Minnesota Cities Magazine
More from May-Jun 2019 issue

Two-Way Street: Does Your City Have a Short-Term Rental Ordinance?

Justin Otsea
City Planner
Two Harbors (Population 3,637)

Two Harbors is situated along Lake Superior just down the road from Duluth, and we get a lot of visitors. The city was getting a lot of calls from individuals looking to buy properties strictly for short-term rental purposes. This—combined with a recently completed housing study identifying a shortage in both housing and rental stocks in the community—made permitting the use a priority.

Developing the program

We worked with the Planning Commission, first reviewing other Minnesota cities’ short-term rental programs, and developed something we thought would work for our community. We got input on the drafted ordinance from the head of the Chamber of Commerce, who both represents the hotel industry and owns multiple rental properties. We looked at the issue over the course of six to seven months from research to ordinance adoption in 2018.

The overall goal of the program was three-fold. First, given the limited housing/rental stock in the community, the city wanted to keep a record of the amount of short-term rental activity.

Second, the hotels in Two Harbors are subject to a tourism tax, and regularly see no-vacancy signs in the high-pressure season. To even the playing field, given the similar uses, the city decided to tax the short-term rental use accordingly.

Third, the ordinance gives the city a way to deal with any problems related to short-term rentals. We had received a handful of complaints regarding short-term renters, and we had little to no mechanism for enforcement if a significant issue were to arise.

Early enforcement efforts

Enforcement has just started over the last couple of months. We sent written notice of the new ordinance to the short-term rental property owners we know of. We’ve started to receive compliance and are continuing to monitor existing and new properties.

We’ve also reached out to Airbnb. We’re seeking the company’s assistance with the taxing/permitting process, but a meaningful partnership has not yet been formed.

Starting small

We started with limited regulations, so we could easily enforce them and evaluate the effectiveness and workload of administering the program. Starting a small program that can be expanded if needed has been the best approach for our community.

Dale Stefanisko
Code Enforcement Officer
Prior Lake (Population 25,735)

Like so many ordinances, the short-term rental ordinance adopted by the City of Prior Lake in 2015 was born out of nuisance-related complaints. After a handful of complaints were received about a couple rental properties in Prior Lake, the City Council wanted to consider its options.

Weighing options

The Council considered prohibiting short-term rental properties altogether. However, recognizing that Scott County is a tourist area, the City Council decided to allow them with certain regulations.

The process to create the short-term rental ordinance started with staff researching other communities and included talking to short-term rental property owners, residents, the police, and other city staff.

Striking a balance

The city’s primary goal was to create an ordinance that would allow short-term rentals while also ensuring that they do not become a nuisance or blight to the neighborhood.

To achieve that goal, the ordinance identifies specific short-term rental conditions and requires a common nuisance violation notice to be posted. This required posting, including local code requirements and contact information of the property owner or agent, must be displayed at the rental property. The permitting process also includes a requirement that the applicant acknowledge they have read the short-term rental code.

Since its adoption, the ordinance has been adjusted to address parking requirements for properties on private streets or properties on an island in Prior Lake.

Involve key stakeholders

For other communities considering the adoption of a short-term rental ordinance, we would recommend involving key stakeholders potentially affected by an ordinance. These stakeholders would include potential rental property owners or their agents, neighboring property owners, neighborhood associations, and city staff members that would be involved with the permitting process or enforcement of the ordinance.

The ordinance and required permitting have worked well for Prior Lake. The few complaints received in recent years have been related to renting properties without a short-term rental permit. But since the adoption of the ordinance, the city has received few complaints about short-term rental properties, so we consider it a success.

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