Governor Doug Ducey Arizona League of Cities and Towns

In 2019, Governor Doug Ducey told reporters at the Arizona League of Cities and Towns conference that a 2016 law barring cities from regulating short-term rentals had some unintended consequences.

Short-term rentals promise to once again dominate the conversation at the Arizona Legislature, which kicked off its latest session this month.

Legislators plan to put a number of proposals forward to address concerns from residents throughout the state who have complained that the explosion in rentals, spurred by the popularity of apps like Airbnb and Vrbo, has led to increases in noise complaints, parties and illegal activity in residential neighborhoods.

Scottsdale has one of the largest short-term rental supplies in the state.

As of March 2019, Scottsdale had 5,369 vacation rentals, according to analytics site AirDNA.

However, the city has been largely barred from regulating those rental properties by a 2016 law supported by Governor Doug Ducey that prohibited cities from regulating short-term rentals.

The City Council did pass ordinances in 2019 instituting heavy fines on individuals and property owners responsible for nuisance parties or unlawful gatherings.

Though the ordinances apply to all residential properties, not just short-term rentals, they are widely seen as a response to community complaints about parties at short-term rental properties.

At an August 2019 meeting about then-proposed ordinances, short-term rentals dominated the conversation.

“As far as the types of homes, owner occupied versus rental, I would say that the majority of the complaints that we receive…are from rental properties,” said Raun Keagy, Scottsdale’s planning and development area director.

One Scottsdale resident who attended the meeting said partiers at rentals in her neighborhood regularly overfill trashcans, play loud music at 2 a.m., urinate in public and park illegally.

Not all residents were against short-term rentals, though, including a short-term rental operator who acknowledged that there are some bad actors but said he and his wife are respectful of neighbors’ concerns.

Now, Rep. John Kavanagh, R-Fountain Hills, plans to propose legislation that would increase regulations on short-term rental properties.

Last year, the legislature passed a Kavanagh-backed plan to return a modicum of power back to the cities.

Cities can now require property owners operating short-term rentals to keep emergency contact information on file with the city. The law also requires those property owners to have a state transaction privilege tax license.

The Scottsdale City Council on adopted those new rules in 2019.

Kavanagh said his new proposal would further address resident grievances.

“We’re trying to make the houses as invisible as possible to neighbors,” Kavanagh said.

Kavanagh said his proposal would include limits on how many people can occupy a rental, bans on smoking outdoors near other buildings, and required usage of available off-street parking.

The proposal would also require noise meters to be installed inside and outside rentals and owner contact information to be posted on the front of the house.

Kavanagh said those measures are “minimally what’s needed to provide some relief…” to neighbors.

However, he said other proposals at the legislature would have a tougher time getting past the governor’s desk.

Ducey has remained supportive of the 2016 law that removed local control, which he has argued protects private property owners from interference by overly-burdensome local legislation.

However, last year, Ducey opened the door to amending the legislation.

At an Arizona League of Cities and Towns conference, he told reporters the law had some unintended consequences and has resulted in disruption in some neighborhoods as real estate investors bought up properties for the sole purpose of using them as short-term rentals, according to Howard Fischer with Capitol Media Services.

“It does appear in the situation of Airbnb and other organizations that we have some people out there that are doing some things that are disruptive to communities,’’ Ducey said.

Rep. Isela Blanc, D-Tempe, filed H.B. 2176 in January, which would effectively bar real estate investors from purchasing properties solely to use as Airbnbs.

The bill, if passed, would restrict investor-owned properties to areas with commercial zoning and only allow short-term rentals in residential areas if the owner uses the property as their primary or secondary residence as determined by the county assessor.

Kavanagh said Blanc’s proposal is “more restrictive and is a higher risk” to get shot down by the governor.

Still, Kavanagh said that if nothing is done to reign in short-term rentals, the Governor could face further pushback from the legislature in the form of a ballot referral to return to local rule.

Returning control over short-term rentals to local governments is one of the few issues that has generated bipartisan support at the Arizona Legislature in recent years.

“I personally think it totally connects with the fact that our cities and towns, their hands have been tied with being able to enforce their planning and zoning, and their private property versus commercial property ruling,” Senate President Karen Fann, R-Prescott, told Ben Giles with public radio station KJZZ.

Arizona House Minority Leader Charlene Fernandez, D-Yuma, told Giles that the legislature needs to take another look at local control.

“As a state Legislature, we came in and preempted that,” Fernandez said. “I think we need to revisit local control to make sure that we’re talking to our city councilmembers, our community members, the leaders and see exactly what’s happening in their areas.”

Kavanagh said he does not think Blanc’s proposal or a complete return to local control would pass muster with the Governor.

“There’ll be a push for a return to local rule, but the governor would veto that,” Kavanagh said. “So, the only way that would come about would be if there was a ballot referral, and we limit the number of ballot referrals because they don’t want to flood the ballot.”

Kavanagh said he would support the ballot referral option.

And, if nothing is done, Kavanagh predicted support to kill the 2016 law will grow.

“I think my bill is minimally what’s needed to provide some relief, so hopefully that will happen down the road,” Kavanagh said. “If not, I eventually see the situation getting so bad that there’ll be the votes for a ballot referral to kill it completely or even without a ballot referral to kill it completely.”

Even without new legislation reverting back to local control, the City Council will have the opportunity on Feb. 4 to decide the fate of two properties used as short-term rentals.

The application, originally scheduled to be heard at the Council’s Jan. 14 meeting, is seeking to alter zoning on two sites just east of City Hall to remove a restriction limiting residential uses – and short-term rental uses by default – to 35 percent of the floor area on the first floor.

The applications, which were both recommended for denial by the Planning Commission, were moved from the January meeting after the applicant, STR Ventures, requested a delay.