Oro Valley 'gets ahead' of Airbnbs, other vacation rentals with licensing system

Oro Valley property owners will need licenses to continue offering vacation rentals on websites such as Airbnb and VRBO. The Town Council has passed an ordinance requiring an $80 annual fee as officials begin regulating vacation rentals and hope to raise revenues from their “growing popularity.”

Property owners in the town north of Tucson have until May 5 to get their licenses, and they can apply online, by phone or in person. Oro Valley will have a “hands off” approach to enforcing the new ordinance, but the town is looking for a way to be able to respond to potential complaints, said Paul Melcher, town director of community and economic development.

Town staff are offering to help owners with the process with two informational Zoom meetings on March 8. Oro Valley will publish the Zoom links on March 1 on their vacation rental information webpage.

The Oro Valley Town Council voted 7-0 to pass the ordinance requiring licenses for short-term rentals during a regular meeting in early January, but the 90-day window for property owners to begin complying opened at the beginning of February.

“The Town Council wanted to get ahead of any short-term issues that might arise,” Melcher said. “Even though there were a very small number of complaints received, being out in front of it and taking a proactive stance regarding licensing would also give us better tracking for the existing short-term rentals and any new ones coming in.”

Before applying for the license, owners have to give written notification to their neighbors about their plans to rent out their property for short-term stays. Owners will also have to display their name, phone number and an emergency contact near entrances and their license number on the website listing. The property also will need a sign telling neighbors it’s a short-term rental.

The state defines short-term or vacation rentals as units offered for stays shorter than 30 days. Rentals non-residential uses including retail, restaurant, banquet space or other similar uses.

The application requires proof that the rental is insured as well as registered as a short-term rental with the Pima County Assessor's Office. The $80 fee, which is the cost of an Oro Valley business license, has to be paid to renew the short-term rental license.

During the past two weeks, 17 people have applied and earned their short-term rental license, Melcher said.

The state of Arizona charges a bed tax and a 2.5% sales tax that’s required to run a rental business. Those state tax revenues circle back around to fund Oro Valley town services, but the rental licensing fee will cover the “costs related to the technology, staffing, materials and other costs needed to process short-term rental applications,” according to town documents.

Enforcement of the ordinance will fall to the neighbors as the town has no plans of inspecting properties. Neighbors can report short-term rentals that they suspect don’t have licenses, and the town will investigate those complaints.

Neighbors would have to call the Oro Valley Department of Community and Economic Development at 520-220-4800 to make the complaint.

Penalties range from $500 or a fine equal to one night’s rent for a first offense to $3,500 or a fine worth three nights’ rent. Owners have to shut down their rental if they’re not in compliance, and the Oro Valley can impose an additional civil penalty worth $1,000 a month until the owner complies, according to the ordinance. 

The Oro Valley Police Department still has to answer criminal complaints, which includes noise complaints.

Vacation rentals and other forms of short-term stays except hotels brought in more than $500,000 for Oro Valley with bed taxes in fiscal year 2022, and that marks a 130% increase from the previous fiscal year. Almost $1.9 million came in via tax revenue from hotels, which was a $1 million more than the last fiscal year and a 134% increase.

Melcher attributed the boost to “revenge tourism” as people showed an eagerness to travel again in the months after distribution began for the COVID vaccine. With more than $500,000 in total bed revenue from hotels and rentals so far in FY2023, returns again look “healthy,” Melchor said.

The Town Council was trying to “get ahead” of the “growing popularity” of vacation rentals in the town and begin regulating them while their numbers are still manageable, Melcher said.

Oro Valley currently estimates they have a little more than 400 vacation rentals. The city of Scottsdale, by comparison, has about 8,000 vacation rentals, Melcher said. The Town Council decided to be proactive after hearing “horror stories” from Scottsdale and places such as Sedona and Prescott Valley about trying to “play catch up with registration and licensing” vacation rentals once they’d already proliferated, he said.

“If the town can get out in advance of it and have some licensing, then we’ll have a better sense of how many short-term rentals are out there and if there are any issues,” Melcher said.

Few complaints about vacation rentals had been reported to Oro Valley, Melcher said, and they “have not been problematic.” The expectation is that owners won’t have trouble affording the $80 fee or be deterred by the application process. Oro Valley isn’t trying to limit chances to bring in tourists, Melcher said.

“It’s good to have (tourists) here, certainly. People who are coming here are buying groceries, eating out, buying gas, going to local venues, acting as tourists,” Melcher said. “And those rentals give another option for those tourists.”