Missoula to intensify efforts to bring short-term rentals into compliance – Montana Free Press

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Of Missoula’s approximately 585 short-term rentals, nearly half are unregistered with the city, according to planning officials. 

As cities across Montana and the United States grapple with short-term rentals’ effects on the housing market, Missoula has improved its monitoring to help grasp the scope of the local situation and begin addressing the more than 200 unregistered rentals.

“We want to bring folks into compliance for health and safety,” said Eran Pehan, Missoula Community Planning, Development and Innovation Department director. “We also want to collect this data to better understand the story of short-term rentals in our community — the positive benefits, how do they challenge the housing market and what does it mean in moving forward with regulations. It helps us make really informed decisions.” 

Missoula adopted its first ordinance regulating tourist homes in late 2016, requiring owners to get a business license and a health and safety inspection. The city did some basic education on the new rules and has enforced them on a complaint-driven basis like other codes, Pehan said.  

Although not specified in the tourist home regulations, under the city council’s direction Missoula does not require owner-occupied units to register, Pehan said. That includes rentals that are part of the residence, such as single rooms or accessory dwelling units, as well as if the unit is the owner’s primary residence.  

“We hear a good deal from folks with short-term rentals in an apartment located in a home or an ADU, … revenue from that short-term rental is an important way Missoulians can finance and afford to purchase a home,” Pehan said. 

Although it can be tricky to confirm ownership if it’s listed under an LLC or trust, the majority of short-term rentals in Missoula are owned by individuals or businesses located in the community, Pehan said. 

In 2021, the city council approved a study of how tourist homes were affecting the local housing market. Resulting recommendations included increasing the registration fee, which hadn’t changed since 2016, and more actively monitoring short-term rentals, Pehan said. 

Last February, the council increased the registration fee from $60 to $555 and the renewal fee from $31 to $206 to help cover the costs of staff time. The council previously budgeted money to pay for the monitoring software. 

“We need to add to our housing supply, and I think it’s reasonable to consider businesses [as] businesses and not consider businesses residential pieces of property.”

Missoula council member Daniel Carlino

Council member Daniel Carlino wanted the city to take further steps, and in October he proposed banning new short-term rentals unoccupied by the owner in residential zones, only allowing them in commercial or industrial areas. Carlino spoke in favor of mixing more businesses into residential neighborhoods to improve walkability but didn’t want tourist homes to be the exception. 

“We need to add to our housing supply, and I think it’s reasonable to consider businesses [as] businesses and not consider businesses residential pieces of property,” Carlino said during a Land Use and Planning Committee meeting on Jan. 24. 

Short-term rentals account for 1.5% of Missoula’s housing units and are clustered around downtown, the Riverfront neighborhood and the University District, according to city mapping presented at the meeting. As of October, 63% of short-term rentals were located in residential zones, 21% in business or commercial areas and the city was unable to locate the remaining 16%, Pehan told the council. 

While the council agreed on its support for mixed-use neighborhoods, many members wanted any zoning changes like the one proposed to be worked out through the ongoing code reform. Carlino’s proposal was voted down 10-2. 

Short-term rental regulation varies across Montana. The state requires tourist homes — defined as non-owner occupied units — to receive an inspection and license from the health department, according to the Department of Health and Human Services website. Operators must also pay state lodging taxes. 

As listings have increased in the last decade amid a statewide housing crunch, some cities with high rates of short-term rentals have taken additional steps to regulate them. 

In October, Missoula’s software mapped 587 short-term rentals, with a majority located in residential neighborhoods. Credit: courtesy city of Missoula

In October, Bozeman’s city commission voted to ban new non-owner-occupied short-term rentals, while grandfathering existing permitted units. The city had 35.3 short-term rental listings per 1,000 households, compared to 11.8 listings per 1,000 in Missoula, according to a 2022 data report from Granicus, the software Missoula uses to monitor tourist homes. 

While Missoula’s total number of short-term rentals has remained stagnant for the last three years, other cities compared in the report have likely seen numbers increase since 2022, Pehan said. 

Resort towns like Whitefish and Jackson Hole, Wyoming, have a 1,000 to 2,000% higher rate of short-term rentals than Missoula, according to the 2022 data. Whitefish regulates short-term rentals as a business use and allows them in commercial or resort zoning districts only, Pehan said. 

Kalispell considers short-term rentals a residential use and requires a conditional-use permit, Pehan said. Great Falls, Helena and Livingston codes don’t specifically define short-term rentals, she said. 

It’s difficult to predict what regulations would help Missoula get ahead of problems seen in other cities, Pehan said during the January meeting. Aggressive attempts to regulate short-term rentals in New York City, for example, increased the number of illegally operating rentals, she said. 

“I don’t have a good answer for that, other than the most powerful indicator of whether short-term rentals are gonna grow or stagnate or even decline in a community at this point in time seems to be the market, not how a community chooses to regulate them,” Pehan said.

Missoula’s heightened efforts to bring its own hundreds of illegally operating short-term rentals into compliance will start in the next couple of months, Pehan told Montana Free Press.  

The city will mail notices to owners of the 263 unregistered rentals it’s identified and staff will walk them through steps of how to apply and get in compliance, Pehan said. The city won’t fine tourist home owners that have been operating while unregistered as long as they work to come into compliance, she said. 

“I think our primary message right now is we want to be partners in helping people understand how to safely operate a short-term rental in our community,” Pehan said. “Whether they’re considering operating one or they already do, people can call us with questions or to figure out requirements.” 

As of December, 114 short-term rentals are registered and in compliance with the city and 19 have applications in process, according to city data. Staff identified 11 primary residences and 40 partial living units not required to register. 

Fourteen tourist homes are still operating after the city rejected their applications. Those rejections could be for a variety of reasons, including inadequate fire protection or lack of onsite laundry service, Pehan said. Often, those problems can be remedied, but some — like a lack of safe fire exits or windows that don’t meet code — are either extremely costly or impossible to fix, she said.  

“Our goal is to help bring people into compliance, not to identify issues to shut them down,” she said. 

Ultimately, if an unregistered tourist home continues to operate, staff would refer the case to the city attorney. The office would send a final warning and, if the owner doesn’t comply, cite them in municipal court, Ryan Sudbury, Missoula civil city attorney, said at the meeting on Jan. 24. 

Many tourist homes are likely unregistered because owners don’t know about the requirement or what it entails, Pehan said. When asked about the benefits of registering, Pehan said the inspection reassures renters of a unit’s safety and improves marketability. 

Over the last six months, the community planning department has been tracking bottlenecks within the registration process, Pehan said. The department reviews the application and organizes building and fire inspections, she said. Staff typically complete those steps in about three weeks. 

Short-term rental operators must also apply for a health license and receive an inspection from the Missoula City-County Health Department. In the last three to four years, the COVID-19 pandemic pushed those reviews to the back burner, Pehan said. While the timeline is improving, the health reviews take an average of 20 weeks, and city staff are working with the department to streamline the process, she said. 

Missoula City Council member Jennifer Savage is particularly familiar with these delays, as she’s worked for about 16 months to get her short-term rental registered. 

After applying to the city and health department in August 2022, Savage and her husband didn’t hear back until inquiring in January 2023, she said. In September, Savage scheduled a building and fire inspection for later that fall and passed. 

Late last year, the health department asked Savage to apply after apparently losing the paperwork she delivered in 2022, she said. After reapplying, Savage’s case has been assigned to a sanitarian, with the review expected to take 35 to 45 days, she said. 

While she supports the city’s plans to monitor short-term rentals and encourage compliance, Savage said owners need a timely process. Expanded outreach and education on the regulations, as well as clarifications in the language, would help applicants, she said. 

“We have to have a pathway for people to be able to successfully register their short-term rentals, and right now in Missoula, there have been many roadblocks in that pathway,” Savage said.

Savage is working with fellow council member Stacie Anderson and staff to bring forward a proposal on Feb. 14 requiring short-term rentals to include permit numbers in online listings. The requirement should encourage registration like it has in Bozeman and Whitefish, Pehan said.

However, Missoula’s application process needs to be streamlined so people aren’t required to do something they can’t achieve, Savage said. As Missoula does not have an overabundance of tourist homes like other communities, the rentals can provide economic benefits to the city and owners, she said. 

“I think there’s a narrative out there that all short-term rentals are bad. I don’t agree with that, just like I don’t think they’re all owned by out-of-state landlords,” Savage said. “I think they’ve been a tool for many people to stay in their houses, pay their mortgages and live in the Missoula community, which we all know can be challenging. … I think that’s sometimes a story that doesn’t get told.” 

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