Hobbs offers no plan to deal with her concerns about vacation rental properties

PHOENIX — Gov. Katie Hobbs said Thursday she has no solution to the problem of available housing being converted into vacation rentals, nor to deal with out-of-state investors snapping up homes that might otherwise go to Arizona residents.

Her comments came two days after she signed legislation requiring cities of more than 75,000 population to allow owners of single-family homes to build at least two “accessory dwelling units’’ on their properties, or three on larger lots.

Hobbs, in signing House Bill 2720, also agreed to a provision that forbids local officials from saying owners can’t use the new “casitas’’ for vacation rentals, despite objections of city officials who said that undermines the stated goal of creating more affordable housing.

The Democratic governor, in a prepared statement explaining her decision to sign the bill, acknowledged there is a need to “work together to address short-term rentals that displace long-term community residents.’’ Also needed, she said, is to “crack down on speculation by out-of-state real estate investors that drives up the cost of housing for Arizonans.’’

But Hobbs, after a ribbon-cutting ceremony Thursday at a new Phoenix complex for renters of limited means, deflected reporters’ questions about what she intends to do about all that.

“I think the plan is much bigger than the casita issue,’’ she said, while noting that Arizonans continue to ask for answers.

“Everywhere I go, communities across the state, when we talk about affordable housing, the short-term rental issue comes up, whether it’s the fact that out-of-state investors are coming in and buying up housing stock for short-term rentals. It’s a problem, obviously, (along with) the ability of cities to regulate as well,” Hobbs said.

And her idea? “We’re working on a plan,’’ Hobbs said. “You’ll hear more about that in the coming months.’’

The governor acknowledged this isn’t a new problem. It arose in 2016 when Republican Gov. Doug Ducey, her predecessor, signed legislation stripping cities of their rights to regulate short-term rentals.

And it has become more acute in some communities, to the point where 15% of the housing stock in Sedona is short-term rentals and the city has a plan to let local employees who cannot afford to live in town sleep in parking lots.

But Hobbs, who took office in January 2023, had no answer to what she has done other than to say she’s studying it.

“None of these issues started overnight,’’ she said. “And we’re not going to fix them overnight. I have a few more years — hopefully, more than that — and we have a lot of things to tackle. This is definitely on the list.’’

Airbnb lobbying

All this dates back to extensive lobbying in 2016 by Airbnb, a company that arranges, for a fee, short-term rentals through its internet application. The firm sold that year’s Arizona measure as a way of helping homeowners meet their bills by renting out unused bedrooms.

Ducey bought into the pitch. “For thousands of hardworking citizens, opening up their home to out-of-state guests provides the financial breathing room they need to provide for their family or enjoy an extra expense that they otherwise couldn’t afford,” he said at the time.

But it was obvious from the start that the law covered more than those renting out a bedroom, or even their whole home.

There is no limit on the number of properties an investor can buy and days a home can be rented out, all in the same residential area, potentially turning the whole area into a vacation rental zone. Ducey brushed aside questions of whether that could change the character of neighborhoods.

“I’m not going to answer these hypotheticals,’’ he said at the time.

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Those “hypotheticals’’ soon became reality, to the point where Ducey admitted three years later that the idea didn’t exactly work out as predicted.

“I think there were some unintended consequences in a law that had the best of intentions,’’ he said in 2019. “It does appear in the situation of Airbnb and other organizations that we have some people out there that are doing some things that are disruptive to communities.’’

By that point, however, the industry had marshaled enough support to repeatedly block any repeal or major changes to the 2016 law.

Some cities urged veto

This year, Senate President Warren Petersen, R-Gilbert, said he would not support any requirements that any rentals of the new casitas that can be built must be long-term, saying how homeowners use them is a matter of private property rights.

The bill Hobbs signed earlier this week mandates that cities of more than 75,000 allow accessory dwelling units and bars them from requiring they be reserved for long-term rentals to local residents. Lawmakers did add a requirement that the owner of any new casitas actually live on the property.

None of that affects Sedona, as it is below the 75,000 population threshold. But other cities were not happy with the legislation and urged the governor to veto it.

“The stated intent behind this measure is to address the affordable housing crisis,’’ but this “will not make a dent” in the problem, wrote Scottsdale Mayor David Ortega and other members of the city council.

They also pointed out that Scottsdale already has more than 4,000 short-term rentals. “We know this bill will add to that total,’’ they wrote. “More noise, more trash, and more complaints from long-term residents.’’

And a city didn’t have to be immediately affected for its elected officials to express concern. Casa Grande, at 63,73 population last year according to U.S. Census figures, has grown 17% in three years. Mayor Craig McFarland has issues with pieces of the bill.

For example, he said, what are billed as accessory dwelling units actually could be larger or taller than the original home on the property or might differ in style.

There is a prohibition against a city requiring additional off-street parking for the other units, leading to a risk of “overcrowding neighborhood streets which may lead to additional safety concerns,” McFarland said.

Hobbs wasn’t the only Democrat in support of the law, which was pushed through by Rep. Michael Carbone, R-Buckeye.

Sen. Anna Hernandez, D-Phoenix, said she “does not want to be in a moment where we’re blocking out working class families’’ from building a casita and getting more income that could help their quality of life.

She said using the additions as short-term rentals won’t “destroy neighborhoods’’ as opponents contend.

“What we have seen is that what has destroyed our neighborhoods is that cities continue to uphold exclusionary zoning that have not let us for years to onboard diverse type of housing,’’ Hernandez said. “ADU’s have wide support across political spectrums. They have support across all kinds of communities.’’