Phoenix passes new short-term rental regulations, but with little hope it will help

Nightmare stories like those of Sarah Lauterbach prompted Phoenix to crack down on short-term rentals Wednesday, when the City Council unanimously adopted a sweeping range of new regulations, although even supporters said the changes won't do enough.

The new rules take effect Nov. 6.

For Phoenix resident Lauterbach, being forced awake at 2:30 a.m. in late August from loud music and partying wasn't a surprise.

It was a Thursday, and since the house behind hers had been converted into a short-term rental three years prior, she and her husband had grown accustomed to nighttime disruptions every Thursday through Sunday.

But waking up to the sound of 11 gunshots, fired in rapid succession, was a different story. Lauterbach said she, her husband and 8-year-old daughter woke up to the noise just before 5 a.m. on Saturday, Aug. 26.

The shots were followed by individuals moaning in pain and cars speeding off. Lauterbach's daughter, a third grader, didn't want to leave the house for a week. It was "traumatic," Lauterbach said.

The incident, which was reported by AZ Family at the time, was the worst experience Lauterbach's family had with the short-term rental, but not the only one. She's also dealt with men urinating over the wall into her backyard, partiers throwing beer cans, and intensely bright lights shining into her property, she said.

The short-term rental, near Tatum Boulevard and Bell Road, sits on the border of Phoenix and Scottsdale. It's ideal for parties. The website listing shows the backyard has a big pool, fire pit, mixed-use basketball and pickleball court and even a putting green.

DJs blasting music all night long and crowds of what look like college-aged kids have become the norm, Lauterbach said.

It's a story Lauterbach's Phoenix City Council representative Jim Waring knows all too well. And he's sympathetic, he told The Arizona Republic. He's had his own share of similar problems, most recently when police banged on his door to tell him four individuals staying at the short-term rental next door had illegally trampled through his backyard.

Stories like these are why Phoenix City Council approved new short-term rental regulations Wednesday.

The regulations will impose financial penalties on property owners who fail to permit their properties or break short-term rental rules. The city will also require short-term rental platforms, such as AirBNB or VRBO, to require properties to be properly permitted by the city before they can be advertised.

The ordinance comes a year after the state legislature loosened restrictions on cities' abilities to regulate short-term rentals, allowing them to adopt a permitting process.

Applications for short-term rental permits in Phoenix will open Oct. 26 and enforcement of the policy starts Jan. 15, 2024.

But city officials warned the public Wednesday not to expect a significant improvement in short-term rental woes. State law still significantly restricts cities' regulation powers, Deputy City Manager Alan Stephenson told the council.

"Constraints put on the permit process are not likely to result in a number of things we have heard from residents about their complaints regarding short-term rentals," Stephenson said.

Even Mayor Kate Gallego's celebration was tepid.

Gallego said the city repeatedly hears from residents about how short-term rentals undermine quality of life.

"With today's vote, the city intends to maximize the limited tools the state legislature has allowed us to use to regulate short-term rentals," she said.

What the new short-term rental ordinance does

Phoenix codes before Wednesday's vote only required short-term rental owners to register their properties with the city and provide emergency contact information.

The new codes will replace the process for registration with one establishing new permits.

The new codes will:

• Create a permitting and licensing system, in which applicants must meet certain standards to receive the license to operate. The city must approve or deny the applications within seven days.

• Allow the city to charge $250 for the permitting, licensing and renewal processes.

• Allow the city to charge a fee up to $1,000 per month for property owners who fail to register their short-term rentals.

• Allow the city to charge:

  • a $500 civil penalty for the first violation committed by a short-term rental property,

  • a $1,000 penalty for the second violation within 12 months, and,

  • a $3,500 penalty for the third and subsequent violations within 12 months.

• Allow the city to suspend short-term rental permits if the owner has three violations within 12 months.

• Require short-term rental platforms to ensure properties are properly permitted before they can be listed on the platform. Failure to comply could result in a daily $2,500 fine.

• Require short-term rental owners to carry $500,000 liability insurance, provide emergency contact information to the city, provide notice to neighbors of their intent to operate and conduct background checks on renters.

• Require short-term rental owners to undergo a criminal background check to ensure they are not convicted felons or sex offenders.

• Require short-term rental owners to conduct sex offender checks on renters.

• Require short-term rental owners to send notices to neighboring properties, homeowners associations and neighborhood associations within 600 feet of their intent to operate.

• Create a mechanism for short-term rental owners to appeal city rejections, non-renewals or suspensions of licenses.

State law requires the city to accept or reject permit applications within seven days.

Lauterbach sees the new ordinance as a positive step in the right direction, but she's skeptical it will do much to solve the problem. Councilman Waring feels the same.

In Waring's view, the ordinance is as strong as it can be given state laws that restrict cities' abilities to regulate short-term rentals and the city's staffing capacity to enforce regulations.

In 2016, former Gov. Doug Ducey signed a law that prevented cities from banning short-term rentals and required them to treat short-term rentals the same as long-term rentals.

After residents across the state began sounding the alarm over troublesome properties, the legislature in 2022 loosened the restriction on cities, allowing them to create a permitting and licensing process.

But, Waring pointed out, the city still cannot prevent short-term rentals or even saturation of short-term rentals within one neighborhood, which is a problem he said his district is experiencing.

The city still is struggling to adequately staff its city departments, which makes enforcement harder, he added.

Residents call on Phoenix to strengthen the rules, lead the Valley

Resident Katie Bauer has been advocating for short-term rental regulations, mostly at the state level, since 2016.

She's "content" with the new ordinance and "glad they're finally doing something," but said she wonders why Phoenix, as the biggest city in the Valley, hasn't been leading the way on short-term rental regulations.

Phoenix joined a handful of other cities that had already strengthened short-term rental rules since 2022, including Glendale and Scottsdale.

Bauer, along with 11 other neighborhood leaders across the city, sent a letter to City Council Monday asking for improvements to the ordinance.

Many of the requests were adopted, such as strengthening notification requirements to include notices be sent to neighborhood associations and HOAs, rather than just neighboring properties.

The 12 neighborhood leaders who make up the Neighborhood Coalition of Greater Phoenix also advocated for "verified listings," the provision that requires platforms to ensure properties are properly permitted before they can be advertised.

Councilwoman Debra Stark added the verified listings provision at the last minute, just before the council approved the ordinance.

However the coalition was not successful in getting the council to adopt all the changes it said would add teeth to the ordinance.

Petitioners also wanted to specify a maximum occupancy per livable room, which would cap the number of guests at a short-term rental. Stephenson, the deputy city manager, said the city couldn't legally do that.

The coalition also advocated for requiring short-term rental properties to hang front- and rear-yard cameras to document potentially illegal activity. The suggestion was not discussed Wednesday.

Reporter Taylor Seely covers Phoenix for The Arizona Republic / azcentral.com. Reach her at tseely@arizonarepublic.com or by phone at 480-476-6116.

This article originally appeared on Arizona Republic: Phoenix passes new short term rental regulations, but concern remains