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City council considers regulation of short-term rentals or ‘Airbnb’ type units

Mountain Home City Council proposed regulations on short-term rentals commonly found listed on services like Airbnb and VRBO this past Thursday, June 23.

Mayor Hillrey Adams stated that one of the reasons this came about was to ‘level the playing field’ since hotels within city limits collects an ‘A and P’ tax, or an advertising and promotion tax, and pays for a business license.

“Somewhere in the middle here is what we’re trying to get to, see if we can level that field. And we also need to know where these places are at,” said Mayor Adams.

A quick look on Airbnb’s website shows not all units advertised within the city of Mountain Home limits appear to be collecting the advertising and promotion tax.

Discussions were murky on the legality of regulating short term rentals designed for these services after a member of the public, Joey Peglar, brought up the Arkansas State Supreme Court’s 2018 decision deeming private residences that are rented short-term as non-commercial businesses.

“The Arkansas Supreme Court has already taken action on this in 2018 and deemed vacation rentals not commercial business,” said Peglar.

Peglar, a local realtor in the area, owns and operates several short-term rentals in the City of Cotter.

“I’ve had thousands of people over 14 years, and I’ve never had a problem,” said Peglar. “I can tell you what it does for that small house that might be run down that’s sitting next to a neighbor that maybe it’s been a rental for a year or two years at a time that has some, not so nice people in it, that don’t take care of their yard– it changes that, and it brings up the property value.”

Questions and confusion arose on how Mountain Home would regulate the rentals, ensure safety and what would be fair.

Airbnb currently does not require hosts to obtain additional liability insurance or a short-term renter’s policy, so it’s up the local municipality to enforce.

In Spring of 2021, the City of Fayetteville, Arkansas began requiring hosts 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.

Concerns were also raised about short-term rentals attracting bad apples and party-goers to otherwise peaceful and quiet neighborhoods.

Rental companies have made strides to restrict party behavior. On Tuesday, June 28, Airbnb announced that the 16-guest limit that was imposed due to COVID-19 is now permanent, an effort to prevent house parties from occurring.

“We believe there is a direct correlation between our implementation of the policy in August 2020 and a 44% year-over-year drop in the rate of party reports,” the company said in a written statement. “The ban has been well received by our Host community and we’ve received positive feedback from community leaders and elected officials. As we build on this momentum, we believe the time is right to codify this policy.”

Peglar said he has not personally seen parties and claimed that typically ‘what you see are ranch style homes’ up for rent.

“I personally don’t see that, but maybe someone else has a different perspective,” Peglar said.

Airbnb currently has a number of anti-party measure to stop unauthorized parties. These include anti-party reservation prevention, special holiday anti-party measures, a 24-hour safety line, our Neighborhood Support Line, and a partnership with Vrbo, a competing rental company, to share information on repeat “party house” offenders in the US.

In other Council news, the ordinance to regulate ‘rubbish’, weeds and grass length was adopted in a unanimous vote without further discussion.

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