North Texans in heated debate over bill to protect short-term rentals

As District One City Councilman in Arlington, retired airline pilot Charlie Parker represents thousands of residents who live in the shadow of the city’s treasured entertainment offerings, including Six Flags Over Texas, Hurricane Harbor and the gleaming stadiums that serve as home to the Dallas Cowboys and Texas Rangers baseball club.

That’s a good thing, he says, but it has also led to constituent complaints stemming from throngs of out-of-towners, often college students, who trek to Arlington for a game or other event, rent a house for a night or two, and jolt an otherwise peaceful neighborhood with dusk-to-dawn partying.

One party that “went nuclear,” he recalled, featured exotic dancers outside smoking pot and an ambulance roaring through the neighborhood at 3 a.m. to transport a belligerent occupant who was Tased by police.

Now Parker fears those scenes could become even more frequent under legislation being considered in Austin. “The City of Arlington does not particularly care for Hancock’s bill,” the 67-year-old former Navy fighter pilot said with obvious understatement.

Hancock is State Sen. Kelly Hancock, a Republican from North Richland Hills who chairs the Senate Business and Commerce Committee. Hancock’s bill is SB451, which would prohibit counties or municipalities from banning short-term rentals, defined as those under 30 days.

Texas cities and homeowner groups, including some who are combat-hardened from battles over short-term rentals at the local level, are mustering a fierce counteroffensive to SB451, saying the bill would undercut municipal zoning laws and potentially erode the character of residential neighborhoods.

The Texas Municipal League, which represents more than 1,100 cities, is opposing the bill along with individual cities such as Fort Worth, Arlington and Austin. Two Fort Worth officials — Assistant Planning Director Dana Burghdoff and Senior Assistant City Attorney Melinda Ramos — testified against the bill at a recent hearing.

Conversely, Hancock and the bill’s supporters see SB451 as an important property-rights measure that would eliminate an inconsistent patchwork of local enforcement and further accelerate the short-term rental business that has blossomed as a vital part of the Texas tourism industry. Short-term rentals — which are particularly visible through prospering online rental platforms such as HomeAway and Airbnb — have contributed more than $1.5 billion in economic activity in Texas and supported the creation of more than 16,000 permanent jobs, Hancock said.

In Fort Worth, short-term rentals are prohibited in neighborhoods zoned solely for residential use but, with escalating demand for short-term rentals, officials have been studying possible changes that could allow case-by-case consideration for special exceptions, similar to policies now used for bed-and-breakfasts.

But Burghdoff and Ramos, along with officials from other cities, say the bill takes a one-size-fits-all approach that would automatically allow commercial enterprises serving essentially the same functions as hotels alongside homes in neighborhoods originally intended solely for residential use.

“It will change the character of the neighborhood,” Burghdoff said in a telephone interview. “We know the demand [for short-term rentals] is there, and … we think we need to accommodate it, but we just need to do it in a way that’s respectful of the property owners who bought their property for a residential purpose and bought in a neighborhood expecting residential neighbors.”

One concern facing city officials, Ramos told the committee, is the potential of an ultimate “tipping point at which a neighborhood changes from being residential in character and becomes transient in nature due to the concentration of short-term rentals.”

Arlington currently has no zoning regulations governing the location of short-term rentals but asks short-term rental enterprises to register with the city to pay a hotel occupancy tax, said Jennifer Wichmann, the city’s management resources director.

At the end of the 2016 fiscal year, Wichmann said, Arlington collected a total of $48,136 in taxes from 22 properties classified as homeowner rentals. Over an 18-month period from January 2015 to June 2016, officials responded to 15 calls involving short-term rentals for a variety of incidents that included alarms, investigations and property crimes, Wichmann said.

Wichmann said the city opposes the bill, at least in its current form, but is willing to work with Hancock and his staff on possible changes.

“The current draft of the bill would not only prohibit us from doing any sort of regulating [of short-term rentals], but [it] also makes paying taxes optional,” she said.

Striking a balance

The committee has heard testimony on the bill but has not announced a timetable for a vote that would send it to the full 31-member Senate, raising the possibility that the measure could undergo further refinement before it lands on the Senate floor. “What we’re trying to do is strike a balance here,” Hancock said at a recent committee hearing.

Hancock and other proponents say that cities would still be empowered to set residential zoning restrictions and could rein in disruptive behavior through traditional regulations such as nuisance ordinances. Cities would also be authorized to prohibit short-term rentals that house sex offenders, sell drugs or alcohol, or operate as a sexually oriented business.

Some opponents have noted that Hancock would seemingly be spared from any adverse affects of the bill because the measure exempts property-owners associations and Hancock belongs to a homeowners association in his North Richland Hills neighborhood.

Hancock said the exemption is “consistent with the premise of the bill” by prohibiting governments from restricting private citizens “from entering into mutually agreed-upon contracts or arrangements regarding the use of their private property.

“SB 451 exempts private organizations such as Homeowners Associations because, whether you like them or can’t stand them, they are voluntary cooperative agreements between multiple private property owners,” said Hancock. “This applies whether the contract is between a property owner and a short-term renter or a group of property owners who willingly decide not to allow short-term renting. They have the right to make that choice, but shouldn’t have a ban forced on them by government.”

SB451 has broader implications as one in a series of measures that city officials see as a state assault on their power to control issues at the local level. The trend gained traction in 2015 when state lawmakers effectively overturned a local fracking ban in Denton by asserting their authority to regulate energy development. It also has been evident in other state-vs.-local disputes over plastic bag prohibitions and ride-sharing services such as Uber and Lyft.

Hancock’s bill has further raised the profile of the surging short-term rental industry, as evidenced by the growth of HomeAway and Airbnb, both of which have endorsed SB451. HomeAway was acquired by Expedia Inc. for $3.9 billion in 2015. Airbnb, which has an estimated valuation of $25.5 billion, is the world’s third-largest privately held start-up, according to a report by R Street, a free market think tank that supports efforts to boost the “sharing economy” that includes ride-sharing and the short-term rental market.

The Web-based platforms serve as a conduit for individuals to rent homes, apartments and even single rooms to travelers, often for high-profile events such as sports contests or concerts.

Bennett Sandlin, executive director of the Texas Municipal League, said opponents of Hancock’s bill typically don’t have a serious quarrel with homeowners who rent out their residences during out-of-town trips. “Those are generally not a problem,” he said.

Instead, he said, the outcry focuses on absentee investors who buy multiple residences in neighborhoods, sometimes pack them with extra beds, and rake in hefty profits at times of peak demand, such as Austin’s SXSW or an event at AT&T Stadium in Arlington, home of the Dallas Cowboys.

Party houses

Gary Daley, a pharmacist who lives in north-central Arlington, recalls fraternity-type parties from a year or two ago that were held at an investor-owned house across the street from his home, often producing a line of cars that blocked traffic in his neighborhood and left the street littered with beer bottles. Loud music frequently poured out of the open front door. “They were coming out the next day carrying sleeping bags,” he said.

The party house later changed ownership and the neighborhood has generally been calm, he said. “But that doesn’t mean it couldn’t start back up tomorrow,” he added.

Austin, with SXSW, music festivals and other entertainment venues, served as an early battlefield in the debate over short-term rentals as angry homeowners pressed for a crackdown by the city.

In 2012, the council imposed regulations that included permit requirements and paying hotel taxes, but continued homeowner pressure led to last year’s enactment of a ban on investor-owned short-term rental facilities in residential areas by 2022. The ban would be overturned by Hancock’s bill if it becomes law.

Jessica Neufeld, an Austin attorney, recalls how the issue turned strangers into allies as like-minded homeowners showed up at City Council sessions and discovered they shared a common mission.

“Everybody realized they lived next door to a short-term rental and were being terrorized,” she recalled.

In Neufeld’s case, she said, the terror came from next door when the neighboring residence became a frolicking scene of cars, noise and sometimes fireworks before eventually being sold to a “lovely” family of four.

“We were generally concerned about being trapped in that home,” she said in recalling the times she and her husband considered selling their house. “Would you purchase it if you know that next door was a full-time hotel?”

Neufeld ultimately became a leader in the Austin neighborhood movement and now is preparing for a statewide fight as she and her allies gear up to take on SB451.

“It would disrupt a lot of families if Hancock’s bill gets passed,” she said.

This story was originally published March 25, 2017 at 7:07 PM with the headline "North Texans in heated debate over bill to protect short-term rentals."