Virginia Senate considers bill to limit some local authority to regulate short-term rentals – Virginia Mercury

Virginia’s General Assembly is considering legislation that would limit some of the authority local governments have to regulate short-term rentals like those offered through Airbnb and Vrbo.

Proposed by Sen. Lamont Bagby, D-Richmond, the bill wouldn’t overturn short-term rental requirements already imposed by localities but would prevent them from introducing certain new ones.

The bill states that no local ordinance enacted after Dec. 31, 2023, can require a special exception, special use or conditional use permit for a property owner to operate a short-term rental at their primary residence.

Virginia municipalities crack down on short-term rentals

It is one of a handful currently being considered by the General Assembly that relate to short-term rentals. A proposal by Del. Lee Ware, R-Powhatan, would create a state registry for all short-term rentals. And a measure proposed by Sen. Saddam Azlan Salim, D-Fairfax, would mandate that local governments allow accessory dwelling units, or ADUs, which are sometimes used for short-term rentals, without a special use permit in single-family residential zoning districts.

Airbnb has made headlines in recent years for refusing to send localities basic tax information even as it has continued to pay them taxes. In 2022, Virginia enacted a law requiring rental intermediaries like Airbnb to submit addresses and receipts of each rental to the locality where it sits. Local governments contend that Airbnb has been flouting Virginia law for more than a year by refusing to send them that tax information, making it impossible to know if the company is paying too much or too little in tax.

At the same time, an increasing number of local governments, concerned about the impact of short-term rentals on already limited housing stock, have begun passing ordinances to regulate such businesses more strictly. Richmond, for example, last September approved 12 regulations for short-term rentals in the city, addressing issues such as parking, signage, owner occupancy, and room and renter limits.

Bagby’s bill would make it so localities couldn’t require new special exceptions, special use permits (SUPs) and conditional use permits (CUPs) for short-term rentals involving a homeowner’s primary residence. These permits are often required for uses that could potentially negatively impact surrounding properties and therefore must be approved by a locality.

However, he told the Senate Local Government Committee Monday, the proposal would “not limit the ability of local government to use the CUP or SUP process for properties whose primary use is short term, such as vacation homes or an investment property.”

Bagby did not return requests for comment on the legislation, which is moving swiftly through the Senate.

While his proposal has gotten support from Airbnb, Virginia Realtors and members of the tech industry, it is being opposed by the Virginia Association of Counties, the Virginia Municipal League, Fairfax County, Virginia Beach, the city of Hampton, the town of Cape Charles and the North Virginia Beach Civic League.

“What our members like about the existing statute is it allows them to craft a short-term rental ordinance with input from their community,” said Joe Lerch, the Virginia Association of Counties’ director of local government policy. “Our concerns in opposition are related to the fact that it’s dictating what a local ordinance shall have.”

Andrew Cohen of the North Virginia Beach Civic League, which represents the city’s North End neighborhood, said his organization worked with city officials to create ordinances that worked for their locality.

“We’re not taking a position opposing [short-term rentals] outright,” Cohen said. “Our legislative agenda, very clearly, is we don’t want the state to preempt the ability of localities like Virginia Beach to make their own ordinances, do their own zoning, land use, and determine where STRs are an appropriate use.”

Cohen worries Bagby’s bill could lead to housing and rental price increases. Some economists warn that what’s been dubbed “the Airbnb effect” may drive up housing prices to the extent that community members can no longer afford to live in their neighborhoods.

“If they were allowed to proliferate without limitation, then it would hollow out the neighborhood and there would be fewer and fewer resident owners and more people who are just weekly renters,” Cohen said. “It would very much undermine the nature of our neighborhood, and it would be done for the benefit of investors and realtors who now do that as their business.”

Ware’s bill would direct the Virginia Department of Taxation to create a statewide registry of short-term rentals. Significantly, it would also require any rental intermediary that isn’t reporting property addresses and gross receipts to the local government each month as state law requires to submit certain information to the state registry — a provision that appears to narrowly target Airbnb.

“What these accommodation intermediaries are supposed to do is report locations of these places that are offered for short-term rentals and remit taxes,” said Ware. “This outlier has been remitting taxes, but not offering any other confirmatory information.”

In a House Finance subcommittee meeting Tuesday, Ware said Airbnb represents 60% of Virginia’s short-term rentals.

Airbnb has argued that requiring it to provide addresses and receipts for rentals violates the Fourth Amendment of the U.S. Constitution.

“We’re not asking for anything that violates anybody’s Fourth Amendment protections,” Ware said. “We’re just asking them to follow the Virginia law on this.”

But Ron Jordan, a lobbyist for Airbnb, vociferously objected to the bill, saying its supporters had put forward a “raft of misstatements and mischaracterizations.”

“There’s federal case law and federal statutes that supersede some of the requirements in this statute, and Airbnb believes it is in compliance,” he said. For those who disagree, he added, “That’s why we have courts, ladies and gentlemen, to make those determinations and clarify what the laws really mean.”

Salim, who represents part of Northern Virginia, says his accessory dwelling unit bill is an effort to create affordable housing. Sometimes referred to as “granny flats” or “in-law suites,” accessory dwelling units are either standalone or attached secondary housing units that sit on a single-family residential lot. While they can be popular for short-term rentals, Salim said his legislation arose from his constituents’ desire to accommodate family members in the expensive suburbs of Washington, D.C.

“If you wanted your kids to come back to town, you wanted your parents or grandparents to come live with you, those are some of the things that could be done right now,” Salim said. The bill would “allow you to either bring your parents in or even your grandparents back to the area, instead of living somewhere else where the cost is going to be significantly higher.”

However, his proposal has also gotten pushback from many of the groups opposing Babgy’s legislation because it too would supersede local authority by forbidding local governments from banning the units in single-family residential neighborhoods.

The current version of the bill would allow localities to charge up to $250 for permitting and would let them impose certain conditions, such as requiring units to include dedicated parking, mandating that rental terms be no fewer than 30 consecutive days, and limiting square footage to 1,500 square feet, among other possible allowed constraints. The proposal is also moving quickly through the Senate.

While some housing advocates say accessory dwelling units could help ease housing pressures, they’re still an expensive proposition. One estimate puts the cost of building a new standalone ADU at somewhere between $60,000 and $225,000, while converting a garage into an ADU can cost $6,000 to $26,000.

“We have a lot of folks whose kids have gone to college and they’re adults, and they’re trapped in 3,000-square-foot homes out in the outer suburbs, because if they sell it, there’s nowhere to go,” said Sen. Schuyler VanValkenburg, D-Richmond, during debate on the bill Monday. “It is not as if we legalize this, we would have a flood of people living in ADUs. That’s just not the reality. This is a small piece of the puzzle.”

Lerch said Virginia’s counties don’t oppose ADUs, just Salim’s legislation.

“Our stance is there’s really not a one-size-fits-all in terms of how an accessory dwelling unit ordinance should be written,” said Lerch. “These things are really expensive to build, so even though you might have an ordinance that allows them by-right, you have to do firewall separation.”

Lerch mentioned there are ways to make ADUs less costly, noting that Washington, D.C., recently created a $2.5 million pilot program to help support their creation.

“Make this a way for people to make income that helps them stay in place without them doing away with the rental market at the local level,” Lerch said.