Arizona Senate Bill 1168 (S1168) passed on July 6, 2022, giving cities and counties a fraction of the controls they lost when former Governor Doug Ducey signed SB1350 into law on May 13, 2016. Ducey’s bill, dubbed the “Airbnb bill,” left tourism cities helpless as vacation rentals absorbed or priced dwindling worker housing out of reach.

Page City Council asked staff on Sept. 27, 2023, to prepare a new ordinance to regulate short-term rentals.

The partially regained powers allow cities to require permits and charge annual fees to operate short-term rental properties. Cities can also levy fines or revoke permits for noise violations, property maintenance or troublesome guests. Cities can charge up to $250 to cover permit expenses such as administration, inspections and enforcement.

Page City Counselors Brian Carey and Mike Farrow did the legwork for the ordinance and gave a presentation summarizing their findings. They proposed an ordinance based on Scottsdale, Arizona, Ordinance 4566 adopted on Oct. 25, 2022.

The Scottsdale ordinance requires a vacation rental license at $250 per year. Homeowners operating with an expired, revoked or suspended license will be fined a minimum of $1,000. among other conditions, applicants must provide proof of a valid transaction privilege tax license, attest they aren’t registered sex offenders or convicted felons involving a death, serious injury or felony use of a deadly weapon.

One item in the Scottsdale ordinance makes it difficult for nonresident owners. In case of emergency, any person designated as an emergency contact must respond in-person within one hour to the physical location of the vacation rental. Failure to respond shall be punished by a minimum fine of $500, and failure to arrive within one hour shall be punished by a minimum fine of $250.

The mayor and all council members who spoke appeared supportive of adopting an ordinance, except Theresa Lee.

“I know the consensus is to move forward with this,” she said. “I just want it on record that I’m against this. We’re diving way in as a government into what people can and cannot do with their personal property.”

Lee went on to talk about license suspension provisions in the Scottsdale ordinance, which addresses a concern for communities worldwide. The short-term rental industry is growing quickly and dominating neighborhoods. Greater numbers naturally increase the risk of disturbances and illegal activities, and add stress to already strained police and emergency services. 

“As a property owner, if I'm going through VRBO, which means I’m a business, which means I’m paying my TPT, which means the city and the state are getting their taxes, if somebody that I rent to decides to be stupid in their rental during the time they are renting from me, I lose my business note for no more than a year,” said Lee.

The provisions Lee refers to states that “any attempted or completed felony act, arising from the occupancy or use of a vacation rental or short-term rental, that results in a death, or actual or attempted serious physical injury, shall be grounds for judicial relief in the form of a suspension of the property’s use as a vacation rental or short-term rental for a period that shall not exceed twelve (12) months.” 

City Attorney Josh Smith replied to Lee’s concern.

“It doesn’t require that we have that as a regulation,” Smith said. “It’s allowed if the council wanted to include that, but we don’t have to.” 

Smith reminded Lee that part of the process is getting feedback, then getting direction from council for final inclusions.

Counselor Farrow, also responding to Lee’s concern, said, “We’re not looking to over-regulate or super-regulate. We’re looking to begin a process to address housing issues and balancing. For instance, my neighborhood, they’re all owned by out-of-state LLC’s. Where’s the benefit for the city there? The person that cleans it gets a benefit. I think we have to look at recent cases where the person was operating an illegal operation, not registered. The city was aware of it. The people were already informed and there was a death in the house due to the inability to exit the facility because it wasn’t proper. So then the city and the [rental] owner are both sued. Our goal is to have a balance. We don’t have to have, as you said clearly, all these things in it.”

Mayor Bill Diak as expressed many times his desire to influence state legislators, and return the powers stripped from cities. 

“VRBOs, unfortunately, are treated as a regular residential property but it's not to the city’s liking,” Diak told the Chronicle in June. “If you're running a VRBO, it’s considered a residence, not a business. So that is a flaw in our state system that I have fought for the last four years, and I’ve got about another year and a half to continue to fight that process, to change that, because it is not right.”

The City of Page, along with 90 other cities in Arizona, belong to the League of Arizona Cities and Towns (LACT). The organization is effectively a lobbying group working on behalf of its members to shape state policies. A key concern for all is regaining control from the state to prevent the short-term rental industry from depleting worker housing supplies. 

June 24, 2022, an agreement was signed by LACT Executive Director Tom Belshe, Airbnb, Inc. and Expedia Group. Rather than counting on state legislators, a handful of LACT members chose to work with the powerful lobbyists from the short-term rental and online bookings industry. What they got was SB1168, a bill that essentially gives cities the power to deal with nuisances. What they gave in return was a promise to back off pursuing meaningful legislation to deal with their housing shortages. 

According to the May 13, 2022, minutes of LACT’s Executive Committee meeting: “A short-term rental work group created by the League has been meeting to draft reforms and provide feedback. Legislative staff have used the workgroup’s feedback to negotiate on Senate Bill 1168. This bill will not include density caps on short term rentals due to significant opposition by the short-term rental industry and Arizona Association of Realtors. There is ongoing discussion on the establishment of regulatory license requirements for short term rental operators to enforce city and town codes and ordinances. The League expects the industry will ask for a moratorium on future short-term rental legislation. The League has not agreed to a moratorium. The League did negotiate a compromise amendment that was included in the House of Commerce Committee adopting some of the reforms the League has requested.”

A month later, views changed, and LACT caved.

Belshe said leaders from 10 jurisdictions chose to take the deal: Scottsdale, Sedona, Flagstaff, Goodyear, Lake Havasu City, Fountain Hills, Paradise Valley, Phoenix, Tempe and Chandler. Below is an excerpt from the agreement titled “Moratorium on Short-Term Rental Legislation between the League of Arizona Cities and Towns, Expedia Group and Airbnb, Inc.”

 “Except as permitted in the following section, for a period no less than three years, the League of Arizona Cities and Towns, Expedia Group, and Airbnb may not advocate for, or work to introduce, legislation concerning changes to A.R.S. § 9-500.39 and related statutes, including provisions incorporated in SB 1168 (2022). Exceptions to the moratorium may be made only when all parties agree to the proposed changes.

“In consideration of the parties agreement above, the League of Arizona Cities and Towns agrees not to pursue the full repeal of provisions as passed in SB 1350 (2016) for a period of five years, and for a period no less than five years the League of Arizona Cities and Towns may not advocate for, or work to introduce, legislation concerning changes to add regulatory obligations and burdens on an online lodging marketplace, including Expedia Group and Airbnb.”

With the compromise weighted heavily in the short-term rental industry’s favor, Senate Bill 1168 was passed the following month. 

Another bill approved by LACT members that session, House Bill 2663, died in the House Rules Committee. The bill would have allowed cities to limit vacation rentals based on total housing stock.

According to reporting by Arizona Republic, “Paradise Valley Mayor Jerry Bien-Willner, who has been outspoken in the fight for local short-term rental control, said the vacation rental industry would likely have blocked SB 1168 from passing if not for the moratorium.”

“We’re already at a point where it’s gone too far,” said Joanna Carr, research and policy director of the Arizona Housing Coalition. “How can we claw back what we’ve already lost?”

.peCOMMUNITY