Senate Bill 1350 poised to spur residential short-term rental marketplace

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

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

A proposed bill at the Arizona Legislature will likely 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.

Debbie Lesko

Debbie Lesko

Senate Bill 1350, sponsored by Arizona Senate Majority Whip Debbie Lesko (R), would restrict local cities and towns from being able to regulate or restrict the use of vacation rentals or short-term rentals within municipal boundaries.

Municipal leaders and advocates 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.

Residents in both the Town of Paradise Valley and Scottsdale share common concerns about short-term rental services meant to disrupt the hotel marketplace. Opponents of the bill say the only thing disrupted by services such as Airbnb and others is the established quality of life in both communities.

“I recently purchased a house in Paradise Valley, but I was not aware that across the street is a home being rented out on a short-term basis,” said Paradise Valley resident Pat Terranova in a March 16 phone interview.

“The owner actually lives less than a mile away in Clearwater Hills. He is not respecting my concerns — he basically feels that this is just the way it is. I have had to, on numerous occasions, call the police. This is exactly the sort of thing that should be regulated.”

Mr. Terranova contends a home in his neighborhood is routinely used for weddings, elaborate parties and event lodging.

“It is that sort of activity that these Airbnb houses create. They are not occupied by the owner. This one is owned by investors and they have just chosen to make it an investment property. I don’t think Paradise Valley wants to see this happen.”

Mr. Terranova contends short-term rental services are challenging the harmony of established neighborhoods.

“What is happening is this changes the dynamic of the neighborhoods, which is why you are living there in the first place,” he said. “I am not talking about owner-occupied homes and they are renting out a bedroom — that is what Airbnb was originally meant to be. It just seems like a runaway freight train that has a complete disregard for the interests of the local towns and the local tourism industry.”

Paradise Valley Councilman Jerry Bien-Willner says his No. 1 concern presented by Senate Bill 1350 is the threat it poses to the character of the town he was elected to represent.

Jerry Bien-Willner

Jerry Bien-Willner

“I can tell you that I feel very strongly that we need to maintain the character of our town,” he said in a March 22 phone interview.

“Having an event center, a quasi-commercial use in a residential area is prohibited by current town code. You can’t, under our current code, buy a home and then hold it out for events. No one would want to live next to that; these are the types of things our ordinance is designed to protect.”

While Councilman Bien-Willner has concerns over short-term rental rules he does not want to be an impediment to the evolution of the tourism marketplace.

“It’s not that I am steadfastly against this in all circumstances,” he pointed out. “It is worth looking at those issues and to ensure there are safeguards in place for the residents of the town. There are large homes and this is a great market for that type of product.”

In pursuit of a compromise

Both representatives from the town of Paradise Valley and the city of Scottsdale have been to the Arizona Legislature lobbying on behalf of local controls for short-term rentals, but officials there say the effort may be futile.

“We share the same concerns as Paradise Valley or Prescott, anywhere that is a city that has short-term rentals,” said Scottsdale government relations director Brad Lundahl in a May 22 phone interview. “We have had a ban on short-term rentals in place since the 1960s.”

Mr. Lundahl, like his counterparts in Paradise Valley, have attended stakeholder meetings at the Arizona Legislature to try and strike a compromise between political interest and local control.

“While we respect and encourage open commerce, this bill will allow business activity to occur in residential neighborhoods. We do need protections for these types of activities,” he said.

Mr. Lundahl says Scottsdale is gunning for an exemption to the reach of Senate Bill 1350.

“We have been pushing to be grandfathered in so that any city that has an existing short-term rental ban in place would get to keep it,” he said. “That would take care of us — otherwise we are opposed to the bill.”

Ken Strobeck, League of Arizona Cities and Towns executive director, says Senate Bill 1350 falls in line with Gov. Ducey’s political agenda.

“He is very supportive of that kind of business model and this bill fits right in with this agenda,” he pointed out in a March 22 phone interview. “There are issues that we are very concerned about. We feel that it is important to be able to protect the interest of cities and towns.”

Mr. Strobeck says municipal leaders are likely fighting a losing battle.

“We aren’t going to be able to dictate what we want,” he said of the prospects of compromise. “It is all a matter of what people will agree to and what you can get votes for. This is the only thing that matters: what you can get votes for.”

Paradise Valley Mayor Michael Collins says Senate Bill 1350 can have far-reaching unintended consequences.

“The legislation as proposed would prevent Paradise Valley and other cities and towns in Arizona from protecting residents from the adverse impacts associated with the short-term rental industry,” he said in a March 23 statement.

“Companies are actively buying residential properties purely for short-term rental purposes and marketing them online. This is not a residential use and this business activity can be in direct conflict with the quiet residential lifestyle and high quality of life at home that Paradise Valley residents expect.”

While Mayor Collins applauds Gov. Ducey’s effort to break down barriers for businesses to succeed in Arizona, he feels the proposed legislation is a political step too far. The governor, too, is a resident of the Town of Paradise Valley.

“Readers need to remember to vote for state legislators who practice what they preach,” he pointed out.

“Fighting federal government mandates and regulation under the banner of state’s rights and local control, while at the same time preventing local government from placing the interests of its residents first, seems to be a bit hypocritical. We need to find a balance between deregulation of the sharing economy and its unintended adverse impacts to residential neighborhoods and communities like Paradise Valley. This legislation as proposed does not strike that balance.”

Sen. Lesko did not return a phone call for comment. Local leaders say the current legislative session is likely to last the next three to four weeks, but no timeline to when Senate Bill 1350 will be ratified has been identified.

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