The Latest on STR Regulations in Arizona: Change is Close

General Landlording & Rental Properties
6yFollow

The Latest on STR Regulations in Arizona: Change is Close

Melanie Johnston
Real Estate Agent · Scottsdale, AZ · Member since 2018 · 412 posts · 366 votes
Posted by the City of Scottsdale on NextDoor on 2/18/20: Two hearings this week on short-term rental bills

The State Legislature will be hearing two bills this week in both the House of Representatives and the Senate to address the growing problems with short-term-rentals and the impact they are having on our neighborhoods. The goal of the bills is to provide more oversight and give local government a greater ability to manage short-term rentals. You are encouraged to share your thoughts, feedback and concerns with legislators.

On Thursday, February 20, 8:30 a.m., the Senate Commerce Committee will be hearing SB 1554 (https://bit.ly/3bQfhxl) introduced by Senator Kate Brophy-McGee. 

On Thursday, February 20, 9 a.m., the House Government Committee will be hearing HB 2875 (https://bit.ly/2SVVxju) introduced by Representative John Kavanagh.

My thoughts: Until a few years ago when Gov. Doug Ducey decreed that Arizona cities could not limit a property owner's ability to rent their property, 30-day minimum rentals were the law in Scottsdale. HOAs have always had the ability to create their own rules, with the vote of a majority of their owners, and all (but one) I've come in contact with have rental restrictions. I'm helping a BP couple search for a property to STR and, having spoken to at least 10 HOA reps in the last week, those restrictions range from a 30-day minimum to a 6-month minimum.

But with these regulations on the horizon, the thought that buying in a hon-HOA neighborhood (mostly SFHs) gives you the freedom to STR on a nightly basis is under threat.

There are many active Airbnbs right now in condo complexes across Arizona that have restrictions the owners are simply ignoring. This will no doubt continue, despite new regulations, but cities will likely toughen up their enforcement when given new powers.

I owned vacation rentals back in the day when Scottsdale required a 30-day minimum stay and they cash flowed well. Yes, your rates go down in the summer, but there are people who need a furnished rental for jobs/family/medical visits, so your property doesn't have to sit vacant when it's warm (okay, hot) outside. I currently operate a Scottsdale STR in a non-HOA neighborhood and use a hybrid model of high-income monthly rentals in the winter, 3-night min rentals in the "shoulder" seasons and monthly in the summer when I break even and spend zero time managing the rental.

Just be aware of what's happening so you can make decisions that are best for you. I will provide updates in future posts.

Melanie

6Reply
33 views

Most Popular Reply

Justin Ellis
Property Manager · Scottsdale, AZ · Member since 2015 · 113 posts · 77 votes
6y

@Melanie Johnston great info as always!

@Matt Morgan

Just based on reading the proposed changes, I would say these regulations would hurt investors bottom line quite a bit....

- 30 day min rentals (the deal breaker)

- In person check-ins (additional expense or at minimum a time investment)

- Noise monitoring devices required (a small expense, but this one I agree with)

- Max heads in beds (although reasonable at 2 adults per room)

- Posting a contact number in bold for the public to see (100% need to pay for cameras and an alarm if this one passes, that sign might as well read "rob this house").

I'm all for regulation, I just hope they don't "government the crap outta this" and in an attempt to control isolated incidents, make a system overly complicated and expensive, therefore no longer profitable to the small guy.

1Reply
See this reply in the discussion

10 Replies

Jump to latestLatest
  • Matt Morgan
    Residential Agent And Investor · Scottsdale, AZ · Member since 2013 · 212 posts · 83 votes
    6y

    Thoughtful write up Melanie and always appreciate you keeping us Scottsdale investors and agents up to date with the latest. 

    From what I've read, the few potential legislative changes coming down the pipeline won't have a very dramatic effect on how STR's operate and will probably have a pretty negligible effect to an investor's bottom line.

    Also, you mention only 1 community that you've come in contact with doesn't have a restriction against short term rentals. I personally know of 17 just in the Old Town area that don't have a restriction and I'm sure there are more. This number may diminish as the years go by as some communities have been amending their bylaws.

    Please keep us up to date as you hear more.

    1Reply
  • Justin Ellis
    Property Manager · Scottsdale, AZ · Member since 2015 · 113 posts · 77 votes
    6y

    @Melanie Johnston great info as always!

    @Matt Morgan

    Just based on reading the proposed changes, I would say these regulations would hurt investors bottom line quite a bit....

    - 30 day min rentals (the deal breaker)

    - In person check-ins (additional expense or at minimum a time investment)

    - Noise monitoring devices required (a small expense, but this one I agree with)

    - Max heads in beds (although reasonable at 2 adults per room)

    - Posting a contact number in bold for the public to see (100% need to pay for cameras and an alarm if this one passes, that sign might as well read "rob this house").

    I'm all for regulation, I just hope they don't "government the crap outta this" and in an attempt to control isolated incidents, make a system overly complicated and expensive, therefore no longer profitable to the small guy.

    1Reply
  • Matt Morgan
    Residential Agent And Investor · Scottsdale, AZ · Member since 2013 · 212 posts · 83 votes
    6y

    @Justin Ellis You're right, the 30 day minimum would definitely have an impact. But based on what I've read, the few changes that are probably coming will be more along the lines of the other items you mentioned.

    0Reply
  • Melanie Johnston
    OP
    Real Estate Agent · Scottsdale, AZ · Member since 2018 · 412 posts · 366 votes
    6y

    @Justin Ellis and @Matt Morgan It will be very interesting to see how this shakes down and what it means for investors and STR operators. A while back the City of Scottsdale held a community meeting about STRs (this was before the current backlash) and I was surprised that the auditorium was filled with about 95% (very vocal and upset) haters. So if they all make their voices heard like they did that day, look out.

    0Reply
  • Melissa Romano
    Real Estate Agent · Scottsdale, AZ · Member since 2017 · 32 posts · 30 votes
    6y

    Just so everyone is aware, the bill did pass but it looks like there is still some work/modification that needs to be done before it actually becomes law. 

    0Reply
  • Melanie Johnston
    OP
    Real Estate Agent · Scottsdale, AZ · Member since 2018 · 412 posts · 366 votes
    6y

    The good news is that people who rely on STR income to support their families showed up in force to tell their side of the story at yesterday's hearings. As the Arizona Republic reports, "Two controversial measures that put limitations on short-term rentals passed initial votes Thursday, one in the House and one in the Senate."

    ______________________

    "Across the Capitol courtyard Thursday, Sen. Kate Brophy McGee, R-Phoenix, won an initial vote for Senate Bill 1554.

    As introduced, the bill would have limited the number of times owners could rent out their properties to just once a month if the property was not the owner's primary or secondary residence.

    But an amendment offered by Sen. Michelle Ugenti-Rita, R-Scottsdale, eliminated that provision and instead the bill now would prohibit a "corporate entity" from operating a vacation rental in a residential zone unless authorized by a municipality.

    This provision would limit investment companies that buy up multiple properties to be used as rentals while protecting family rentals. Some opponents said they have incorporated their small rental businesses, however.

    “It’s delicate but we do need to advance the conversation,” Ugenti-Rita said before casting her vote in favor of the measure. "We need to face it. We need to deal with it."

    The hearing included more than an hour of testimony from frustrated neighbors complaining about rentals in their neighborhoods and various municipal officials from around the state urging lawmakers to help them regulate in the industry.

    That was followed by several rental-property owners asking lawmakers to keep their hands off."

    ________________

    Obviously the "corporate entity" provision is problematic for STR owners who own their homes in LLCs. An evolving story for sure! Stay tuned.

    Melanie

    0Reply
  • Drew Hittner
    Member since 2019 · 45 posts · 16 votes
    5y

    @Melanie Johnston have you heard anything else about this post Covid?

    0Reply
  • Angel Fabricio Aguilar Ortega
    Member since 2020 · 6 posts · 0 votes
    5y

    I used to work for the biggest company in the world dealing with vacational rentals,hotels etc. This is a complicated issue because most owners don't have the means to screen renters and property at the end of the day can turn into a dump affecting property values, security of a neighborhood, etc. The only positive is for investors trying to turn a profit at the expense of other families neighborhoods. Even the lawmakers don't understand. For example, ghost properties , or fake , dangerous, illegal activity renters. Or property owners trying to maximize profits by turning the house into a hostel type property. I am an investor but I have seen a lot of the headaches that this small industry can have on communities. Specially in a conservative state like Arizona. More importantly the only way it would work is if the property is on a commercial/residential zone. 

    0Reply
  • Melanie Johnston
    OP
    Real Estate Agent · Scottsdale, AZ · Member since 2018 · 412 posts · 366 votes
    5y

    @Drew Hittner It has not been a topic of discussion much during COVID.

    Here is a link to the latest short-term rental rules in Scottsdale:

    https://www.scottsdaleaz.gov/c...

    Melanie

    0Reply
  • Rigel Menard
    Member since 2018 · 1 post · 0 votes
    5y

    To see the current text of the more consequential bill (sb 1554) go here:

    https://www.azleg.gov/legtext/...

    After reading the bill, I cannot figure out if a house with a long-term tenant and a short-term rental would fall within the scope of the regulations. This is because the bill expressly states a residential rental dwelling unit is not an str and vice versa. The bill will get picked up by the AZ legislature again early next year and could be in effect by spring 2021.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free