Many ordinary citizens in Arizona are engaged in illegal activity that is a class 1 misdemeanor, punishable up to $2,500 and imprisonment up to six months. Each day they are in violation is considered a separate offense. Hypothetically, a week of this action could equal $17,500 and three and a half years in jail.
The offense? Renting their home for less than 30 consecutive days.
The advent of innovative services such as Airbnb and VRBO has turned the long existing temporary rental industry into a fast-growing, coordinated phenomenon. In typical bureaucratic fashion, cities see a successful burgeoning market and want to ban it or regulate it to death. The cited code and violation is from the quaint community of Sedona and they join the ranks of Jerome and Scottsdale with out and out prohibitions of short-term home rentals. Other communities such as Yavapai County require onerous use permitting processes.
Residents renting their homes for a short time run the gamete in intention. Some have a second home they casually rent or allow friends and families to borrow when they aren’t enjoying it themselves. Others use it to supplement their income. And others still buy homes with the express purpose of giving consumers an experience and an alternative to traditional lodging. Yet regulators are having a field day trying to define the activity with broad, catch-all ordinances. The result – the definitions of short-term rental encompass everyone from the babysitter, a time-share, to the in-laws staying a week for Thanksgiving who bring a bottle of wine in “payment”.
These bans and regulations impose a significant infringement on property rights. In 2006 Arizona voters passed Prop 207, the Private Property Rights Protection Act in order to put a stop to rampant regulatory takings of property by cities and towns. Except for expressly health and safety purposes, which are exempt, jurisdictions in Arizona are required to fairly compensate property owners whose value is reduced by regulation passed after the voter initiative. Also, private property owners are sheltered from taking on the full costs of the infringement – if the “public good” can take it – they can pay for it too. Many argue with their ability to rent out their homes being stymied, the government owes them just compensation for the value lost.
Cities are trying to make the argument that short term rentals are a potential danger to public health and safety. This has been quickly dispelled. The Goldwater Institute recently won suit against Sedona, demonstrating the city does not meet the standard of the exemption. In the final judgement, the ruling Yavapai County Superior Court judge stated, “other than unsolicited complaints, the record is void of statistics gathered by the Defendant (Sedona) on health or safety problems caused by short-term rentals. The street department did not report an increase in traffic. The sanitation department did not report trash collection problems. The police department did not report on an increase in traffic citations, parking violations, or disturbing the peace. The fire department did not report safety hazards, and the zoning department did not report safety concerns on short term rentals.”
Not only is it incumbent upon the cities and counties to prove a legitimate nexus between their regulation and a legitimate public health concern, their ordinances must be proportional to the impact of the use. The reality is that short term rentals pose no real risk, and the sooner these arbitrary restrictions are lifted, the better property owners and consumers in Arizona will be served.