Real Estate

Hague: My thoughts on short-term rentals

Greg Hague
Posted 10/15/19

Recently I wrote an article about the detrimental effect of short term rentals on quiet residential neighborhoods. If you didn’t see it, it’s online at neighborhoodmotel.com.

My …

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Real Estate

Hague: My thoughts on short-term rentals

Posted

Recently I wrote an article about the detrimental effect of short term rentals on quiet residential neighborhoods. If you didn’t see it, it’s online at neighborhoodmotel.com.

My issue  is a state law prohibiting Arizona communities from regulating short term rentals. It was passed by the state legislature in 2016, supposedly with the goal of ensuring that Arizona homeowners could rent out a spare bedroom by the day, even if they were in a quiet community where residents didn’t want a motel-like operation next door. 

This law had negative consequences in communities across the state, particularly in Sedona, one of our state’s crown jewel locations. Sedona had an estimated 200-300 vacation rentals before the new law took effect.  Today, it’s estimated to be 1,000 homes, about 20% of Sedona's total housing inventory!   

Sedona residents who used to pay $800 to $900 a month for rent, now pay $1,800 to $2000. They’ve been forced out of town as the inventory of homes for rent by the year continues to plummet, while rental prices continue to skyrocket. 

As quoted in the Arizona Republic, Steve Segner, owner of the boutique hotel El Portal in Sedona said, "the increase in short term rentals has increased traffic, noise and competition in the city." He wonders why his business is inspected by the health and fire department, yet someone can go around the corner, buy a 5 bedroom house, and be open for business the next day with no oversight.

The Arizona Republic also quoted Brenda Mendel, a Sedona resident who tries to earn extra income each month by renting out one of her bedrooms on Airbnb’s website. She commented that people who have never owned a home may not realize how expensive it can be to make a mortgage payment, pay property taxes and insurance. 

In my opinion, homeowners who rent out a bedroom to generate extra income aren’t the problem. They live there. They are more likely to control noise and late night partying to preserve their sanity as well as their relationship with neighbors. 

The problem is investors who are snapping up homes in quiet neighborhoods, then renting them out to vacationers, one bedroom at a time. I just spoke with a Phoenix homeowner who is constantly plagued by a home that was converted to a party house just three doors down. He said he has counted up to 30 people at a time partying and staying all night at this house.

Hotels have experienced staff to control the noise and restrain late night hard-partying guests. But most investor-Airbnb operators don’t live on the premises and don’t monitor their guests’ activities. Neighbors are forced to complain to the police when they are awakened by blaring music at 3:00am. Then they have to complain again a few nights later when new vacationers do the same thing.    

To demonstrate the draconian effect of the Arizona law prohibiting communities from regulating short-term rentals, Sedona was forced to abolish its 30-day minimum restriction on rentals. It then passed an ordinance that required short term rental operators to register with the city and pay a minimal $50 fee for a business license. 

But the Arizona Attorney General’s Office decided that Sedona’s attempt to maintain minimal oversight over neighborhood motels violated the 2016 state law. So the city was prohibited from imposing safety requirements, collecting business operation taxes, or even knowing who was operating a business in its neighborhoods. 

The problem could become serious in every Arizona community. Most have multiple bedroom homes and are located close to golf and other recreational opportunities. In other words, Arizona communities are perfect for the proliferation of neighborhood motels. 

Virtually every week we have Airbnb investors trying to buy our Hague Partners' listings. It’s our responsibility to help our sellers sell at the highest possible price, so we work these transactions like any other. But when our homes sell to Airbnb investors, we feel awful for the neighbors on each side and across the street. Our clients win, but their neighbors lose. 

The effect of the 2016 law on property values is interesting. Increased demand from Airbnb investors tends to push up prices on the homes they buy. BUT the neighbors’ homes become less desirable and less valuable because buyers who intend to live there (still the majority of the market) don’t want a neighborhood motel next door. Would you?

Community government should decide what’s right for community residents. Mayors and council members live in their communities, know residents personally, and should be the ones who make the laws that determine the area’s character. This worked fine prior to 2016, and it will work fine again when the 2016 law is repealed. 

What’s the solution? I couldn’t find even one U.S. state that has anything like this Arizona law. While I’m sure our state legislators and the governor had good intentions, the result was not what they intended. So let’s join together and make our voices heard.

If you agree, email me at greg@haguepartners.com. Just say “I agree. Let’s make our voices heard.” 

Together, let’s prevent communities across Arizona from suffering the same fate as Sedona.  

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