Do you live next to an Airbnb? Most in Denton are unregistered

Most aren’t paying the monthly 7% hotel occupancy tax, nor are they registered with the city, as required by the short-term rental ordinance, according to a Feb. 27 presentation by Ron Menguita, Denton’s principal planner, to the city Development Code Review Committee.

In fact, only eight short-term rentals in Denton are paying the hotel occupancy tax. Seven are registered, while three registrations have expired. Twelve were denied or canceled. City staff predicted between 200 to 250 are currently operating unregistered in Denton, based on listings seen on sites like Airbnb.

The city’s short-term rental requirements and regulations states that “no person shall advertise, offer to rent, or rent, lease, sublease, license, or sublicense a residential property within the city as a short-term rental for which a registration has not been properly made and filed with the Development Services Department.”

City staff contacted Airbnb about this issue but claimed in the Feb. 27 presentation that the short-term rental company has been “unresponsive.”

The Feb. 27 presentation was a response for the City Council to amend the 2019 development code regarding short-term rentals after the 5th Circuit Court ruled in Hignell-Stark v. City of New Orleans that it was unconstitutional to require primary residence for short-term rentals registrants, as Denton currently does.

It also discriminates against out-of-state real estate owners who want to offer short-term rentals and opens the city up for possible litigation, Menguita pointed out in the presentation.

Now the Development Code Review Committee is addressing this issue as a high priority at its bimonthly meetings to find what one council member called the “sweet spot” between those who don’t want short-term rentals in their neighborhoods and the property owners who want to offer their spaces for rent.

Those short-term rental owners must now include those who live out of state or may not dwell at the residence, according to the 5th Circuit Court ruling. It was the first substantial ruling related to short-term rental ordinance, and although it’s technically limited to the 5th Circuit, it offers insight into what other rulings could likely look like and impact municipalities around the country, a Denver law firm pointed out in an October report on its blog, Rocky Mountain Real Estate Law.

That impact is now being felt in Denton. The code review committee’s first meeting to discuss amendments to the development code took place Feb. 27. Members discussed it again at their March 13 meeting and plan to continue the conversation at the next meeting on March 27.

“In principle, I agree with them,” said District 3 council member Jesse Davis, who chairs the Development Code Review Committee. “Some of these regulations were to prevent this proliferation [of short-term rentals] into single-family neighborhoods.

“People who don’t want them say they are not safe and [that it is] not good for the city to have mini-hotels in the middle of neighborhoods.”

Established in October 2019 as part of the updated development code, the short-term rental rules, Section 5.35(T), require property owners offering short-term rentals to register with the city.

The rules were adopted in January 2020 by ordinance, Ryan Adams, Denton chief of staff and director of marketing and communications, said in a Thursday email to the Denton Record-Chronicle.

Valid for a year, the short-term rental registration costs $100 and requires property owners to meet certain minimum standards and restrictions.

City staff define short-term rentals as the rental of an entire dwelling unit and includes any residential property rented for a period of fewer than 30 days and homes listed on Airbnb, Vrbo and similar booking websites.

All short-term rentals must pay a hotel occupancy tax every month. The eight short-term rentals in Denton that pay the tax are self-reporting, according to the Feb. 27 presentation.

Once the registration receives approval, a notice with information for a 24-hour complaint hotline is sent to all property owners within 100 feet of the rental property.

On the city’s website, city staff points out that the regulations don’t prohibit short-term rentals but instead allow the city to monitor them and make sure they meet certain standards “in order to protect the integrity of Denton neighborhoods and the safety of the community.”

The short-term industry has been experiencing an explosion for several years, and 2022 brought new peaks of added supply and demand, according to a Jan. 23 Forbes report.

District 2 council member Brian Beck, who also serves on the Development Code Review Committee, said city staff reached out to some of the vendors who offer short-term rentals in Denton. Some of the short-term rental websites, Beck said, don’t offer a mechanism to collect the hotel occupancy tax.

Airbnb isn’t one of them, Beck said.

Airbnb couldn’t be reached for comment by deadline.

Beck stressed that guests who stay at short-term rentals do contribute to local businesses. Denton is a known music city and a destination for people to attend such events as the Denton Arts & Jazz Festival, the Denton Blues Festival and the Denton Black Film Festival.

In the Feb. 27 presentation, city staff offered several reasons to amend the code. They proposed clarifying the existing code language to include maximum occupancy, maximum and minimum parking requirements, and a prohibition against using a home as a party venue.

They suggested implementing additional specific-use standards, such as not allowing RV or travel trailer short-term rentals, implementing enforcement and inspections, and addressing whether apartments or bedrooms should be allowed as short-term rentals.

City staff also offered examples of what short-term rental regulations look like in Dallas, Galveston, San Marcos and Arlington.

For example, Dallas is currently developing proposed standards for a short-term rental registration and regulation ordinance since the city has no standards for the use of residences as short-term rentals. Instead, the Dallas tax code considers them to be a lodging use to collect Dallas’ hotel occupancy tax. Chapter 27 of the tax code exempts short-term rentals that pay the tax from registration and inspection requirements, according to the Feb. 27 presentation.

Menguita also offered an example of the proposed changes to the short-term rental ordinance. One change would be tweaking the language about the city reserving the right to inspect the space to determine compliance with the Denton development code and other city codes, changing the language from inspecting “the residential premises” to “the dwelling unit or bedroom annually.” If the city finds a violation, staff will then issue a written notice of the violation and set an inspection date for it to be corrected prior to “renewal of registration,” instead of “its occupancy,” as the ordinance states now.

City staff also suggested amendments such as requiring one parking space per guest room or requiring a local emergency contact other than the property owner who lives within 20 miles of the property and is reachable on a 24-hour hotline. Beck said the local person could be a property management company.

Some of the questions they’re trying to answer include: How do you make someone who is offering the property internationally collect Denton’s hotel occupancy tax? If the short-term rental hosting site doesn’t have the mechanism to collect the tax, how do you collect it?

They could also decide to separate short-term rentals into their own category, separate from hotels and motels, Beck said.

Residential property owners, in some cases, could be simply renting their home for a few weeks while they’re on vacation in Florida, not necessarily doing it on a daily basis like a Hilton or Motel 6.

“In our dialogue, I haven’t seen an appetite to treat it dramatically differently than motels and hotels,” Beck said.

Beck said it has been difficult for the city to keep up with how many short-term rentals are operating in Denton because only two staff members are monitoring them. He indicated that a vendor could also be hired to handle it.

Once the Development Code Review Committee finishes with its recommendations, Beck said the short-term rental issue will go before the Planning and Zoning Commission for commissioners to review and then the City Council.

Committee members warned staff that a public hearing would need to be held with community stakeholders before the council votes to approve any changes, Beck said.

Until then, Beck said they’re seeking input from residents. Residents can also attend the Development Code Review Committee meetings to provide feedback, in addition to emailing the city or council members.

“This is a big deal,” Beck said. “People are lined up on both sides from ‘Never, never ever’ to ‘Don’t take money from us.’”