SB 1350 likely to bring new dynamic to Valley of the Sun neighborhoods

SB 1350 is likely to spur new uses in the local housing market, municipal officials say. (File Photo)

SB 1350 is likely to spur new uses in the local housing market, municipal officials say. (File Photo)

Local leaders say SB 1350 has gut the ability for local municipalities to regulate short-term vacation rentals outside of commercially zoned resort or hotel establishments within city and town limits.

Senate Bill 1350, sponsored by Arizona Senate Majority Whip Debbie Lesko (R), goes into effect at the end of calendar year 2016 and restricts local cities and towns from being able to regulate or restrict the use of vacation rentals or short-term rentals within municipal boundaries.

The city of Scottsdale has had regulations prohibiting any rental of a home for fewer than 30 days since the late 1950s, which many say was an effort to protect the tourism industry — specifically hotel room rates and occupancy.

Municipal leaders say the proposed legislation is meant to help fuel the idea of a “shared economy” championed by Arizona Governor Doug Ducey, but the unintended consequences of allowing residential homes to act as boutique hotels could be devastating to local neighborhoods, they contend.

Now it appears, time will tell.

City leaders at the Town of Paradise Valley and city of Scottsdale share common concerns about short-term rental services meant to disrupt the hotel marketplace. Municipal leaders say the only thing disrupted by services such as Airbnb and others is the established quality of life in both communities. Tourism officials appear reticent to make any comment on the matter — one way or the other.

The concern? Homes in affluent residential neighborhoods such as those found in the Town of Paradise Valley and portions of Scottsdale will now become boutique hotels and temporary destinations for tourists seeking less-expensive lodging options.

A ban on prohibition

“We did have an ordinance in place since the late 1950s or early 1960s that barred short-term rentals,” said Scottsdale Government Affairs Director Brad Lundahl in a May 17 phone interview. “SB 1350 now places a complete ban on our short-term rental prohibition.”

Mr. Lundahl says the long-term impact of SB 1350 is hard to predict.

“It is important to remember Scottsdale is very business friendly. We hope there are enough measures that our protections are there for our residents as these new uses occur. We are talking about neighborhoods and those residents have a right to live peacefully in their neighborhood even against new and changing technology.”

Scottsdale Councilman Guy Phillips says the Arizona Legislature has negated the city’s ability to regulate vacation rentals in Scottsdale, while ensuring penalties are in place for attempting to do so.

Guy Phillips

Guy Phillips

“Since the state passed a law to withhold state funds from cities who don’t comply with its laws, it virtually neuters Scottsdale’s ability to protect our neighborhoods,” he said in a May 18 statement.

“It might help the tourism market place for millenials but not for those seeking a quality experience in a affluent city.  This only helps short-term and overnight stays, which provide little to the local economy.”

Councilman Phillips says SB 1350 will have a lasting impact on local neighborhoods.

“When you’re seeking a home to raise your family, will you want one where the neighbors are overnight renters and partiers?” he asked. “We should be able to provide quiet and peaceful neighborhoods for our residents and the state has taken that away.”

But greed is in control, Councilman Phillips contends.

“Special interest lobbyists are working through the state to eliminate a municipality’s rights for their own gain,” he pointed out. “I call upon the League of Cities to band together and confront the state’s overreaching laws and penalties.”

Rebecca Grossman, Scottsdale Area Association of Realtors president and CEO, offers a different perspective as both the Scottsdale and Arizona association of Realtors are in a position of support of SB 1350.

Rebecca Grossmann

Rebecca Grossmann

“Prior to SB 1350, short-term rentals were essentially ‘flying under the radar’ in most areas including Scottsdale, which prohibited less than 30-day rentals,” she said in a May 18 statement.

“Additionally, these violations created an unfair playing field for the hotel industry where they are required to collect and remit taxes. This legislation takes away the controversy as to whether private property owners are allowed to rent out their home, as they see fit, on a short-term basis.”

Ms. Grossmann says Scottsdale City Council in January 2015 received a citizen petition to consider lifting the short-term rental ban.

“A city, town, or other taxing jurisdiction can now levy a transaction privilege, sales, use or similar tax/fee,” she said. “In Scottsdale — this is commonly referred to as the bed tax in relation to what is considered transient lodging, which is rentals of less than 30 days. More revenue to a community is definitely a positive outcome of this change.”

Ms. Grossmann says SB 1350 speaks to a restoration of private property rights rather than assault on local neighborhoods.

“In our area we see many owners using their vacation homes as a short-term rental to offset the costs,” she said.

“This legislation will allow more flexibility and restores private property rights to owners who wish to do less than 30-day rentals. It may result in reduced housing stock available to those who live and work in a community, but that impact would be difficult to measure.”

A view of the Arizona Legislature complex in downtown Phoenix. (File photo)

A view of the Arizona Legislature complex in downtown Phoenix. (File photo)

A unique predicament

Paradise Valley Town Manager Kevin Burke says tools are still in place for his municipality to curtail neighborhood issues such as noise, parking and event permits.

Kevin Burke

Kevin Burke

“Obviously, we would love to maintain as much local control as possible to respond to the uniqueness of our resident concerns regarding short-term rentals,” he said in a May 17 phone interview.

“What we are finding out in Paradise Valley is in some instances people are renting because they want to hold an event. We may be able to address issues of parking, noise and traffic for these events as those are still in our toolbox — we just have to figure out the best way to do that.”

In early May Mr. Burke met with the general managers of various local resorts.

“It is on their radar,” he said. “We had our general meeting with the GMs and while they didn’t express an opinion one way or another, we know the industry is concerned about a level playing field.”

Paradise Valley Vice Mayor David Sherf says the trend of short-term rentals in Paradise Valley is impacting the bottom line of local resorts.

David Sherf

David Sherf

“This trend has accelerated recently and may be creating new sources of demand from individuals and families that chose not to travel for various reasons, but it is clearly is taking some business from our resorts,” he said in a May 18 statement.

“Our resorts know their customers and provide a total known experience including product quality, amenities, service levels and a sense of security that most individual home rentals cannot provide. Where the hotel industry is most feeling the impact of this increased competition from individual home rentals is in the diminished ability to charge maximum room prices during peak demand periods such as during major sporting events.”

The true test of the impact SB 1350 will have on the local tourism will be realized during peak season.

“During peak times, an increasing number of alternatives to staying at hotels come on the marketplace at prices less than are being asked by the hotels and resorts,” he pointed out. “This limits the pricing power of the hotels and resorts and thus may limit  the growth of bed and sales taxes in the Town that we have enjoyed in recent years.”

But Vice Mayor Sherf contends SB 1350 will likely have more of an impact on neighborhoods rather than resort communities.

“Quality of life is a very important reason people choose to live in Paradise Valley,” he said.

“Prior to SB 1350 we were evaluating short-term rentals as they impact our residents and we will continue to evaluate ways to try and alleviate some of the problems that may occur with a small percentage of these rentals.”

Vice Mayor Sherf says current problems erupt in neighborhoods when overnight stays are meant to create a party atmosphere rather than a tranquil one.

“The occasional use of a home as a short-term rental with the homeowner and nightly occupants respecting the privacy and character of our single-family neighborhoods is not a problem,” he explained.

“What is a problem is owners who may not respect the neighborhood and rent to tenants that create noise, sanitation and parking problems.”

Vice Mayor Sherf says his municipality is devising an education program to inform residents on what can and what cannot be done in Paradise Valley homes in terms of short-term rentals.

“There are health, safety and town codes associated with renting homes to third parties that people may not be aware of, including obtaining business and sales tax licenses from the town and importantly no commercial use of a home,” he said.

“Homeowners need to evaluate the insurance coverage contained in their homeowner policy as it may preclude home rentals and owners should understand what happens when a renter overstays in a home, which is probably a civil matter not a police matter. The Town will continue to address ways to mitigate problems that may arise from some short term home rentals and communicate our policies.”

Northeast Valley Managing Editor Terrance Thornton can be contacted at tthornton@newszap.com

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