Loading...
III.4. Short-Term Rental Update; Howard CITY OF HOPKINS Memorandum To: Honorable Mayor and Council Members Mike Mornson, City Manager From: Kurt Howard, Planner Date: March 14, 2023 Subject: Short-Term Rental Update _____________________________________________________________________ PURPOSE Staff will present an overview of short-term rentals (STRs) in Hopkins. The presentation will briefly ground the Council in definitions and the history of STR regulations in Hopkins, review current regulations that apply, revisit questions raised during the first STR application review processed by the City, explore potential policy objectives and recommend adjustments to the City’s regulatory approach to STRs in Hopkins. Staff will be looking for input and direction from the Council on various policy objectives and regulatory elements that could be incorporated into a potential update to the City’s regulations for STRs in Hopkins. INFORMATION The growth in the popularity of STRs enabled by online platforms including Airbnb, Vrbo, and many others has, expanded the reach of the STR market such that its impacts are felt in a wide variety of communities. Some of these impacts are arguably positive, such the availability of flexible hospitality options that did not exist before and economic development benefits. However, STRs can also bring with them negative impacts, including threats to neighborhood character and nuisances that create tension between landlords and neighbors. The mix of impacts that STRs will have in Hopkins is as unique as the community itself, so an effective approach to regulating STRs should be informed by the community’s goals and vision regarding the role of this land use in Hopkins. Short-Term Rentals Defined Short-term rentals are considered by the zoning code to be a form of lodging. Lodging is described as “establishments that provide temporary lodging for less than 30 days to transient guests who maintain a permanent place of residence elsewhere”. Short-Term Rentals are defined as “all or a portion of a residential dwelling unit offered for rent to overnight guests for fewer than 30 consecutive days”. History of Short-Term Rental Regulations in Hopkins Prior to the Zoning Code Update completed in the summer of 2 022, STRs were not specifically acknowledged or regulated in the City Code. In 2018, staff adopted an internal zoning policy of treating short-term rentals the same as bed and breakfasts, Planning and Economic Development Department since code language was readily available and bed and breakfasts have similar impacts to STRs. During the Zoning Code Update process, the topic of STRs was studied and considered more closely. It was ultimately decided to specifically acknowledge and regulate STRs as follows. Current Regulations Short-term rentals in Hopkins are currently regulated through three primary means: zoning, licensing, and general nuisance standards. In terms of zoning, STR as a land use is permitted in non-industrial mixed-use zones, conditional in neighborhood zones, and prohibited in all othe r zones. All permitted STRs in the City are subject to the Supplemental Use Regulations established by the code, which are: 1. Short-term rentals must comply with all applicable licensing and permit requirements of the city and Hennepin County. 2. No more than 6 adults and their dependent children may occupy rooms within a short-term rental. 3. Short-term rentals are not permitted on lots occupied by accessory dwelling units. 4. External structural alterations or site improvements that change the residential character of the lot upon which a short-term rental is located are prohibited. Examples of such prohibited alterations include the construction of a parking lot, the addition of commercial-like exterior lighting, and signage. 5. A register of short-term rental guests must be maintained and made available to the city upon request. 6. Short-term rentals may not be used for special events to be attended by individuals who are not registered guests of the short-term rental unit. The City Code’s rental licensing requirements apply to STRs in the same manner as any other rental dwelling unit. Many of these provisions area a natural fit for STRs, but some rental licensing requirements translate poorly to STRs. Most notably, all rental licensees are required to conduct criminal background checks on all prospective tenants. The City’s general nuisance ordinances related to things like noise, trash, and parking all apply to properties used for STR the same way they do for all other properties in the City. These ordinances reinforce the expectation to be a good neighbor and grant the City authority to step in if nuisances persist. Questions Raised The first application for a Conditional Use Permit (CUP) to use a property as a STR was considered by the Planning and Zoning Commission at its meeting on October 25, 2022 and by the City Council on November 1, 2022. Processing this permit application offered an opportunity to evaluate the City’s new regulations in practice . Questions, comments, and concerns raised during the application review process touched on the following topics:  The impacts of STRs on neighborhood character and how to manage them  The impact of STRs on affordability and availability of housing  The ability for the City to effectively monitor and address nuisances should they arise after an STR has been permitted  Rates of compliance with STR regulations and how to address existing unpermitted STRs  Ensuring a fair and consistent process for reviewing and deciding on STR permit applications In light of the insights gained by the first CUP application review , staff received direction from the City Council to study the City’s regulatory approach to STRs. Policy Objectives In order to identify opportunities to improve the City’s approach to regulating STRs, it is helpful to reflect on what outcomes the City hopes to achieve with its regulatory approach. Developing a clear set of policy objectives helps ensure that the regulatory approach taken is informed by Hopkins’ unique situation in the STR market, the community’s priorities, and the City’s capacity to effectively enforce its policies in a practical and cost-effective manner. Examples of potential policy objectives that have been articulated by the City Council, Planning and Zoning Commission, community, and staff thus far include:  Protecting life safety  Minimizing nuisances  Accurately tracking the number and location of STRs operating in the City  Preserving neighborhood character  Protecting affordability and availability of housing  Improving rates of compliance  Enabling reasonable use of private property  Offering options for hospitality Regulatory Elements A variety of tools and mechanisms are available to help the City achieve its policy objectives regarding STRs. Registration: A requirement for STR operators to register with the City could provide the City with an effective means of tracking the number and location of STR operators in the City. This approach could have the effect of creating an approachable means for STR operators to formalize their operation in the City while providing the City with a more reliable account of the number and location of STRs. The collection and availability of this information would help the City track and evaluate the impact of STRs on an ongoing basis as dynamic trends in the STR market continue to develop . Licensing: A requirement for STRs to obtain and maintain a special Short-Term Rental License could allow the City to specify the terms that all STRs must adhere to in order to operate legitimately in Hopkins, identify a timeframe for license renewal, and establish grounds for license revocation. An effective STR licensing program would likely retain some elements of the current licensing requirements, while omitting elements that are poorly suited or impractical for STRs. One notable element of the current rental licensing requirements that is poorly suited for STRs is the requirement for hosts to run criminal background checks on prospective guests. The terms of the license could also cross -reference the City’s general nuisance standards related to noise, trash, and parking, and include inspection requirements if desired. Inspections: Inspections could offer the City an opportunity to verify that basic life safety protections are in place for STRs that are permitted to operate in Hopkins. These protections could include the installation of smoke detectors, carbon monoxide detectors, and proper egress for sleeping areas. Inspections could be required either as a one-time requirement prior to finalizing approval of an STR or on a recurring schedule. Zoning: The City’s current zoning of STRs identifies the use as permitted, conditional, or prohibited depending on the zone. For zones in which the use is identified as permitted, properties are allowed to use their property for STR subject to the supplemental use regulations and rental licensing requirements. For zones in which STRs are a conditional use, STR operators are required to appl y for a CUP which requires an $800 non-refundable application fee and a public hearing at the Planning and Zoning Commission before a final decision is made by the City Council. Analysis A fine-tuned and coordinated mix of these regulatory elements may be better suited to meet the community’s policy objectives than the CUP application process. The CUP application review process and public hearing do create an opportunity for the community to review the proposed use and develop conditions as needed to maintain public welfare. However, the scope of the CUP application review process is limited to the particular merits of an individual application rather than the impact of STRs in the City overall. Additionally, CUP approval runs with the land and grants CUP holders permission to use the property for STR so long as the approved conditions are being met, limiting the ability to revise operating conditions over time according to feedback and changing trends. Finally, the cost, timeline, and uncertainty associated with the CUP application process could increase the temptation for STR operators to circumvent the proper approval process altogether. Given the high proportion of properties in the City where STR is a conditional use, this would significantly harm rates of compliance and deprive the City of valuable information needed to effectively monitor STRs and their impacts. Recommendation In light of these considerations, staff recommends that the following potential amendments to the City’s regulation of STRs be considered:  Require STR operators to obtain a license with a two-year renewal period  Require initial inspection to verify adequate life safety protections are in place  Revise zoning to make STRs a permitted use in zones where it isn’t currently prohibited  Establish appeal process for administrative decisions and license revocation FUTURE ACTION Based on input and direction from the City Council, staff will determin e precisely which ordinance revisions would be needed to implement an y desired changes to the City’s STR regulations and return to the Council with draft revisions.