Paradise Valley wants to stop Airbnb’s “party houses”. It could cost him $1.6 million.

An ordinance passed earlier this year by Paradise Valley to regulate “party houses” could jeopardize $1.6 million the city receives in income tax payments after a Republican lawmaker complained that it violates state law.

Thanks to a proliferation of short-term rentals, often through companies like Airbnb and Vrbo, the city is grappling with how to regulate events and large social gatherings held in residential areas.

“This is our number one problem in Paradise Valley,” City Manager Jill Keimach told City Council Jan. 27 as it prepared to vote on an ordinance regulating short-term rentals, or STR.

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AirDNA, a company that tracks vacation rentals and other rental property information, lists 407 STRs in Paradise Valley proper. Of these rentals, 32% are large homes – they have 5 or more bedrooms and the average guest size for a rental is 10.4 people in a 3 bedroom rental.

The ordinance council unanimously passed that day does a number of things in an effort to curb what city leaders see as bad actors in the STR space, improve safety public and to target “party houses.”

The ordinance requires owners to be on site for certain events, to meet their guests within an hour of arriving at the property, to perform background checks on each guest, to provide the owner’s name and contact information to the city , to install a landline telephone, to prove that the client has read the rules and regulations established by the city, to clean the air filters every three months and more.

But in 2016, the Arizona legislature passed a bill prohibiting municipalities from enacting STR regulations except in specific circumstances. This touted by Governor Doug Ducey and other legislators at the time as stimulating the short-term rental market, although Ducey has since said lawmakers will “revisit” regulation of short-term rentals after a series of complaints from cities and towns that find themselves without a way to sue bad actors.

And it’s this 2016 STR law that poses a challenge to Paradise Valley, after Republican Senator Warren Petersen filed a complaint with the Attorney General’s office. He argues that the order violates that law because it imposes different requirements on specific STRs, has “significant” new obligations for STRs, and “increasing regulatory burdens on businesses by subjecting platforms to new compliance requirements.” liability and disclosure in violation of state and federal laws.”

The challenge is known as Complaint SB1487, named after another 2016 law that allows any lawmaker to ask the attorney general to review an action by any municipality or county if they believe that action violates the law. of State. If the Attorney General finds a violation, the offending law must be repealed or the violator loses 10% of the money they receive from state tax revenue. In the case of Paradise Valley, that would mean a loss of $1.6 million.

Critics of the Paradise Valley ordinance who spoke at the council meeting said the measure was too onerous for STR owners and went beyond what municipalities are allowed to do under current state law. This law states that municipalities are prohibited from taking actions that “significantly increase the regulatory burden on a business, unless there is a threat to the health, safety and welfare of the public. which has not been addressed by legislation or industry regulation in the proposed regulated area”. .”

What started as a legislative travesty turned into a tragedy.

– Mark Stanton, Paradise Valley Council Member

Keimach, the city manager, told council in January that Paradise Valley had worked in the legislature to fix the problem – but with a legislative solution unlikely, they were instead told to use the ‘tools’ provided to them to solve the problem. The new order is what resulted.

“These codes are intended to protect guests from short-term property rentals, as well as neighbors from short-term property rentals,” Keimach told council members, recalling the story of a party house where hundreds thousands of dollars in property damage. and no one could find the owner. Keimach argued that the new order would allow for better communication to address those issues.

The new ordinance also clearly outlines the noise complaint process and allows a police officer to file a complaint if a home is too noisy, as determined by the officer. STR owners can face fines of up to $1,500 under the new regulations.

Paradise Valley Mayor Jerry Bien-Willner said at the council meeting that the city had gone “beyond that” to get feedback from short-term rental owners and residents on the new regulations, adding that they had gone even further than what they had seen in the “Legislative Process.”

“Self-regulation, while helpful, is not enough,” Bien-Willner said, later adding that the new regulations are “not a ban on short-term rentals,” but a way to strike a “balance reasonable”.

In a short speech before testifying on the order, Bien-Willner addressed what he expected would be the incoming SB1487 complaint.

“We’ve worked extremely hard and tested them as hard as possible…to make sure we’re upholding our limited authority,” Bien-Willner said. “That doesn’t mean our revisions, if passed, will go unchallenged.”

Bien-Willner also claimed that “threats from Airbnb started coming” and began referring to the company’s litigation in other cities such as London, New York and others. He also referred to a letter he received from the company as the council and mayor were about to vote, which he called “threatening”.

The letter said Airbnb believed the order violated Arizona law and would challenge city regulations.

“The ordinance’s onerous and impractical restrictions designed to operate as a ‘de facto’ ban on short-term rental hosts are preempted by state law,” wrote John Choi, chief policy officer for Airbnb. .

The ordinance was adopted on January 27 and entered into force on February 26. Two days later, Petersen filed Complaint SB1487 with the AG.

The new ordinance was passed by council with unanimous approval, which Vice Mayor Anna Thomasson said she hasn’t seen much of her time on council. All of the council members also agreed that their main problem lies with the State Capitol.

“What started as a legislative travesty has turned into a tragedy,” Council Member Mark Stanton said.

The sentiment was echoed by colleagues, including Council member Julie Pace, who said lawmakers need to be “re-educated and they need to understand the impact” of the STR issue on local communities.

In 2021, neighbor Scottsdale has seen an increase in STRs despite the pandemic and the industry has supported more than 75,000 jobs and $500 million in tax revenue, according to a Study commissioned by Vrbo.

Republican lawmakers have tried and want to reconsider a possible repeal to the 2016 law, although multiple attempts to do so have failed.

In his letter to the AG, Petersen argues that the ordinance attempts to unlawfully prevent “party houses” by broadly defining an “event center” as any dwelling that is “used for a social gathering.” Petersen says this language could prevent two people from being in an STR at the same time, because a social gathering can be legally described as two people together.

Petersen also claims that the order attempts to obtain more information from STR owners than is authorized. under the law. Petersen did not respond to a request for comment.

Bien-Willner said in a phone interview with the Arizona Mirror that he was not surprised by the SB1487 challenge, but added that the city had done nothing outside of its legal capacity. He also mentioned Airbnb’s track record of fight against municipalities and communities who asked for settlements.

“We try to do the best we can for our citizens and residents with the tools we can and use them in good faith,” Bien-Willner said. “We’re prepared to go through the process, we’re not setting state law and we’ve tried not to break any state law and that’s a health and safety issue.”