Lexington KY could regulate short term rentals like Airbnb

After years of debate, Lexington may soon pass an ordinance requiring short-term rental operators to be registered with the city and pay hotel and motel taxes.

The Lexington-Fayette Urban County Council began deliberations in 2020 on requiring short-term rental operators to be registered. The ordinance made it to the full council in March 2020 but the city hit pause on the debate because of the coronavirus pandemic.

In the meantime, a small group of council members, short-term rental hosts, neighborhood groups and city officials has been fine-tuning the ordinance.

A public hearing on the proposed ordinance is set for 5 p.m. Nov. 29 before the Lexington-Fayette Urban County Council’s Planning and Public Safety Committee in the council’s chambers.

Currently, the city has no idea how many short-term rental operators there are in Fayette County. Other cities, including Louisville, have required short-term rental licensing and registration for years.

“We are a destination city,” said Councilman James Brown, who chairs the Planning and Public Safety Committee. “But we have heard time and time again that some neighborhoods are having concerns and issues with short-term rentals. At the same time, we wanted to create an environment where short-term rentals can be successful.”

Under the city’s current zoning ordinance, short-term rentals aren’t allowed or defined.

The proposed ordinance would require all short-term rental operators pay a $200 license fee and report annually on the number of stays.

For those with multiple short-term rentals, operators will have to pay $200 on the first rental and $100 each for the remaining rentals.

Short-term rentals would get a local registration number that must be advertised on all short-term rental websites. Those who advertise without a local registration number would be fined $125. Repeat violations could result in fines as high as $1,000. The fines can be appealed to a city code enforcement board.

The city has an agreement with Airbnb and Expedia, which includes VRBO, to remit local hotel taxes to Fayette County. Those taxes go to Visit Lex, the city’s tourism group, and also helps pay off debt from the $350 million expansion of Central Bank Center.

Lexington collected $970,000 from short-term rental platforms in 2021, more than twice the $400,000 it got in 2020.

Short-term rental operators that host on platforms other than Airbnb, VRBO and Expedia would have to remit those hotel taxes to the city. Traditional brick-and-mortar hotels have long said short-term rental operators that don’t pay those hotel taxes have a competitive advantage.

Moreover, some Lexington neighborhoods, particularly downtown, have seen a proliferation of short-term rentals, which some worry will detract from the character of the neighborhood. Others worry too many landlords are taking former traditional rental properties and turning them into short-term rentals, creating a supply-crunch in the rental market, and in turn driving up rents.

Short-term rental operators have complained the city’s proposal is too onerous because it requires operators supply the city with all of its rental contracts. Others said they largely operate on Airbnb and VRBO and therefore are paying local hotel taxes, commonly referred to as transient room taxes.

Brown said the 2020 proposal would have required operators to provide the number of stays to the city every month. The current proposal requires it by the end of the year.

Another key change is the definition of a short-term rental. The original proposal limited the number of stays per year. Under the current proposal, a short-term rental is defined as a unit being rented for less than 30 consecutive days, which is in line with state law, Brown said.

The proposed ordinance also makes clear where short-term rentals are allowed and what types of short-term rentals will need city sign offs. It also requires short-term rentals to have smoke and carbon monoxide detectors, sets maximum occupation requirements and other safety measures. The $200 annual fees will help the city pay for software that will assist in managing short-term rentals, Brown said.

If the short-term rental is part of an owner-occupied home, it will be allowed without a conditional use permit. Conditional use permits, which are granted by the city’s Board of Adjustment, will also not be required in certain business zones that allow for homes and other residential properties and hotels.

“From feedback we have received and from what we have seen from other cities, the concern is with the hosted short-term rentals verses the unhosted short-term rentals,” Brown said.

A conditional use permit will be required if the host does not live on the property and the property is in a residential zone or a business zone that allows residential properties but not hotels.

Whether current short-term rental operators will be grandfathered in or will have to get a conditional use permit through the Board of Adjustment has not yet been determined, Brown said. That’s one of the reasons why the city is asking for feedback at its Nov. 29 meeting.

Beth Musgrave has covered government and politics for the Herald-Leader for more than a decade. A graduate of Northwestern University, she has worked as a reporter in Kentucky, Indiana, Mississippi, Illinois and Washington D.C.

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