The Scottsdale Planning Commission did not support a local real estate firm’s request to expand its downtown properties as short-term rentals after finding evidence the company violated existing regulations for months.
Currently, several properties owned by STR Ventures in downtown Scottsdale near Civic Center required to limit residential space on the first floor to 35 percent of the floor area.
The property owner is requesting a zoning change for some of those properties to remove that 35 percent restriction.
The commission, Oct. 16, heard STR Ventures’ application for a property it owns at McKnight Avenue and Main Street, just steps from the Civic Center.
The commission voted 4-3 to recommend that the City Council deny the application, scheduled for a vote Nov. 25.
The commission also voted 5-2 to delay a related application by the company for other properties it owns in the area.
The STR Ventures properties are listed by Good Night Stay, a short-term rental company with listings in Scottsdale, Nashville and Orlando.
Good Night Stay is owned by Scott Graden and John Mckee, who also own STR Ventures, according to the Arizona Corporation Commission.
STR Ventures owns 10 properties in Scottsdale.
At the hearing, Commissioner Christian Serena asked Court Rich, an attorney for STR Ventures, how the company enforced the 35 percent rule.
Rich stopped short of saying his client has been violating existing zoning but admitted he did not know if any steps were taken to comply with city rules.
“I don’t know if from time to time the people that are living there are entering more or less than the 35 percent that they are allowed to,” Rich told the commission.
Listings on Airbnb and the applicant’s website for the McKnight property make no mention of the 35 percent restriction or that renters are barred from certain portions of the property, the Progress found.
Serena said the applicant knew the rules when it purchased the property and had shown “no good faith” by ignoring the 35 percent rule since June.
Rich has said, “STR Ventures has always tried to operate compliantly and it was mischaracterized that there were any issues of compliance. In fact, they are involved in managing over 80 properties and have never had a code enforcement violation.”
Rich said as a show of good faith, STR Ventures closed the operation of the homes in question while the topic is being considered by the city.
If the Council follows the commission’s recommendation on the first application, the McKnight property could still operate short-term rentals, but under the 35 percent rule.
Rich said if Council denies the application, STR Ventures would continue to operate the home as a rental and would construct a wall to separate the office space from the allowable residential space.
The company’s failure to construct that type of barrier when it first began operating the homes struck a nerve with Serena and Commissioner Larry Kush, both of whom voted against approval.
“I’m having a lot of trouble with this,” Serena said. “The city is bending over backward to make this work for the applicant, and I don’t feel like the applicant has even attempted to try to make it work for a few months.”
Rich said, “Whether or not it’s being strictly enforced right now, I think it’s just undeniable that this (proposal) will be better (for the community).”
STR Ventures has agreed to some stipulations with the city and within a private agreement with neighboring property owner Steven Voss that are contingent on the zoning approval.
Voss spent 10 years and $12 million developing the nearby Main Street Place condo and retail mixed-use development.
“For example, if the rezoning is approved stipulations will require the owner to underground utilities in the area, improve the alleyway, institute a shared refuse plan, limit the height of the homes, beautify the current parking lot areas, and limit the number of units to one in each home,” Rich said.
The company had also agreed to limit the height on the buildings to 26 feet. The requested C-2 zoning would theoretically allow heights up to 66 feet otherwise.
STR Ventures also came to terms on a private agreement with Voss that would provide additional landscaping, require the use of noise detection technology, limit noise to maximum levels at the property line, require use of a professional management company with 24-hour access, Rich said.
Voss would also be added as an additional insured party to the STR Ventures’ insurance policy.
Voss, who initially had concerns about the project, told the commission he now supported it.
“I do support the case assuming there is a stipulation for 26 feet, a restriction for one unit for this property along with the landscape stipulations that we discussed,” Voss said.
However, Kush argued the city could not trust the property owner to abide by those guarantees.
“If you’re a bad actor, you’re going to get called out for it; you’re not going to get rewarded for it,” Kush said.
Both Serena and Kush argued the city should not approve a zoning request just to accommodate short term rentals – which have been the subject of ire for many residents.
“One thing I’ve never heard is ‘boy, I sure like having that Airbnb next to me’ – because they’re obnoxious and they’re a nuisance and there’s no way around it,” Kush said.
Kush expressed some concern that the Airbnbs would take over the neighborhood south of the Civic Center and other downtown areas.
Of STR Ventures 10 Scottsdale properties, 8 are located on either McKnight or 1st Street just east of the Civic Center.
Rich, the property owner’s attorney, argued the Planning Commission is the wrong place for a debate over the merits of short-term rentals.
“Given vacation rentals are permitted here the only question is if more than 35 percent of the ground floor can be used and the City gets to stipulate a variety of things that will improve the overall neighborhood,” Rich said.
Good Night Stay co-founder Jay McKee said his company, headquartered downtown, has a reputation as a “good actor” within the short-term rental community and that he has been personally invited by State Rep. John Kavanagh, R-23, to speak for the Arizona Legislature on the issue.
“We believe there are ways to manage them responsibly, and we do,” Jay Mckee said, referring to his company as “the top operator” in the area.
Rich said the company utilizes new technologies to monitor noise and other violations and to notify tenants if they are in violation.
Kush cited multiple calls from neighbors to police regarding the property, though Rich said some calls came from the short-term tenants themselves.
Voss acknowledged residents from his project have called the police due to parties at the neighboring rentals in the past.
Scottsdale Police records show five calls for service regarding the McKnight property between June 1 and Oct. 21.
Rich said two calls came from the Good Night Stay renters to report a peeping tom and another came from a renter who thought they smelled a gas leak.
Rich and Jay McKee both argued the zoning applications would benefit the neighborhood because the company would make a major investment to beautify the properties, improve alleyways and underground utility lines.
The company planned to invest around $1.5 million in home renovations alone for the McKnight property and three other properties on Main Street connected to the delayed second application, Jay McKee said.
McKee said at least one of those properties was in poor shape with squatters living in it when his company bought the property.
Planning Commissioner Ali Fakih said he supported the proposal with the height restriction in place.
“I think having this private agreement and beautifying what’s there – I think this is definitely positive…” Fakih said.
Still, Serena argued many of the improvements agreed to by the applicant would ultimately be performed by any company redeveloping the property.
“I appreciate (the improvements), but I just think it would probably be pretty consistent no matter what it was going to be,” Serena said of the improvements promised by STR Ventures.
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