PRESCOTT – Some Northern Arizona mayors attribute a host of problems affecting their cities to a 2016 law preventing them from regulating short-term rentals.
They are asking state legislators to return local control to cities so they can create rules that suit their individual needs. The law, signed by Gov. Doug Ducey, stripped Arizona municipalities of the power to prohibit vacation rentals.
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At a forum in February, mayors from several northern Arizona counties discussed the impact of short-term rentals. They blamed the law for a variety of issues, including workforce recruitment struggles, lower school retention rates, higher housing costs and neighborhood disruptions.
They said the law has caused a rapid increase in short-term rental properties in northern Arizona towns with large tourist industries.
“Our residents have property rights just like the owners of those mini-hotels, and yet the state legislators turned a blind eye to the very folks that came to Arizona and invested in a home,” said Sedona Mayor Scott Jablow.
Lake Havasu City Mayor Cal Sheehy said that, unlike other areas that recently faced restrictions on short-term rentals, his city has had a long history with vacation rentals because of its proximity to Lake Havasu and the Colorado River. He believes that giving local governments the ability to manage short-term rentals could resolve many of the issues.
“Lake Havasu City has had short-term rentals since the 1970s, so it has always been a part of our market mix and we have had the ability to control it at the local level,” Sheehy said. “When we had that control, we were able to carefully balance the impacts of short-term rentals, and having neighbors in neighborhoods, and allowing our neighbors to be able to sleep at night.”
The rapid increase of short-term rentals in the Sedona area has affected not just current residents’ sense of community but has limited expansion in industries like health care and education, Jablow said.
“Over the last few years, Northern Arizona Healthcare has been impacted by a shortage of housing,” he said. ”Unfortunately, the NHA has lost a wide variety of candidates due to the relatively high cost and even unavailability of housing.”
Schools in northern Arizona are losing students due to the lack of housing that short-term rentals have created, Jablow said.
“The state pays school districts about $5,000 per year per student. When they lose those students, they lose that funding and there’s no way to make it up,” he said.
Prescott Mayor Phil Goode said a 60% increase in short-term rental properties in Prescott over the past five years has generated $25 million in economic activity.
However, he said the growth has placed a strain on city resources, as public safety departments are often redirected to handle neighborhood complaints about noise and trash. Those are resources that could be allocated elsewhere.
“I think it’s valuable to have some of that income generation … but at a certain point they start to become problematic,” he said.
Jablow said neighborhoods without homeowners associations have not been able to limit the number of short-term rentals. Since 2020, these neighborhoods are becoming overrun with them, including his own.
“These are not neighborhoods, they are mini-hotels,” he said.
He cited one neighborhood that had eight short-term rentals, all next to each other.
“Would you want to live next to that? Would you consider that to be a neighborhood? I wouldn’t,” Jablow said.
As a result, he said, permanent residents are frustrated with the lack of community.
“When people move to a neighborhood, they expect to have neighbors,” Jablow said.
Several bills were introduced in the current legislative session that would have limited short-term rental growth, but none of the bills were heard and the issue is considered dead for this year.
Christy Walker, a Phoenix area real estate broker and short-term rental owner, isn’t so sure rentals are the real cause of cities’ financial issues or that a lack of neighbors is all that important to residents.
Limiting rentals could potentially fix some of the housing issues discussed by the mayors, but it would then negatively affect city revenue, she said.
“The more you limit the economy and the availability of them (short-term rentals), the higher the rates go for people visiting, and so that creates a whole different set of problems,” she said.
Walker said many short-term rentals are second homes used by owners to subsidize expenses or help them plan for their retirement.
“I don’t know that those people should be limited from being able to have their expenses offset by renting it out temporarily,” she said. Walker’s own short-term rental property in the Phoenix area was initially a long-term rental, but it became a source of conflict in the neighborhood.
She said her last tenant caused more than $50,000 in damages and created so many issues that the HOA granted Walker special permission to convert the property into a short-term rental.
“It’s become a lifeline for the community,” Walker said. “We have neighbors now that thank us for changing it. … They appreciate the fact that it’s just a simple house where families come to enjoy a few days to relax and enjoy a vacation.”
