At least 400 homeowners in Ahwatukee and over 7,200 city-wide could be affected by new short-term rental rules that Phoenix City Council will be considering later this month.
The city administration last week released its proposed new rules, asking Council to schedule a hearing on them for Sept. 20.
While a council subcommittee tentatively approved some of the new regulations for owners last June, it also directed staff to consider requiring owners to conduct background checks on their customers.
The new regulations come at a time when municipalities across Arizona are girding for a fight with the state Legislature next year for more control over short-term rentals.
While the Legislature and then-Gov. Doug Ducey stripped municipalities of any control over short-term rentals, increasing complaints about rowdy and sometimes violent behavior by renters persuaded lawmakers to return some control to cities and towns.
Last year the Legislature allowed them to establish a permit process and impose fines of up to $1,000 a month for failure to register.
The 2022 statute also allowed municipalities to impose some fees for administrative costs and enact a few other regulations.
What Phoenix administration calls “a very limited permit/license process” is largely aimed at helping municipalities “to gather better data regarding short-term rentals with minimal modifications to the ability to regulate these types of uses,” the council report states.
The proposed regulations would require an owner to pay a $250 application fee for a one-year permit, obtain at least $500,000 in liability insurance and have a transaction privilege tax license from the city.
Failure to obtain a permit would carry a graduated series of fines that can go as high as $3,500.
Owners would also have to notify their neighbors of their intent to operate a property as a short-term rental and provide the city with the emergency contact information of someone who could be at the scene within 30 minutes of a call from fire, police or code enforcement personnel.
The regulations also toughen screening for criminal background checks.
On the one hand, owners would have to prove they are not registered sex offenders and have no convictions within the last five years for any felony involving a death, injury or use of a deadly weapon.
But the owners also would be required to conduct a sex-offender background check of renters.
That proposed background check is considerably less comprehensive than council members Debra Stark and Laura Pastor told staff they wanted to see.
During a June 21 hearing on the administration’s initial proposed regulations, Pastor said a short-term rental in her neighborhood hosted a party where a teenager was shot and the site was never listed for short-term rentals.
“There are a lot of incidents happening within these troubled neighborhoods – and they’re not even troubled neighborhoods, just within neighborhoods, affluent neighborhoods, historic neighborhoods and every other neighborhood,” she said, adding:
“We have to get a handle on them and be proactive in protecting our city,” she added.
City staffers replied that it would be necessary to hire additional employees to verify background information.
The proposed rules also would forbid renting out properties for parties where admission is charged and alcohol is served and no guest stays overnight
Scottsdale is home to so many short-term rentals that have generated neighborhood complaints that it created a five-member Police Department task force assigned exclusively to monitor those properties and respond to calls involving them.
Scottsdale Mayor David Ortega also is asking the Arizona League of Cities and Towns to lobby the Legislature for more local control over short-term rentals.
He wants a cap on the total number of short-term rentals that can exist in a municipality; limits on density in specified areas; and some minimum distance between those properties.
“Each proposal is designed to return the quality of life that Scottsdale neighborhoods enjoyed before the city’s previous ban on short-term rentals was pre-empted by the Legislature,” Ortega said.
“Scottsdale neighborhoods have been shattered by short-term rentals, which are commercial businesses in residential zoned areas. Our residents are clamoring for peace and quiet, free from late-night disruptions and party house annoyances – we want our neighborhoods back.”
Phoenix’s new rules are being proposed at a time when the Valley’s leading analyst of the metro housing market says some parts of the Valley has become so saturated with short-term rentals that owners are turning to conventional long-term rentals instead.
Although city staff in June told the council subcommittee that Phoenix is home to 3,000 short-term rentals, airdna.com – which tracks Airbnb and Vrbo properties for the industry – lists more than twice that number in the city.
The Cromford Report last month stated, “The short-term rental market appears to have peaked in a number of over-supplied locations. This is leading to ludicrous prophecies by a few deranged real estate gurus that a huge flood of former short-term rental homes will hit the market in the near future.
“So many owners joined the Airbnb party that there are sometimes far more short-term rental properties than there are people wanting to rent them. This means lower occupancy and price competition, making ownership of a short-term rental much less attractive than it was a couple of years ago.
“Over the last two years average occupancy is reported to have dropped from 60% to 56%. …Some owners are considering converting to long-term rentals instead. The theoretical advantages are higher occupancy and greater peace of mind but the main disadvantage is a relatively low gross income compared with the owner’s original expectations.”
AirDNA said that for August, occupancy in Phoenix short-term rentals average 53% and the average daily rate was $192. Both are down from the 2023 high, set in February, when occupancy averaged 83% and the daily rate averaged $285, according to airDNA.com.
Some affordable housing advocates have blamed the proliferation of short-term rentals for aggravating the critical shortage in affordable housing in the Valley, citing the low inventory homes for sale.
The business communities in some vacation hotspots in Arizona – notably Sedona – have complained that employees can’t find affordable apartments or homes near their jobs because so many short-term rentals exist.
In the report to city council, Deputy City Manager Alan Stephenson said the city would be required under the proposed regulations to act on a short-term rental owner’s permit application within seven days, regardless of the outcome.
That permit could be revoked for a year if the owner is found guilty of three minor provisions or one major provision of the regulations governing their use.
The proposed measure states that a “verified violation” involves only actions forbidden by “any applicable law or ordinance relating to the use of the property for short-term rental purposes.”
As for notifying neighbors that a property would be used for short-term rentals, the proposed regulations define “neighbors” in an apartment building as being all units on the same floor with the unit that would be rented.
For homes, the notification would have to be given only to those homeowners located adjacent to the rental property and “diagonally across the street.”
The regulations also forbid a long list of activities, such as manufacturing, that are banned in areas with a residential zoning. All applications for a short-term rental permit must also propvide “proof of lawful presence in the United States.”
