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City Attorney recommends reworking proposed short-term rental ordinance

City Attorney Roger Morgan recommended to draft new and different language for the City of Mountain Home’s proposed short-term rental ordinance.

“I’m not a real big fan of not allowing them in R-1 zoning unless you come before and get a special variance,” said Morgan. “There’s been mention of this court case–  the court case doesn’t really deal with what y’all are doing. That deals with protected covenants within a subdivision. It is not a city trying to regulate.”

The ordinance, which had its second reading this past Thursday, prohibits short-term rentals in R-1 residential areas, effectively banning them. The Arkansas State Supreme Court’s 2018 decision deemed private residences that are rented short-term as non-commercial businesses.

“While there hasn’t been a case through the Arkansas Supreme Court that comes down and says a city can’t regulate; I think it’s probably challengeable if you try to outlaw them in specific districts,” said Morgan.

Morgan suggested some ‘simple regulation’ ensuring the City knows where each short-term rental is, make certain they are paying the sales tax like other lodgings, and potentially requiring a safety inspection which he says isn’t necessarily a bad idea.

City Council expressed their intention to let the current proposed ordinance die after its third reading, while Morgan drafts a new proposed ordinance based on what other cities in Arkansas are doing.

In Spring of 2021, the City of Fayetteville, Arkansas began requiring hosts, or short-term rental operators, to obtain a permit and also established “density caps” on how many short-term rentals can operate in a multifamily building and in the city as a whole via zoning. Fayetteville does require proof of vacation rental or short-term rental insurance coverage, as well as proof of ownership.

Hosts in Fayetteville must also submit to a building inspection, ensuring a 16-point safety check.

In an effort to conserve permanent housing in Fayetteville, their ordinance states that no more than 2% of the city’s residential units may be short-term rentals unoccupied by a permanent resident, or what they deem a “Type 2” rental. “Type 1” rentals still have a full-time residency where the owner or occupant may rent out a room in their home.

Ordinances for major municipalities to the West of Mountain Home may seem over-the-top and consume a lot of city resources when compared to big cities to the East such as Memphis.

The City of Memphis, Tennessee took a different and more direct approach and reached out to short-term rental companies like Airbnb and VRBO for information. Both companies now share data of all rental properties and their hosts within city limits. No business license or building inspection is required.

Additionally, Memphis’ hotel tax is collected from the renter automatically, with Airbnb making automatic monthly deposits to the City of Memphis for all tax collected for that period.

“The public has a right to know, I mean, if my neighbor is renting out a short-term rental, I’d like to know,” said City Councilman Jim Bodenhamer. “I’m not against it, I just want some regulation.”

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