? Is airbnb bad for ARIZONA

State puts limits on cities looking to regulate temporary rentals

Broussal and his wife moved into their Phoenix neighborhood thinking they were buying into a quiet area with well-kept homes.

But for a month in 2015, Broussal said it felt like they lived across the street from an “unmanaged fraternity house.” Music blared from the cozy, two-story residence, and at times more than 20 cars jammed the driveway and narrow street. The home’s temporary occupants and their visitors left trash and broken bottles strewn about the property.

The police visited the house repeatedly, responding to complaints about the noise and parking. Broussal described the situation as “a total fiasco.”

A student at a local college had rented the home the month leading up to graduation using an online rental site like Airbnb or Vacation Rentals by Owner, Broussal said.

From January through April, a new group rents the house almost every weekend.

“It’s like a hotel without management,” Broussal said.

Residents across Arizona can tell similar stories. Their concerns had prompted local governments to regulate or ban temporary rentals.

Jerome, Prescott, Scottsdale and Sedona, for example, had instituted bans on renting properties for less than 30 days because of residents’ complaints, concerns about public safety and objections raised by the hotel industry.

But a new state law will limit local control over short-term rentals, which has Arizona cities and towns evaluating how they will protect neighbor-

hoods now that they have less authority over these rentals.

The new state law takes effect at the end of the year, ending cities’ ability to ban Airbnb, VRBO, FlipKey and HomeAway. These websites help property owners list their apartments and houses to rent for days or months.

The law also requires the online marketplaces to automatically collect taxes from hosts. The money will be turned over to the state, and the Arizona Department of Revenue will distribute it to the corresponding cities. This will end widespread confusion about collecting and paying rental taxes, proponents of the law said.

The law, the first of its kind in the nation, will put Arizona at the forefront of the sharing economy, Gov. Doug Ducey has said.

But many city officials are unhappy with the law and skeptical about the benefits of the state’s efforts to expand the sharing economy.

“I’m getting really tired of this Legislature acting like they know better than local governments,” said Steve Kozachik, a Tucson councilman. “We are not a creature of the state. We are a chartered city, so for (the Legislature) to tell us how to do our local laws is hypocritical.”

Sedona City Attorney Robert Pickels said the Legislature is contradicting itself by complaining about the federal government’s overreach while telling cities they can’t decide issues like this.

Arizona tourists can use Airbnb to rent anything from a couch in Phoenix for $15 to a mansion in Paradise Valley for more than $1,000 a night.

About 131,000 people used Airbnb in Arizona last year, according to an Airbnb analysis.

Some argue such rentals increase tourism beyond traditional hotels and bed-and-breakfasts. A report by Airbnb found that visitors who use short-term rentals stayed twice as long as tourists who use hotels. They also spend twice as much money and focus their spending in the neighborhood where they’re renting.

The Airbnb study showed that Arizona hosts earn on average about $4,000 per year from their rentals. Almost half of Airbnb hosts nationwide use that money to pay for necessities like groceries and rent, the company’s report said.

The new law helps Arizonans earn extra income by renting out their property, said Daniel Scarpinato, a spokesman for Gov. Doug Ducey.

But cities here and elsewhere have struggled with how to regulate such rentals.

New York City has been especially hostile to Airbnb — allocating $10 million to track down and punish hosts operating illegally. The New York state legislature passed a bill in June threatening hosts with fines up to $7,500 if Gov. Andrew Cuomo signs it.

San Diego fined one Airbnb host $25,000 last year. In February, the city cracked down on more than 200 hosts, notifying them that they owed taxes on their rentals. San Diego is working on clarifying their guidelines.

Scarpinato said Arizona instead wants to stay “out of the way” so residents can fully participate in the latest technologies.

“Many states are tripping over themselves trying to figure out how to handle new technology,” Scarpinato said. “We want to be recognized nationally as being a leader of the sharing economy.”

Airbnb is lobbying for more states to follow Arizona’s lead, but how the law works here may help determine what they choose to do.

Many Airbnb hosts may use money they make from renting their homes to pay for necessities, but popular tourist destinations are seeing something different. Investors are buying properties and renting them out like hotels, said Steven Mauk, director of development services for Yavapai County.

“We saw whole neighborhoods turn into 90 percent short-term rentals,” Mauk said.

That was the reason Sedona banned them more than 20 years ago, he said.

A high concentration of short-term rentals can cause neighbors to lose a sense of ownership of their area.

They can also become “party houses” that prompt ongoing neighborhood complaints.

And they allow homeowners to compete with hotels.

Kozachik, the Tucson councilman, said the new state law creates an uneven playing field for the hotel and bed-andbreakfast industry. Most people who rent their houses on Airbnb do not pay for improvements to abide by health codes, he said, so they have an unfair advantage over businesses that are required to meet such safety standards.

Mauk added that popular vacation spots, such as Prescott and Sedona, already draw heavy tourist traffic so these cities have little to gain from opening more places to stay. Instead, forcing them to allow potentially disruptive Airbnb guests only detracts from the peaceful neighborhoods residents want, Mauk said.

Kevin Burke, town manager of Paradise Valley, said most short-term rentals don’t cause problems. And other city officials agreed the majority of Airbnb hosts and guests are not problematic, but those that are can stir a lot of controversy.

Arizona cities have handled vacation rentals very differently — from not regulating them at all to banning them.

Airbnb began operating in Arizona in 2009. The state law arrived as some cities were beginning to regulate them.

Most cities’ zoning ordinances don’t touch on vacation rentals, noted Greggary Lines, a recent law school graduate who researched potential regulations for Airbnb in Arizona.

“Some cities had no idea what I was talking about when I called them about their regulations for Airbnb,” Lines said. “It would kill all Airbnbs if they followed all the rules on the books right now.”

Paradise Valley had assembled a committee to discuss the problems shortterm rentals bring up. It halted those efforts when the Legislature began working on the new law. The same happened in Tucson.

“It was a few bad apples driving the need for new policies,” Burke said.

The new law’s supporters said the state needed to pre-empt complications caused by the “patchwork” local regulations that were being adopted.

In the Valley, it’s difficult to know where one city ends and another begins, Scarpinato said. So allowing every city to make its own regulations is confusing for hosts and visitors.

People who say the state is being hypocritical with this law are wrong, said Christina Sandefur, Goldwater Institute executive vice president who helped write the bill.

Local control is often good, she said, because city government usually understands a community better than the state. But local regulations are not best in all situations, she said. It’s the state’s job to step in when local governments overstep their bounds and violate people’s property rights, Sandefur said.

In this case, people should be able to use their property as they choose as long as their guests aren’t disturbing others.

Rather than ban short-term rentals outright, she said, it’s better for local government only to step in if they become a nuisance.

She compared the issue to a backyard barbecue. Some gatherings get loud and out of hand, but cities don’t ban them altogether. Instead, they enforce ordinances that address issues like noise and parking.

Lines, the law student who studied the impact of Airbnb regulations, pointed out even cities that banned vacation rentals still had listings on Airbnb, so the state action addresses the inevitable.

“The fact is: Short-term rentals were already here even if you try to weed them out,” Lines said. “They can still happen regardless of bans, so the underlying factor is that they’re here. Let’s take advantage of them.”

Many city officials acknowledged the law does provide a few tools to regulate them.

Hosts must provide an emergency contact so they can address problems. Cities can also limit rentals for reasons such as traffic, health and sanitation, and sex offenders.

“The final bill doesn’t prohibit our ability to crack down on complaints,” said Scott Butler, Mesa’s deputy city manager.

Prescott Deputy City Manager Alison Zelms is pleased cities have some latitude to regulate the rentals, but said it turns local governments into “hotel managers” instead of allowing them to ban rentals entirely if they choose.

“Now problems are being dealt with on a complaint basis vs. preventing them,” she said.

Most city officials are discussing how they will move forward. Their plans include figuring out how to track complaints about rental properties and making residents aware of who to contact if they have problems.