Arizona Bill Stopping Cities From Banning Vacation Rentals Heads to Governor

Last week, the Arizona State House of Reprsentatives approved a bill, SB 1350, that would prevent Arizona cities and counties from banning short-term rentals and sets up rules for collecting taxes from platforms like Airbnb, HomeAway, FlipKey, and the like, essentially legalizing short-term rentals throughout the state.

The bill, which was already approved by the state senate, is just one signature away from being signed into law by Arizona Governor Doug Ducey, a noted champion of pro-sharing economy legislation.

Once Ducey signs off on the bill, which he is expected to do so, cities and counties in Arizona will not be able to ban short-term rentals or vacation rentals, but they can regulate them in certain cases where issues of public health and safety, noise/nuisance, and the operation of “adult-oriented businesses.”

The law also puts into place a tax collection structure by which taxes collected from short-terms rentals will go toward a Hospitality Studies Scholarship Fund. Under SB 1350, platforms like Airbnb can register with the state and local jurisdictions to collect taxes from their hosts and guests and remit them.

Proponents of short-term rentals, such as the Travel Technology Association, a trade group of online travel companies, are applauding the bill.

“Rather than assuming outdated regulatory approaches are adequate for short-term rentals, Arizona policymakers proved forward-looking,” Matt Kiessling, short-term rental policy lead for the Travel Technology Association said in a statement. “By recognizing that regulatory predictability encourages innovation, improves the local economy, and solidifies tax revenue, Arizona has set itself apart as a leader in smart, common-sense policymaking regarding the peer-to-peer economy.”

Not surprisingly, trade groups associated with the hotel industry, including the American Hotel & Lodging Association (AH&LA) are not pleased with the passage of the bill. In a letter sent to Gov. Ducey by AH&LA President Katherine Lugar, Lugar cited recent research conducted by Penn State’s School of Hospitality (and commissioned by AH&LA) showing that 85% percent of Airbnb hosts in the Phoenix metro area are essentially commercial operators, and she added the following:

“Knowing these facts, the current legislation does not go far enough to combat commercial hosts, and does not make a distinction between true ‘home sharing’ versus commercial lodging operators,” Lugar wrote. “Addressing the rapidly growing issue of commercial operators who run illegal hotels is necessary to provide a truly level and legal playing field among Arizona businesses and to protect our communities.” She urged the governor to reconsider signing the bill.

How SB 1350 Compares to Similar Short-Term Rental Laws

Arizona’s SB 1350 is similar to legislation that was passed in 2011 in the state of Florida where vacation rentals have long been popular with travelers visiting the state. That 2011 law prohibits local governments from regulating and restricting vacation rentals, including restricting the duration or frequency of rentals. However, any regulations throughout the state that were established prior to 2011 still apply.

That’s why, in certain cities, there’s been a bit of push back against the 2011 law, and some cities have begun instituting some regulations. In August 2015, Fort Lauderdale passed an ordinance that allows the city to regulate vacation rentals that aren’t timeshares, and requires property owners to be officially registered with the city, as well as pass a maintenance and life safety inspection in order to operate a vacation rental.

In April 2015, the Monroe County Tourist Development Council in the Florida Keys released a report pointing out that Airbnb hasn’t been collecting the appropriate sales and county bed taxes on behalf of its hosts, and asking for local governments to require that Airbnb collect the taxes. Monroe County, similar to Fort Lauderdale, requires rental licenses and permits for vacation rentals.

While Arizona’s SB 1350 does allow cities to, in some minor ways, regulate short-term rentals in their local jurisdictions with regard to public health and safety, it does not allow them to ask online platforms like Airbnb for any specific information about who’s using the platforms to host guests.

Essentially, once a platform like Airbnb or HomeAway registers with the state as an “online lodging marketplace,” those businesses are not required by law to provide any information about its listings or hosts, making it extremely difficult for local governments to go after illegal, commercial operators on those platforms.

This is a reason why new short-term rental legislation proposed in Los Angeles is requiring Airbnb and similar business to have to provide information about who is listing on their platforms, and where they are operating.

Going forward, it’ll be interesting to see how local cities throughout the state respond to the new law, and to what lengths they can actually go to in order to regulate short-term rentals.