By Howard Fischer
Mail | X: @azcapmedia

PHOENIX — Gov. Katie Hobbs said Thursday she has no solution to the problem of available housing being converted into vacation rentals.

Nor, she said, to deal with out-of-state investors snapping up homes that might otherwise go to Arizona residents.

Her comments come just two days after she signed legislation requiring cities of more than 75,000 to allow owners of single-family homes to build at least two “accessory dwelling units” on their property — three on larger lots. That measure was pushed by Rep. Michael Carbone, R-Buckeye.

But Hobbs, in signing House Bill 2720, also agreed to a provision that forbids local officials from keeping people from using all the new “casitas” that would be built for vacation rentals despite the objections of several cities who said it undermines the stated goal of creating more affordable housing.

The governor, in a prepared statement at the time explaining her decision to sign the bill, acknowledged there is a need to “work together to address short-term rentals that displace long-term community residents.” Ditto, she said, to “crack down on speculation by out-of-state real estate investors that drives up the cost of housing for Arizonans.”

But Hobbs, after a ribbon-cutting ceremony Thursday at a new rental complex in Phoenix for those of limited means, deflected questions about what she intends to do about all that.

“I think the plan is much bigger than the casita issue,” she said, even while agreeing that Arizonans have continued to ask for answers.

“Everywhere I go, communities across the state, when we talk about affordable housing the short-term rental issue comes up, whether its the fact that out-of-state investors are coming in and buying up housing stock for short-term rentals,” the governor continued. “It’s a problem, obviously, (along with) the ability of cities to regulate as well.”

And her idea?

“We’re working on a plan,” Hobbs said. “You’ll hear more about that in the coming months.”

The governor acknowledged this isn’t a new problem. In fact, it first arose in 2016 when Doug Ducey, her predecessor, signed legislation stripping cities of their rights to regulate short-term rentals.

It has become more acute in some communities, to the point where 15% of the housing stock in Sedona is short-term rentals and the city has a plan to let local employees who cannot afford to live in town sleep in parking lots.

But Hobbs, who took office in January 2023, had no answer to what she has done other than to say she’s studying it.

“None of these issues started overnight,” she said.

“And we’re not going to fix them overnight,” the governor continued.

“I have a few more years — hopefully, more than that — and we have a lot of things to tackle. This is definitely on the list.”

All this dates back to extensive lobbying in 2016 by Airbnb, a company that arranges, for a fee, short-term rentals through its internet application.

The firm sold the measure as a way of helping homeowners meet their bills by renting out unused bedrooms. In fact, the name comes from the company’s origins in San Francisco where founders rented out air mattresses in their apartments as a “bed and breakfast” operation.

Ducey bought into the pitch.

“For thousands of hardworking citizens, opening up their home to out-of-state guests provides the financial breathing room they need to provide for their family or enjoy an extra expense that they otherwise couldn’t afford,” he said at the time.

But it was obvious from the start the law covered more than those renting out a bedroom, or even their whole home.

There was — and still is — no limit on the number of properties an investor could buy and days a home could be rented out, all in the same residential area, potentially turning the whole area into a vacation rental zone. But Ducey brushed aside questions of whether that could change the character of neighborhoods.

“I’m not going to answer these hypotheticals,” he said.

But those “hypotheticals” soon became reality, to the point where even Ducey admitted three years later the idea didn’t exactly work out as predicted.

“I think there were some unintended consequences in a law that had the best of intentions,” he said in 2019. “It does appear in the situation of Airbnb and other organizations that we have some people out there that are doing some things that are disruptive to communities.”

By that point, however, the industry had marshaled enough support to repeatedly block any repeal of the 2016 law — or even enact any major limitations.

Even this year, Senate President Warren Petersen, R-Gilbert, said he would not support any requirements that all the new casitas that could be built to be used only for long-term rentals, saying how homeowners use them is a matter of private property rights.

All that leads to 2024 and what is in the bill Hobbs signed earlier this week mandating that cities of more than 75,000 allow accessory dwelling units and barring them from requiring they be reserved for long-term rentals to local residents. About the only concession to the complaint of these units all ending up as short-term rentals was that lawmakers added a requirement that the owner of any new casitas also actually live on the property.

None of that affects Sedona as it is below the 75,000 population threshold. But other cities were not happy with the legislation and urged the governor to veto it.

“The stated intent behind this measure is to address the affordable housing crisis,” wrote Scottsdale Mayor David Ortega and other members of the city council. But they said this “`will not make a dent” in this problem.

They also pointed out Scottsdale already has more than 4,000 short-term rentals.

“We know this bill will add to that total,” they wrote. “More noise, more trash, and more complaints from long-term residents.”
And a city didn’t have to be immediately affected for its elected officials to express concern.

Consider Casa Grande which, at 63,73 last year according to U.S. Census figures, has grown 17% in three years. For Mayor Craig McFarland, the issues were less about affordable housing than other pieces of the bill.

For example, he said, what are billed as accessory dwelling units actually could be larger or taller than the original home on the property or might differ in style. Then there is a prohibition against a city requiring additional off-street parking for the other units leading to a risk of “overcrowding neighborhood streets, which may lead to additional safety concerns.”

Hobbs wasn’t the only Democrat in support of the law, even without restrictions on short-term rentals.

During debate on the measure, Sen. Anna Hernandez, D-Phoenix, said she “does not want to be in a moment where we’re blocking out working class families” from building a casita and getting more income that could help their quality of life.

“I don’t want to be a part of that,” she said. She said using the additions as short-term rentals won’t “destroy neighborhoods,” as opponents contend.

“What we have seen is that what has destroyed our neighborhoods is that cities continue to uphold exclusionary zoning that have not let us for years to onboard diverse type of housing,” Hernandez said.

“ADU’s have wide support across political spectrums,” she said. “They have support across all kinds of communities.”