Constitutional Amendment Needed to Allow Regulation by Cities and Towns of Short-Term Rentals

Question: In a recent column you said that if twelve Sedona homeowners wanted to prohibit Airbnb and VRBO short-term rentals in their small community of twelve homes, the twelve Sedona homeowners could form their own HOA to prohibit short-term rentals. In other words, if a group of homeowners already lives in an HOA community, or forms an HOA, the HOA can prohibit short-term rentals. If you don’t live in an HOA community, however, all of your neighbors can sell their homes to investors, and turn their homes into short-term rentals for up to 365 days a year. Why doesn’t our Arizona legislature do something to prevent a nice neighborhood from turning into a Motel 6?

Answer: If you are opposed to short-term rentals in a community, the Arizona legislature is the problem, not the solution. In response to a Town of Sedona ordinance regulating short-term rentals in Sedona, the Arizona legislature three years ago adopted SB 1350 (now A.R.S. § 9-500.39) that restricted regulation by Arizona towns and cities of short-term rentals. SB 1350, however, does not apply to HOAs that can still prohibit short-term rentals. In the future, however, the Arizona legislature could also restrict any regulation of short-term rentals by HOAs, e.g., the Arizona legislature already restricts regulation by HOAs of the display of flags such as the American flag, and of the display of real estate “for sale” signs. As to SB 1350 being repealed, one state legislator who had opposed SB 1350 said that there isn’t a “snowball’s chance” that SB 1350 will be repealed by the Arizona state legislature. Therefore, a constitutional amendment by the voters may be required to allow local communities such as Sedona and Scottsdale to regulate short-term rentals.

Note: Arizona is the only state that restricts regulation of short-term rentals by local communities. There is no rational argument that 49 other states allow local communities to regulate short-term rentals, but Arizona does not. Why then does Arizona have SB 1350? The answer will be discussed more fully in next week’s column, but the short answer is the enormous profits to investors who own short-term rental homes, and as Cyndi Lauper sang years ago, “Money changes everything….”