City concerned over bills relaxing regs on short-term rentals, ADUs

The Whitefish City Council held a special meeting Monday, April 10, to discuss what action to take on two senate bills that could potentially hinder workforce housing efforts in Whitefish; the bills will both be addressed in the Montana Legislature this week.

The bills, SB 268 and SB 528, were both introduced by Sen. Greg Hertz, R-Polson. The first concerns short-term rental laws, allowing them to be operated with little to no regulation, and the second bill revises laws concerning accessory dwelling units (ADUs), proposing changes that are contrary to recent regulations the City of Whitefish painstakingly crafted to encourage more affordable housing.

“The concern we have… is that in Whitefish we are unique and we have a very high number of short-term rentals, and with additional ADUs being out there, by right without owner-occupancy requirements, they will potentially just turn into (more) short-term rentals,” Whitefish City Manager Dana Smith said during the meeting.

“The call for action is of the public in Whitefish, the people that are going to be individually impacted from both of these bills,” Smith added.

Both bills take away local government control of short-term rentals and accessory dwelling units and requests by city officials to have Whitefish excluded from these bills due to the special nature of the extremely popular resort town, fell on deaf ears.

The city says that while an extra revenue stream may be enjoyed by a handful of people via short-term rentals, these bills impede Whitefish’s ability to solve its own problems, especially with regard to housing.

Whitefish resident Richard Hildner was one of six citizens who spoke during the public comment portion of the meeting.

“These two bills… do nothing to relieve the critical shortage of affordable workforce housing, they erode the ability of our local officials to make local decisions that affect our community,” Hildner said. “The City of Whitefish community should, aggressively as possible, oppose both SB 268 and SB 528.”

Another resident Rhonda Fitzgerald, who is also an owner of the Garden Wall Inn, noted that during the hearing, Sen. Hertz said the League of Cities and Towns supported his bill but they do not support it. She said if they once did, they don’t any longer.

She said a short-term rental is a hotel use in a residential neighborhood.

“Hotels have managers for a reason,” Fitzgerald said. “These would be unsupervised hotel uses scattered all through the neighborhoods and I think it would be a tremendously huge law enforcement issue.”

SB 268 REVISES short-term rental laws and establishes that a short-term rental is a residential use of property rather than a commercial use. Short-term rentals would be permissible unless expressly prohibited in zoning, however, zoning could not prohibit the short-term rental of a property owner’s primary residence or a property adjacent to that residence.

Property owners would be allowed to use both their primary residence and their ADU as short-term rentals, providing the owner resides in the primary residence for at least seven months a year. The state leaves the responsibility of enforcing the residency requirement to each individual city.

“Trying to prove someone was a resident for seven months is just going to be an enforcement nightmare,” said Whitefish City Attorney Angela Jacobs.

Councilor Rebecca Norton commented that short-term rental owners pay bed tax, in Whitefish they pay resort tax, and they have to report the income from the short-term rentals on their income tax.

“On SB 268, it says the main premise is that it is not commercial property which I find really shocking,” she said. “How is this even allowed to go through the legislature and redefine what something is when it’s had long-standing use as commercial property?

“We have a dire housing crisis and it’s not only affecting businesses, it’s affecting families,” Norton added. “So to have this imposed on us as well is adding fuel to the fire we’ve been trying to control for a long time.”

Councilor Ben Davis asked who was supporting the bill and why they think it is a good idea.

“My understanding is that both bills are being supported by the realtor’s association and Airbnb and VRBO,” answered Smith. “That’s the main push for it.”

Citizens for a Better Flathead, a local nonprofit that fosters citizen participation and advocates for sustainable solutions for the valley, explained the bill in a statement, writing, “SB 268 will allow every homeowner in every town in Montana to rent out both their home and a backyard dwelling unit on Airbnb or VRBO. Under SB 268, there is no requirement that the homeowner be in the home. Vacationers as renters will come into your neighborhood and transform it from a quiet street to an ongoing stream of out-of-town guests, in and out of multiple houses.”

An amendment to the bill also passed that would grandfather in short-term rentals that are already operating. SB 268 was passed by the committee and the Senate and it is up for second reading on Wednesday, April 12 on the House floor.

THE OTHER concerning bill, SB 528, requires municipalities to adopt certain regulations regarding ADUs and prohibit others. It allows one ADU by right on a single-family lot and the ADU can have a maximum size of 1,000 square feet and a maximum height of 35 feet.

The bill requires no parking for an ADU, no owner occupancy requirement, nor does it require the builder to pay impact fees for ADU construction.

Currently in Whitefish, the maximum size of an ADU is 800 square feet if it is deed restricted as affordable for at least five years. Other ADUs in Whitefish have a 600-square-foot size limit and a height limit of 26 feet.

Additionally, Whitefish requires one parking spot per ADU, unless deed restricted, and does charge impact fees for all residential construction. Whitefish’s new ADU requirements are meant to encourage homeowners to build affordable, long-term rental units.

“Cities cannot, under SB 528, require any parking, require the owner to live in the main house, require the owner to pay their fair share for impacts to water and other city services, or that the unit match the house in design or materials,” wrote Citizens for a Better Flathead.

Councilor Giuseppe Caltabiano described SB 528 as “top-down forcing (of) regulations” and he finds it contradictory with other bills and with the way layers of power in the government are meant to operate.

“If they tell us how to use land then what’s the point of us working toward a growth plan,” Caltabiano said. “Senate Bill 528 needs to be opposed… on principle.”

Smith said the legislature is tired of hearing from the cities and hearing from the people who live in Whitefish would be more effective. The city is encouraging residents to send comments to their representatives and/or participate in the hearing.

For SB 528 (ADU), a hearing in the House Local Government Committee is scheduled on Thursday, April 13 at 3 p.m. For SB 268, the hearing in the House for the second reading is on Wednesday, April 12.

The Legislature's remote participation portal is at leg.mt.gov/session/have-your-say. Participants can register to testify remotely and upload comments on bills. Participants must be registered by 5 p.m. the business day before a bill is scheduled for a committee hearing.

To find and contact your representative(s), visit https://leg.mt.gov/legislator-lookup/.