Especially with the prevalence of short-term rental platforms like Airbnb and Vrbo, single-family rental homes in Greater Phoenix are a great example of the intersection between residential and commercial real estate.In fact, many commercial investors have entered the single-family home sector because of its value and are successfully managing large portfolios of rental homes.
But the success of the short-term rental (STR) model is not without criticism due to more serious issues such as loud parties, trash, parking, and a recent shooting at a Scottsdale property. A new law, Senate Bill 1168, passed in July and takes effect in September, seeks to allow vacation home renters to profit from the revenue while limiting the negative impact on local communities. (Note that home sharing is also boosting Arizona's bottom line: Airbnb alone generated $87 million in tax revenue from 2017 to 2020.)
This isn't the first law regarding short-term rentals at the state or city level. The new law represents a significant change from a 2016 law that prohibited cities from regulating STRs differently from long-term rentals, but it maintains the original overriding law that prohibits cities from banning or restricting short-term rentals in their jurisdictions. In 2019, a law was enacted that allows cities to limit rentals to lodging only, prohibit events that require permits, such as weddings, and impose heavy fines on repeat violators.
How Arizona's short-term rental rules are changing
Source: https://www.airdna.co/vacation-rental-data/app/us/arizona/phoenix/overview
Whether you have long-term plans to offer your home as a vacation rental or want to take advantage of visitors coming to the 2023 Super Bowl, the Phoenix WM Open, or MLB Spring Training, you'll want to pay attention to how the city adopts new regulations. At a glance, here are the upcoming changes:
Operators must possess local licenses, permits, contact information, and proof of compliance with tax and other laws and regulations. Contact and other information for nearby single-family homes must be provided. New fines for violations and a three-strike rule regarding license suspension after three or more health and safety violations within a 12-month period apply. More serious violations, such as felonies, wrongful death, and intentionally harboring a sex offender, can result in immediate suspension or revocation. Must maintain liability insurance of at least $500,000 or operate through an online rental platform that offers similar coverage.
The future of vacation rentals
Municipalities with thriving short-term rental markets, such as Scottsdale, Phoenix, Sedona, Flagstaff and Lake Havasu City, are expected to be pioneers in enacting new ordinances. Glendale, home of the Super Bowl, may add to a new ordinance it enacted in May that would require short-term rentals to provide contact information to the city and prohibit retail and adult businesses from operating. Sedona, where about 1,000 of its 6,600 homes are used for short-term rentals, launched a program in August to offer up to $10,000 to property owners who remove their properties from the STR platform and instead offer long-term rentals to local workers.
Even with the new law in place, opposition to Airbnb, Vrbo and other STR entities will undoubtedly continue in the Arizona Valley region and other parts of Arizona. Some would like to see caps put on vacation rentals in the future, such as limiting investor-owners or restricting the number of guests who can stay at a property. While SB 1168 should help curb abuses by “bad actors” in the vacation rental industry, housing costs remain high and housing supply remains historically low.
Contact us to learn more about Arizona rental properties
To learn more about rental properties in Arizona, contact ROI Properties.
Contact us today to help you find the perfect rental property or help you sell your existing property for the highest and best price. [email protected] or call 602-319-1326.