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Homeowners in AZ Fight to Keep Vacation Rentals Open

May 11, 2015

Jerome, Ariz.—From San Francisco to New York, cities with bustling tourism economies are cracking down on homeowners offering their private homes as vacation rentals. Responding to the growing popularity of internet rental services like AirBnB and VRBO, powerful hotels and vocal neighbors are urging cities to ban or severely regulate private short-term rentals, often hurting local tourism and violating people’s rights. But homeowners in tiny Jerome, Arizona, are fighting back.

In 2012, Gretchen Groseta’s family bought a century-old home to rent to people visiting historic Jerome, a former mining community turned artist enclave nestled into a hillside about 2 hours North of Phoenix. After the mine’s closure, residents sustained the town by transforming it into one of Arizona’s most popular tourist destinations. For years, property owners have opened their homes to vacationers, and Gretchen’s family planned to do the same. But after purchasing the home and restoring it to its former grandeur, the Town announced a ban on short-term vacation rentals.

Last week, the Groseta family and three other homeowners in Jerome filed notices with the Town that their constitutional rights have been violated and that they are entitled to compensation under Arizona’s Proposition 207. Prop. 207 is a voter enacted protection requiring governments to pay property owners when new regulations reduce the value of their property.

Jerome officials are trying to evade Prop. 207 by claiming that short-term vacation rentals—which were previously permitted in Jerome—have actually been forbidden all along. By claiming that no new land restriction has been enacted, they are hoping to avoid compensating property owners.

“These homeowners have followed every rule the Town has set out for them, and all they are asking for is that the rules aren’t changed in the middle of the game,” said Jared Blanchard, a staff attorney with the Goldwater Institute who is representing the property owners. “If you buy a house with the intention of using it as a rental property and the government says that’s allowed, the government can’t come back after-the-fact and refuse to let you rent the property out without compensating you.”

Banning short-term vacation rentals hurts property owners who are relying on rental income to pay the bills and families seeking affordable vacation lodging. But Jerome’s story is part of a growing national trend to limit short-term rentals, allowing private property to be micromanaged by local officials who are often influenced by special interests who stand to benefit from restricting others’ rights.

“These families have put countless hours and hundreds of thousands of dollars into their Jerome homes, bringing new life to dilapidated, century-old houses, and providing visitors with an experience they can’t get anywhere else,” said Christina Sandefur, vice president for policy at the Goldwater Institute. “If the Town now wants to restrict these homeowners’ rights, it must do so openly and transparently through the legislative process where property owners’ voices can be heard, and it must ensure the costs of regulation are shared by the community as a whole, not shouldered by individual property owners.”

Last week’s filing of a notice of claim by four property owners begins the administrative appeal process required under Prop. 207. A hearing will be set to determine the lawfulness of the Town’s new interpretation of its zoning code.

Click here for more information about Jerome’s ban on vacation rentals.

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