It's law: Local government cannot prohibit vacation rentals, but HOAs can

In a measure that some feel will damage local communities and others believe will affirm property rights, Gov. Doug Ducey signed SB 1350 on May 12, a law which includes a provision prohibiting local governments from banning vacation rentals.

The core basis of the newly signed bill deals with money. The state's position is that it was missing out on unreported tax revenue from homeowners renting their property to vacationers.

A provision in the bill places transaction tax collection in the hands of online rental websites and property management companies.

The bill also disallows municipalities from banning homeowners from renting their properties, even if done on a nightly basis in a residential neighborhood.

As part of the law, Provision 7 states: "Stipulates that a city, town or county cannot prohibit, restrict the use of or regulate vacation rentals or short-term rentals based solely on their classification, use or occupancy."

Aside from property owners, proponents of the bill include internet commerce associations (websites such as Airbnb and VRBO), vacation rental managers and - - most visibly - - the Goldwater Institute, a private property rights advocate.

"I think this is great balance. It ensures property rights and sharing economy and still allows cities and towns to regulate nuisance laws and safety laws," said Jared Blanchard, attorney with the Goldwater Institute. "It says that short term rentals cannot be banned, but can be regulated like any other property."

Blanchard says homeowner associations are exempted from the new law, "as it's a private contract. They can choose to regulate vacation rentals."

The Village of Oak Creek has already experienced vacation rental issues that officials believe will be exacerbated by the new law.

"I think it's unfair. We have had whole blocks of neighborhoods turn into short-term rentals and it really changes the character of the neighborhood," said Steve Mauk, Yavapai County's director of development services.

Mauk said he needs to study the signed bill, but he is looking at utilizing "some mechanism" for continued compliance with existing public concerns such as safety and permitting."

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