CITY COUNCIL The City Council of the City of Burnsville met in a governance session at the Burnsville City Hall, 100 Civic Center Parkway, Burnsville, Minnesota the 22 nd day of August, 2017. The meeting was called to order by Mayor Kautz at 8:08 p.m. Present: Coughlin, Gustafson, Kautz, Kealey, Schulz Absent: None 1. ENVIRONMENTAL SCAN: SHORT-TERM (VACATION) RENTALS WHITE PAPER Deb Garross, City Planner, presented the Whitepaper on short-term (vacation) rentals. Council directed staff to research short-term rentals, prepare White Paper to be reviewed through Governance process at the 2017 Allday Work Session. 2015 City Prohibition / 2016 Business Regulations Ordinance Maintain quality of life, compelling interest to protect character of residential neighborhoods Rental of private homes for temporary occupancy threatens essential character and stability of residential neighborhoods o Short-term tenants have little interest in welfare of local community o Do not engage in activities that strengthen neighborhoods o Do not integrate into neighborhoods Rental of private homes for temporary occupancy disturbs residential neighborhoods by o Creating excessive noise o Accumulation of refuse o Trespassing o Disorderly conduct o Vandalism o High Occupant Turnover o Excessive Traffic o Excessive # Parked Vehicles Regulating rental private homes for temporary occupancy is necessary to protect the essential character of residential neighborhoods & health, safety and welfare of community. Rental of residential homes for temporary occupancy often undertaken without o Adequate on site management o Compliance with state & local codes for commercial lodging establishments o Other safeguards for those renting the home What is a Short-term (Vacation) Rental Definitions vary by community o Dwelling unit, bedroom, couch, castle, tree house o Rented for less than 30 consecutive days o With or without owner present (hosted vs non-hosted) o Vacation Rental Time Share Tourist Rooming House STR Lodging Establishment (State of MN) generally any structure, or any part thereof, that is offered for less than a week Why are Short-Term Rentals Popular? Sharing Economy, Peer Economy, Collaborative Consumption Millennials (born between 1981 & 2001) new ethic & change from individual exclusive use to not owning / possessing & shared use 1970 s timeshares purchased/leased by vacationing public typically condominium instead of resorts/hotels Do not require individual to make a long-term commitment
2 No cumbersome process, expense, travel agents, real estate transactions etc. Host sites easy, fast, multiple choices available from web based services More than half of millennials have used sharing services Airbnb, TripAdvisor, FlipKey etc., offer wider variety of options than standard hotel Some prefer to vacation in a home less expensive, comfortable, experience local culture. Popular with owners that can generate significant income. Do not have the same overhead costs, commercial taxes, licensing, health safety standards as traditional Bed & Breakfast, hotel/motels and resorts Positive Perceptions: Embrace growth of sharing economy Provide additional income for hosts/owners Support tourism & provide financial benefit to local economy Potential source of income for governments taxes/fees Reduce blight, activate neighborhoods, support local business Positive for aging in place, sharing chores, bartering, stay in home longer. Most operators are good managers - negative impacts on quality of life may be over stated Stimulate competition for commercial lodging Negative Perceptions: Commercial encroachment into residential neighborhoods Similar issues identified in Burnsville s ordinance Potential to reduce affordable housing Overcrowding / maximum occupancy / party houses May reduce commercial lodging revenues STR do not pay same taxes as commercial lodging Septic System issues renters not aware, excessive water use Unions & service workers oppose STR workers not needed to same extent as commercial lodging Many hosts do not have homeowner/liability insurance for commercial use or to cover potential losses Home owner association conflicts with bylaws on rentals No standard for review for property owners such as criminal backgrounds Potential life safety issue in event of death, injury or property damage Without regulation no mechanism to investigate /resolve complaints from guests Regulatory Environment Minnesota Department of Health (MDH) Licensing jurisdiction over food, pools, and lodging services Definitions and thresholds for uses/activities that require state licensing overlap and have gaps. Prospective business/owner should contact the state or local public health agency for an inspection to determine license fees and formal approvals Some establishments also required to be registered with MDH Role of MN local governments unclear: State law provides that cities may adopt ordinances relating to the public health authorized by law or agreement with the state, and ordinance must not conflict with or be less restrictive than ordinances adopted by a county board. MDH may delegate all or part of its duties with delegation agreement MDH has Licensing, Inspection Jurisdiction M.S. 157.16, Subd. 1 requires an annual license be obtained for every person, firm, or corporation engaged in the business of conducting a food and beverage service establishment, youth camp, hotel, motel, lodging establishment, public pool, or resort. Dakota County not interested in MDH Delegation
3 Statutory City vs Home Rule Charter City Most municipalities in Minnesota are statutory cities such as Burnsville which operate under the statutory code. Home Rule Charter Cities operate under a local charter & can exercise any powers (locally adopted in the charter), as long as they do not conflict with state laws. Voters in home rule charter cities have more control over their city s powers. Have power to make changes without having to wait for legislation. When state laws are silent on a subject, citizens may address them in their local charter. Comparing zoning, licensing and other regulatory matters between statutory and charter cities not apples to apples Regulatory Issues State of MN: 1. State does not have a specific definition for vacation home rental property 2. Many legal/regulatory issues related to short-term vacation home rental are covered in state & local regulations no comprehensive regulation 3. MDH & delegated local public health agencies have jurisdiction to license and inspect vacation home rentals 4. Reality overwhelmed due to popularity many unregulated Burnsville Regulatory Considerations: Burnsville chose to use business regulation authority to prohibit rentals in residential areas similar to several other cities based on: Hotel, motel & lodging establishment licensed & regulated by the state. Burnsville does not have a delegation agreement (uncertain authority to adopt and enforce our own regulations). Gap in state regulations for rental properties with < 5 beds that rent for more than 1 week at a time Unclear to what extent this allows the City to fill the void Pre-emption that occupies the field comprehensively often is ruled to evidence the intention to not have any regulation of those activities not subject to state regulation. Realization on part of some state officials: o Neither willingness nor capability to effectively regulate short-term rentals o Perhaps encourage local regulations even if local regulation is in excess of clear statutory authority Regulated community may not readily assert pre-emption /lack of authority issues in any collective manner since they may fear the alternative prohibition of short-term rentals. Individual property owner, cited by the city for violating local regulations, likely to assert the authority question in any judicial proceedings (similar to challenges to other city regulatory or enforcement actions) While the clean prohibition rule is on firmer ground from a statutory authority perspective, it may lead to enforcement difficulties, since non-compliance can be expected to increase for the foreseeable future. Minnesota State Inspection Issues MN Statutes 157.20 address inspection, frequency, risk categories and orders for food, beverage & lodging establishments and the right to enter and have access at any time during the conduct of business. Inspection frequency based on degree of health risk typically inspected once every 12, 18 or 24 months Short term rentals typically Low-risk Majority short-term rentals not being inspected MN State Building Code Does not require inspections of short-term rentals, vacation homes or similar unless a building permit is applied for. Not all work that is permitted is required to be performed by a licensed contractor can be done by homeowner.
4 No guarantee the structure or premises be compliant with State Building Code. Inspection of site not required prior to licensure or registration by either the State or designated local government. Fire Code Does not specifically address residential short-term rental properties. Most short-term rentals in single family homes No other Fire Code requirements than standard single family home Inspection of the premises is not required at this time for compliance with Fire Code. Federal Law - ADA Short-term rentals may be subject to Federal Laws such as the Americans with Disabilities Act Anyone offering their home/property to the public for use is responsible to comply with all laws. o Reservation requirements o Pool lift requirements o Power-Driven Mobility Devices o Service Animals Burnsville Ordinance: Prohibit short-term vacation rentals under Business Regulations of City Code. Zoning short-term rentals are not a listed use and as such are considered to be prohibited Define short-term vacation unit rented to a transient for less than 30 consecutive days Local Regulatory Trends St. Paul in process of in-depth study for STR no formal action to date Included 2016 City of New Orleans Study for national information Reviewed ordinance standards, permit type, fire & safety, length of stay, # of guests allowed, parking & penalties Chart 1, MN Cities Short-Term Rental Regulations City Ordinances - Prohibit STR: Apple Valley Brooklyn Park Edina St. Louis Park Burnsville Savage 2015 partial ban enacted due to complaints. Banned from renting homes for period shorter than 15 days City Ordinances STR Not Regulated Coon Rapids no STR ordinance Lakeville No STR Ordinance. Overall rental housing program: owner occupied dwelling, may rent rooms within the home to 2 individuals not related to principal family provided the property owner shall not enter into rental agreement with more than 2 individuals within a 30 day period. Plymouth (Charter City) no STR ordinance. Overall residential rental program requires residential rental properties to be inspected and licensed by the City. Allows boarding or renting of rooms to not more than 2 people per dwelling as a permitted accessory use in residential zone. Rochester (Charter City) no STR ordinance but allows Medical Stay Dwelling Units for patients and families 2015 legislation for temporary family health care dwellings.
5 Cities Permit Short-Term Rentals Eagan homeowner can rent out a room within their home for less than 30 days provided owner is present and guest has full access to the home during their stay. Minnetonka (Charter City) allows living facilities for no more than 2 boarders or roomers within a single family dwelling unit as a permitted accessory use provided off street parking is available Chaska allows rental of up to 2 rooms in a home as a permitted accessory use. Prior Lake 2015 ordinance allows STR with an administrative Short-Term Rental Permit issued by Code Enforcement Officer. Duluth (Charter City) Stillwater (Charter City) 2017 updated ordinance ISSUES Impact on Rented Property/Home If operated well, likely there will not be issues Potential for problems greater with un-hosted sites Property damage Guests engage in disorderly conduct Guests may experience life/safety issues during their stay Many hosts/owners do not have proper insurance Impacts to septic systems and wells ISSUES Difficult to Regulate Owners of STRs generally do not come forward to obtain proper permits or licenses To find STRs need to rely on complaints and online postings Many sites do not include address for the rental property online Many different websites/platforms for posting STRs Many agencies may not have staffing to address STRs ISSUES Insurance General home-owners insurance does not cover losses resulting from commercial occupancy ISSUES Unfair Business Advantage STRs not subject to same licenses and taxes as hotel/motels, resorts & Bed & Breakfast STRs able to fly under the radar avoiding licenses and paying local and state sales taxes. Some cities require the STR to obtain proper state licenses and require documentation of local and state sales tax numbers. MN imposes 3% lodging tax on gross receipts for lodging this tax is not being collected for most STRs Burnsville Vacation Rentals City staff aware of 8 STRs being operated Likely there are additional sites staff is not aware of City has not received any complaints from adjacent neighbors from the 8 sites Last year complaint received from the guest of a STR regarding poor conditions inside of the unit STR Listings St. Paul & New Orleans Studies Options: 1. Do nothing leave current regulations in place. 2. Change the ordinance to allow STRs (Chaska) 3. Establish a permit process for STRs (Prior Lake, Lakeville, Duluth) 4. Establish a license and/or registration process for STRs (Stillwater) 5. Other Expert Testimony & Public Comment for this topic is scheduled for Tuesday, September 19, 2017 at 6:30 p.m. Council thanked Ms. Garross for the presentation.
6 2. Adjournment. Motion by Kealey, seconded by Gustafson, to adjourn the meeting at 9:06 p.m. Ayes Coughlin, Gustafson, Kautz, Kealey, Schulz. Nays - None. Motion carried. Macheal Collins, City Clerk Approved by the City Council of the City of Burnsville this 5 th day of September, 2017. Elizabeth B. Kautz, Mayor