that should be strictly enforced.Requirements for providing off-street parking. Unless the unit in question is very well served by public transportation, this is a must. Typically the requirement could be met by extra driveway space, but if even homeowners park on the street, be quite careful to include a sufficient regulation.Noise and nuisance provisions, or reference to other ordinances addressing such situations.Requirements that garbage collection be maintained, and limiting the hours before and after collection when the garbage receptacles can be in front of the home.Minimal required spacing between short term rentals. A particular interval of feet may be used to assure that an entire block does not turn into a short term rental district.Reinforcement of the normal occupancy limits (number of persons who may live in the home) for a particular zoning district as applying also to short term rental tenants.Proof of code compliance, fire safety measures, adequate water and sewer service, or other utilities or infrastructure that may be of particular concern.Requirements for notifying neighbors, or even for their agreement.Limitations on the turnover. Renting to six different tenants within a month probably won't be allowed in many places. There may be a minimum stay, perhaps of a week.Limitations on particular areas of the town or city where short term rental either is not allowed at all or is not restricted. Such statements within a zoning ordinance would amount to establishing an overlay district pertaining just to the subject of transient rentals. Imposition of a special use permit or conditional use permit requirement, allowing for scrutiny of the particular facts of a site before allowing such a use.
This company helps cities draft regulations...for a price. May be worth looking into
This is a comprehensive guide for suggesting regs.https://www.viewpointcloud.com/blog/local-government-resources/airbnb-regulation-guide
STEPS TO EFFECTIVE AIRBNB REGULATION
(from Viewpoint Cloud guide)
Local STR market
Existing policies (state, county, city)
FRAME THE ISSUE
DEFINE PLANNING OBJECTIVES
Match planning objectives with policy measures
DRAFT THE ORDINANCE
Land use and zoning
Adjust regulations accordingly
RECENT UPDATE ON SEDONA
AIR B&B, THE GUERILLA WAR BY THE COMPANY https://www.wired.com/story/inside-airbnbs-guerrilla-war-against-local-governments/ AIR B&B; a comprehensive world look at occupancy Airbnb claims to be part of the "sharing economy" and disrupting the hotel industry. However, data shows that the majority of Airbnb listings in most cities are entire homes, many of which are rented all year round - disrupting housing and communities.
Browse the data for your city below, and see for yourself.http://insideairbnb.com/ AIR B&B PROBLEMS IN NEW ORLEANS https://www.theguardian.com/us-news/2019/mar/13/new-orleans-airbnb-treme-short-term-rentals?utm_term=RWRpdG9yaWFsX0d1YXJkaWFuVG9kYXlVUy0xOTAzMTM%3D&utm_source=esp&utm_medium=Email&utm_campaign=GuardianTodayUS&CMP=GTUS_email AIR B&B HELL The do's and don'ts of hosts and guests as well as horror stories https://www.airbnbhell.com/ HOW AIR B&B TOOK OVER THE WORLD https://www.theguardian.com/technology/2019/may/05/airbnb-homelessness-renting-housing-accommodation-social-policy-cities-travel-leisure?utm_term=RWRpdG9yaWFsX0d1YXJkaWFuVG9kYXlVUy0xOTA1MDU%3D&utm_source=esp&utm_medium=Email&utm_campaign=GuardianTodayUS&CMP=GTUS_email AIR B&B CUTS INTO HOTEL REVENUE https://theconversation.com/as-airbnb-grows-this-is-exactly-how-much-its-bringing-down-hotel-prices-and-occupancy-116324