Phoenix frustrated over Arizona law that allows casitas to be short-term rentals

Phoenix leaders are frustrated over a new state law that expands what’s allowed for backyard guest houses, also called casitas. In May, Gov. Katie Hobbs signed the legislation into law, which requires Phoenix to change its rules.

Before state lawmakers got involved, Phoenix had already addressed accessory dwelling units, or ADUs, as way to increase housing options. 

In September 2023, Phoenix approved an ordinance allowing single-family homeowners to build ADUs in their backyards with limits on size and height and requiring running water and electricity. The city limited one ADU per single-family property and banned them as short-term rentals or vacation homes. The new state law says Phoenix has to allow two ADUs on a lot, possibly three depending on the size, and they can be used as short-term rentals. 

“So the city's policy focused on housing. The state allowed party houses,” said Mayor Kate Gallego, who pointed out the state law exempts cities and towns with populations less than 75,000. “They exempt Fountain Hills, Paradise Valley, Prescott Valley. Just very disappointing. Phoenix is a city that has embraced diversity, but so many cities that do not have the incredible diversity we do were somehow exempted. I wonder why.”

During Tuesday’s City Council meeting, Josh Bednarek, Phoenix’s planning director, was asked about the law’s potential impact.

“If  you have a particular neighborhood that's going to see an onslaught of investment in ADUs, certainly the demand on the infrastructure, with the streets, with traffic, with parking, water and sewer infrastructure, if you're certainly getting to significant levels there, but it's a lot of unknowns,” he said. “There certainly could be areas of the city where the services and the infrastructure and the character could be compromised because we weren't able to collaborate with the community on that.”

Kirin Goff, executive director of Arizona Neighborhood Project, said the law includes a provision regarding short-term rentals.

“So it allows a city to require owner occupancy if an ADU is used as a short term rental. And this addresses some of the concerns that we've heard about out of state investors or nuisance," Goff said.

Vice Mayor Debra Stark said when Phoenix was discussing how to add housing units, the community made it clear they did not want ADUs used as short-term rentals.

“So when you make your property a short term rental, you're making it available to people that might not necessarily live in the city of Phoenix. They might actually be from other states,” she said. ”Yes, you can make money as a short term rental, but you can also use your property as a long term rental and make that money, and you might actually help the housing crisis that we're in.”

Phoenix’s Planning Department says the following regulations must be revised to comply with the state law that takes effect Jan. 1, 2025:

• The number of ADUs permitted is being increased from one to two ADUs per lot having a single-family home. 
• A third ADU is also permitted per lot when the minimum lot size is one acre, and at least one of the ADUs is considered “Affordable Housing” (requiring deed or other restrictions on the property).
• Design review of ADUs no longer require that an ADU match the exterior design, roof pitch or finishing materials of the single-family dwelling. 
• Setbacks for both attached and detached ADUs have been reduced to five feet where adjacent to a side property line.