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Control of short-term rentals must remain local

| March 8, 2023 1:00 AM

By Flathead Families For Responsible Growth

The issues surrounding short term rentals are not going away. To the contrary, the problems are increasing as STR growth explodes across the country.

Whitefish, Flathead County and the rest of Montana are not immune. Over the last year, Montana has witnessed a 32% increase in vacation rental business and is currently ranked No. 13 in the U.S. in STR occupancy, with over 10,000 listings and 2,846 in Flathead County alone.

But STRs have the potential to significantly alter our small-town feel and permanently change our way of life here. Our lawmakers must keep pace with evolving STR industry and give it thoughtful consideration, thinking beyond state-wide, one-size-fits-all solutions that remove local control. Unfortunately, that is exactly what proposed bills SB 268 and 467 are, and it’s not the answer.

These bills would exacerbate multiple issues surrounding STRs in our communities, not the least of which is affordable housing. We urge Senate members to vote against SB 268 and 467 and ask Montanans to contact their senators to request the same.

Senate Bills 268 and 467 propose to establish STRs as a residential use of a property. This means that STRs would be allowed in every zoning district in Whitefish and in all towns and cities across the state that are zoned residential, even if currently prohibited by HOAs. Whitefish would no longer be limited to the 5-6 areas currently zoned for STRs, which is of primary concern to us.

As proposed, SB 268 and 467 benefits a minority of individual property owners and investors engaged in VRBOs/Airbnb’s. However, the rest of us will have to live with the consequences of fewer long-term rentals and affordable housing options, which will worsen the already critical shortage of worker housing.

This will be especially true in communities like Whitefish where tourist demand fuels the conversion of existing housing stock into STRs.

Past arguments in favor of STR residential classification have focused on what is being done on premises, not how long. This interpretation concludes that STRs are being used for ordinary living purposes such as sleeping and eating, which is consistent with the definition of “residential purpose.” If so, hotel use could also be considered a residential purpose. A more reasonable interpretation would hold that STRs with a rental period of 30 days or less amount to hotel use, and thus are commercial in nature.

Further, how can STRs be considered residential and not commercial when they are required to be permitted, often inspected and must collect and pay hotel lodging taxes? Such an approach would be inconsistent and haphazard. STRs must be defined as lodging/commercial-use businesses, which would prohibit them from residential areas not zoned for STRs.

Sen. Greg Hertz says that he has not seen any studies providing evidence that STRs negatively impact the availability and affordability of workforce housing. Clearly, he is not looking hard enough.

The state of Montana may not have commissioned such a study. But there are plenty of studies across the country that assess the impact of STRs on housing prices and rent. Several reputable organizations, such as the Pew Charitable Trusts and the Harvard Business Review, have conducted or published research showing definitively that as the number of a community’s STRs increase, the quantity of affordable housing units decreases.

Affordable housing impacts caused by the conversion of long-term housing to STR use are such a concern that in December 2021, Aspen, Colo. took the dramatic step of enacting a one-year STR moratorium. Aspen used that time to create a new framework of ordinances supported by management technology with the intent of lowering the negative effects of STRs (results of the city’s work have not yet been announced).

Senator Hertz also believes that SB 268 will give local workers the ability to purchase a home and perhaps use an accessory studio on the property as an STR to help them pay for the property. If so, (perhaps this should be part of a state-sponsored study) as long as that property owner can rent that accessory studio as an STR for a premium over long-term rent rates, it effectively reduces the availability of affordable housing.

SB 268 makes no effort to address the tourism/STR conundrum, but rather fuels a catch-22: The more STRs, the more dollars from the hotel tax collected from STRs can be spent on tourism, which attracts more STRs. However, at the same time, there is even less affordable housing needed to support the growth in tourism.

Perhaps the lawmakers should explore increasing the lodging facility use tax and/or changing the property tax to a commercial rate on STRs, as other resort communities across the country have done. Those funds could be redirected to support affordable housing and local STR enforcement, which is woefully inadequate in Flathead County.

SB 268 and 467 are an ineffective legislative approach that benefits only STR owners and does nothing to protect the property rights and character of our community.

We need to do better!

Flathead Families for Responsible Growth board members include Jeffry Allen, Carol Balliet Atkinson, Brad Bulkley, John Collins, Murray Craven, Richard Hildner, Carolyn Pitman, Cameron Blake and Connie Cermak.