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Council considering lower fees for short-term rentals

Wednesday, October 17, 2012 by Josh Rosenblatt

It’s been a little over two weeks since the city started regulating short-term rentals, and already Austin City Council is considering tweaking the law. At Tuesday’s work session, Council members debated an amendment that would substantially reduce the fees paid by short-term rental owners, a change that didn’t please opponents of the properties.

At issue is the fee the Planning and Development Review Department applies to all STR applicants to notify neighbors that such a property will be in their neighborhood. The standard fee is $241. However, the city has gotten numerous complaints from STR owners saying the $476 total fee to register their homes (including a $235 registration fee) is too high. If staff approves the amendment the notification fee will be reduced to $50.

Based on a staff-estimated 1,500 STR applications, the lower fee would result in unrealized revenue of $286,500 annually. Despite that shortfall, supporters of the amendment hope dropping the fee will increase the numbers of STR owners registering with the city. According to staff, as of last Friday, Oct. 12, only 19 homes had been licensed since Oct. 1.

Council Members Kathie Tovo and Laura Morrison–the only two members to vote against the original ordinance in August—were strongly opposed to the proposed amendment, arguing at Tuesday’s meeting that making changes to an ordinance so soon after it had been implemented would invite trouble.

“It would seem to me to make sense to start with the standard notification fee, for which there is precedent and the city has a lot of justification to use the standard notification fee, and then collect those costs, and then determine if it’s appropriate to change it, rather than shifting at this point,” Tovo said.

“Based on the dollar amounts I’ve seen for nightly rentals, people are going to make the money, and it’s their decision. If they feel the fees are too high to make a short-term rental a financially viable option then they shouldn’t do it. But we need to recover the costs that are appropriate to the city and not just respond to citizens who would rather pay less.”

Morrison took issue with both the decrease of the fee and another item on the agenda for City Council’s Thursday meeting that would direct the city manager to recommend changes to the ordinance to ensure better compliance and more ease of enforcement. She pointed out that numerous stakeholders and community members have concerns about the ordinance and argued that it would be better for staff to start collecting a list of those complaints to deal with at a later date, rather than trying to amend the ordinance piecemeal.

“Responding to the growing pains of getting these registered immediately is really problematic for me until we get a feel for how things are working under our belt,” Morrison said.

Tovo said that if Council decides to start changing the ordinance, she has some “tweaks” of her own she’d like to make, including allowing neighborhoods to opt-out of the STR program entirely.

But Mayor Lee Leffingwell said he would view allowing different rules for different neighborhoods “with a great deal of trepidation.” In addition to being an “administrative nightmare,” Leffingwell said, “there’s the issue of basic fairness. It would offend my sense of equity.”

Considering the original STR ordinance passed 5-2, it’s doubtful Council will vote not to grant the fee change and the request for recommendations to improve compliance and enforcement. Knowing this, Morrison suggested limiting the scope of the resolution calling for recommendations to improve the original STR ordinance to four items rather than seven. Morrison said those other three – considering a different method of notification, reviewing the requirements for suspension and revocation of licenses, and considering eliminating the requirement that Type 1 STRs must include the entire dwelling – are actual changes to the ordinance, and therefore to the code, and should be held off another year.

But resolution sponsor Council Member Bill Spelman disagreed, arguing that the resolution would not make any changes itself but only direct staff to consider any problems that might arise if those changes were implemented.

“We’re not tweaking an ordinance with this resolution,” Spelman said. “We’re dealing with implementation details that are not covered by the ordinance but which only came up after the ordinance was passed.”

Expect more fireworks at Thursday’s Council meeting.

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