Arizona lawmakers may finally be ready to rein in short-term rentals.
On a 23-5 margin this past week, the Arizona Senate approved legislation to restore some of the rights of cities, towns and counties to impose some "reasonable" limits on everything from the number of vacation rentals in any one area to how many people can be allowed to stay in a home or apartment.
Sen. Kate Brophy McGee (R-Phoenix) had to give up on some of what she wanted to get the votes for SB 1554.
For example, gone is a prohibition against corporations buying up homes and apartment buildings solely for the purpose of converting them into vacation rentals. And the legislation has a "grandfather clause," essentially saying that local governments cannot drive out any short-term rentals already in place.
But the Senate approval becomes the best chance to impose what Brophy McGee says are "guardrails" to protect residential neighborhoods from being flooded with what amount to de facto unregulated hotels. And she said it also provides some relief to communities that find the supply of affordable rental housing drying up.
This isn't the only action lawmakers are taking on the issue.
In a separate vote, senators approved SB 1490 that says homes and apartments rented out for more than 120 days a year must be classified for tax purposes as commercial.
That is a critical difference, as residential property is assessed and taxed at a rate that is just 55% of what is due from commercial properties.
What's behind both measures has been the explosion of short-term rentals in the wake of a 2016 law that all be eliminated the ability of local governments to regulate them.
Senate President Karen Fann (R-Prescott), who voted for the change when it was first approved, said things did not quite work out as promised.
"It was originally (sold as) grandma wants to rent out her house for a month and make some extra money because she's going to go visit the grandkids," Fann recalled. That, she said, gained fairly widespread approval.
"We said, 'put some guardrails on it, though, because we don't want unintended consequences,'" Fann said.
That didn't happen. In fact Gov. Doug Ducey, in signing the measure at an Airbnb rental in Phoenix, specifically rebuffed questions about what might happen if investors and corporations use the law to get into the business and buy up properties.
"And, sure enough, we've got unintended consequences," Fann said.
Exhibit No. 1, she said, is someone in Sedona building eight-bedroom homes with eight bathrooms for the sole purpose of using it for short-term rentals on a year-round basis.
Brophy McGee had her own examples.
She said someone bought the lone apartment building in Page and converted it to short-term rentals.
"So seven teachers who had signed up to teach can't find a place to live," Brophy McGee said.
Democrats have suggested repealing the 2016 law and restoring the full right of cities to regulate. That, however, has proven politically impossible, not only amid opposition from some GOP lawmakers but also threats of a gubernatorial veto.
Brophy McGee said her bill is an effort to find a politically acceptable compromise.
It starts, she said, with allowing local governments to adopt — and enforce — "reasonable residential use and zoning ordinances."
She acknowledged that language still gives heartburn to some who believe the state should not interfere at all with what people want to do with what they own. Brophy McGee said the measure may require some fine-tuning as it goes to the House.
But there are other, more straight-forward provisions, including one that would allow cities to limit occupancy to no more than two people per bedroom, plus an additional two adults, or whatever are existing municipal occupancy limits, whichever is less.
Her measure dovetails with a proposal from Sen. J.D. Mesnard (R-Chandler), which could remove some of the incentive for investors to buy up residential property and convert it to short-term rentals.
Mesnard said it's a matter of equity. For example, there might be a hotel right next door to an apartment complex where all or some of the units are being rented out on a short-term basis.
"The use is the same from one property to the next," he said. "And yet we classify one as commercial and the other as residential."
Mesnard said what is happening at the apartment complex under this scheme is far different than an apartment complex where people actually are living.
"Nobody is residing at these places," he said.
"Nobody comes home there at night, nobody registers to vote there, nobody's furniture is there, nobody's mailing address are these places," Mesnard said, "Its use is exactly the same as the hotel and motel."
And that, he said, means it should be taxed on the same basis.
Mesnard did have to offer some compromises to get the votes.
The higher taxes would apply only if the property is rented out for more than 120 days a year.
"You could actually do it every single weekend and it still wouldn't reclassify you," he said.
And people would still be able to rent out the places for an unlimited number of days and keep the residential tax classification if the owner actually lived there at least 60 days a year. So that would cover people who might have a second or even third home as long as they occupied it for the annual minimum.
Not everyone believes changes are needed.
"It is a property right," said Sen. Eddie Farnsworth (R-Gilbert).
Farnsworth said he agrees that anyone who buys a property solely for the purpose of renting it out on a short-term basis should be treated differently. But he said if someone buys a property with the intent of living there, they are entitled to be treated as residential no matter how many days they actually rent it out.
That measure also now goes to the House. To this point, however, lawmakers over there have not shown the same level of interest in restoring local control over short-term rentals.
Earlier this month representatives voted 35-25 to kill a proposal by Rep. John Kavanagh (R-Fountain Hills), which had some provisions similar to what Brophy McGee got through the Senate. That includes a link between the number of bedrooms and the number of people who can occupy a property.