Arizona short-term rental bill now goes after ‘repeat bad actors’ to limit overnight occupancy

Arizona cities won’t get a chance to limit the number or placement of short-term rentals in this legislative session. But cities could get some additional oversight.

By a wide margin, the state House on Tuesday approved legislation to allow cities to limit the number of people who can occupy homes and condos which are being rented out by their owners. The bill also makes it somewhat easier for cities to suspend licenses due to violations.

That would be the first time limits have been allowed since 2016, when the state first restricted local regulation of short-term rentals like Airbnb.

Rep. Selina Bliss (R-Prescott) could only get the votes she needed after agreeing to jettison what were the most sweeping provisions sought by some communities, who said they have been inundated by investors buying up homes to convert them into rentals and reducing the supply of affordable housing for residents.

As originally crafted, her HB 2429 would have allowed cities and towns to set a maximum limit of short-term or vacation rentals. Local officials also could have established minimum distances between these operations.

That provoked opposition from both the Arizona Association of Realtors, as well as Airbnb, which operates an online marketplace to connect homeowners with would-be vacationers. And that, Bliss said, was enough to kill the original plan despite its support from the League of Arizona Cities and Towns for more local control.

What's left, she said, is something that the cities, despite their preference for greater local control, can live with.

And she had a message for those who wanted something more.

"Folks, this is as good as it's going to get," Bliss told colleagues.

What’s left of the bill is designed to focus on what she called "repeat bad actors." It starts with limiting overnight occupancy to two for each bedroom, plus an additional two, not counting children, a restriction that could curb properties — particularly those in existing residential neighborhoods — from being rented as "party houses." Bliss said it also takes care of the problem of renters taking up all the available parking.

But nothing in the legislation, which now goes to the Senate, sets any limit on people who are not staying overnight.

HB 2429 also says that local governments can suspend licenses if there are three violations of local permits within 24 months. Now, suspension can occur only if the violations occur within a 12-month period.

It also permits suspension for a single violation that "presents a potential threat to public health or safety" relating to modifying a vacation rental without a required building permit or "failing to remedy an unsafe and unsanitary condition."

What's left from the original bill, Bliss said, was enough to get the cities to support it. She quoted from an email from the League, calling HB 2429 "a targeted, balanced measure focused on repeat bad actors, not responsible short-term rental owners." And she said Realtors dropped their own opposition because what’s left in the bill focuses on "bad actors from the short-term rental industry while protecting the private property rights of homeowners."

"I don't know how we can do better for Arizona," Bliss said.

Rep. Pamela Carter (R-Scottsdale) said she appreciates anything that provides more local control.

"I believe in property rights," Carter said. "But when those property rights infringe on your neighbor's rights, and these short-term rentals become out of control ... where there's parties, there's prostitution and all kinds of things being brought into our neighborhoods where we're supposed to have peaceful dwelling places."

Then there's the impact on communities like Sedona. Lobbyist Kathy Senseman told lawmakers during a committee hearing that short-term rentals now make up a quarter of the housing there.

But Senseman found herself, like Bliss, having to accept what she could get.

"For rural Arizona, we hope it is simply the first step," she told Capitol Media Services after the vote. "Additional work remains to be done to ensure police, fire, teachers, nurses and hospitality workers can call the cities the work in 'home.’”

And Senseman said she believes more is possible.

"Legislation in other states have allowed local government to have more control over short-term rentals and the market still thrives," she said. "So why not here?"

None of what has developed with short-term rentals was mentioned when lawmakers voted in 2016 to allow homeowners to rent out their properties. In fact, then-Gov. Doug Ducey painted quite a different picture: a family trying to earn a few extra bucks by renting out a spare room for a weekend.

"For thousands of hardworking citizens, opening up their home to out-of-state guests provides the financial breathing room they need to provide for their family or enjoy an extra expense that they otherwise couldn't afford," Ducey said at the time.

That does exist. But there also have been investors who have bought up homes — homes they never intended to live in — for the purpose of being able to rent them out to visitors on a year-round basis.

One of the few lawmakers who is not surprised by how the law played out is Sen. John Kavanagh (R-Fountain Hills).

"I didn't move into a neighborhood to have the house next door to me turned into a weekly rental property," he said.

Kavanagh was the only senator in 2016 to vote against the legislation. Every other sitting senator that year — including current Gov. Katie Hobbs — was in support. Only six of the 60 state representatives were in opposition.