ALEC | by Sen. Debbie Lesko
The sharing economy is here to stay. Thanks to ridesharing apps like Uber and Lyft and short-term rental platforms like Airbnb and HomeAway, technology and the spirit of entrepreneurship are joining forces to provide incredible services to consumers and individuals seeking to earn extra income. One in three travelers used a short-term rental in 2015, up from 1 in 10 in 2011. As more and more people are choosing short term rental accommodations when they travel, homeowners are eager to become “hosts.”
This spring I sponsored SB 1350, a new law that harnesses the potential of the short-term rental marketplace in Arizona. It ensures all homeowners maintain the right to rent out their property to interested travelers while preserving the ability of cities to enforce appropriate noise, parking, trash and other ordinances. We did this because we believe encouraging technology and innovation is good for our residents and our economy. We found that the best way for government to engage a new marketplace is through a broad framework that protects private property rights and establishes a regulatory framework without government overreach.
Individual property rights, entrepreneurship and free markets are at the heart of any talk of short-term rental policy. Our economy works best when we keep the government out of it, so we wanted to be sure SB 1350 prohibited municipalities from enacting blanket bans of short-term rentals. When Arizonans choose to rent out their property, we see positive economic impact all around. We all benefit when our residents have new sources of income. In this case, the added income often goes toward property upkeep or covering the mortgage. Also, by meeting the needs of the 21st century traveler, we bring new customers to local businesses and more visitors to experience all the natural wonders our state has to offer. It was imperative to me that any statewide short-term rental policy acknowledges the changing tourism economy while protecting the rights of homeowners to use their property in whatever manner they choose.
This issue gets a bit more complicated, however, when you consider the rights of neighbors to work with their city against bad actors. What happens when a short-term rental leads to repeated noise or trash complaints? How do we ensure long-term residents have recourse to protect the value of their own property from the unintended consequences of short-term rentals? We needed to make sure there was an appropriate balance between the individual property owners and their neighbors. That’s where the Arizona League of Cities and Towns came in. Understanding that short-term rentals are too good an opportunity – for all involved – to pass up, we engaged in a civilized and meaningful dialogue and figured out how to make it work. SB 1350 strikes a delicate balance, making sure that statewide legislation doesn’t impede on a city’s ability to enforce an ordinance and protect their neighborhoods.
In Arizona, short-term rentals are subject to our transaction privilege tax (TPT). Before SB 1350, remitting the TPT was a major hassle for homeowners, requiring separate paperwork every month to both the Arizona Department of Revenue and the city. As the short-term rental market continues to grow, we felt it was important that we streamline this process. Working with the cities and the technology platforms, we established a simplified tax reporting system where short-term rental platforms have the opportunity to form an agreement with the Department of Revenue to collect and remit taxes on behalf of homeowners who would prefer not to handle it on their own. The Department of Revenue then distributes the relevant portion of the taxes to the city. In this scenario, everyone wins: cities and the state have streamlined revenue and tax remittance is made far easier for residents.
By bringing all stakeholders to the table and considering the needs of homeowners, neighbors, cities and the state and acknowledging the economic opportunity that short term rentals bring to Arizona, we drafted a bill that garnered broad bipartisan support. It’s our job as state legislators to protect the rights and freedoms of our residents and, whenever possible, keep the claws of government away from business. But we also need to listen to the concerns of local governments and ensure new entrants and marketplaces aren’t adversely impacting communities. SB 1350 does all of that, pushing Arizona to the forefront of modern public policy in the age of technology and e-commerce.