New Arizona Law Regulating Short-Term Rentals

Question: My husband and I are both retiring this year. We want to buy an expensive condominium in north Scottsdale and convert our Tempe home near ASU into a short-term rental (“STR”). We need the STR income from our Tempe home to fund our retirement. We have been reading that a new Arizona law allows STR owners to be fined, and that STR owners can have their STR license suspended for repeated violations. Am I correct?

Answer: Yes. There is new STR legislation, ARS § 9-500.39, effective September 24, 2022, that basically provides as follows:

1. Cities/Towns can impose a civil penalty of up to $1,000 against a STR owner, if the STR owner fails to provide the required STR contact information to the City/Town.
2. STR owners can be fined by the City/Town for violations of City/Town regulations. The fines can be up to $3,500 for three violations within twelve months.
3. The Arizona Department of Revenue can suspend the STR owner’s transaction privilege license if there are three violations of City/Town regulations within twelve months.
4. STR owners must have liability insurance of at least $500,000.

This new legislation was supported by both the STR industry and Cities/Towns. Although there may be some “tinkering” with STR legislation in the future, the “battle is over” between the STR industry and Cities/Towns.

By way of background, after the Arizona legislature in 2016 prohibited Cities/Towns from basically any regulation of a STR, a fierce battle raged between the Cities/Towns and the STR industry. Under this new 2022 STR legislation, however, the Cities/Towns now have some significant regulatory remedies for “bad” STR, and the STR industry has recognized that profitability has to be tempered by responsibility.

Bottom line: If you and your husband are responsible STR owners, the new STR legislation should not affect your STR income from your Tempe home.