HRA Meeting Date: November 7, 2024
To: Members of the Housing and Redevelopment Authority
From: Melissa Hanson, Housing Coordinator
Jake Reilly, Community Development Director
Risi Karim, Assistant to the City Administrator
Mike Morehouse, Building Official
Mathias Hughey, Associate City Planner
Claudia Garcia, Spanish Interpreter
Title
Housing and Redevelopment Authority Considers Recommendation to Adopt Revisions to Rental License Ordinances.
Body
Action Requested:
The HRA will consider recommending proposed revisions to the Land Development Code related to the licensing of rental properties to the City Council
Summary Report:
At the August 1, 2024, HRA meeting, Staff introduced concepts and language associated with the Phase II Rental License Updates. Attachment 1 is the staff report that was provided and Attachment 2 is the related PowerPoint Presentation.
Based on the brief feedback that was received by the HRA Board, staff has prepared the first two ordinances associated with the Phase II Rental License process to be moved forward to Council:
• Addressing the limitation on rental properties in low-density neighborhoods (Attachments 3 & 4)
• Address Short-Term Rentals (Attachments 5 & 6)
• A draft ordinance reflecting the above for future consideration by Council (Attachment 7)
Background
The policies/ordinances requested for consideration in the Phase II recommendations include:
• addressing the limitation on rental properties in certain areas of the city,
• defining short-term rentals and adopting a licensing process and related ordinance regulating short-term rentals,
• an inclusionary housing ordinance,
• a tenant protection ordinance; and
• an ordinance addressing source of income protections.
The following ordinances and programs are also being researched for future HRA Board and Council consideration:
• a time of sale notification requirement for manufactured homes,
• a tax abatement tool to help fund construction of Accessory Dwelling Units (ADU); and
• a lot rent cap at Manufactured Home Communities.
Limits on rental properties in low density neighborhoods
To address the limitation on rental properties in low-density neighborhoods, staff has prepared updated language to an existing City ordinance, Ord. No. 883, adopted August 18, 2008. A version with changes shown in strikeouts (removed text) and underlines (new text) and a clean version are attached.
When both colleges were struggling with housing all admitted students on campus, the City adopted a policy limiting college rentals in the low-density neighborhoods surrounding the colleges. During the past five years, both St. Olaf and Carleton Colleges have made concerted efforts to house 95% of their respective student populations on-campus. The restriction has also, unintentionally, resulted in fewer rental units available to the public.
Policy change highlights:
• Clarifying the definition of block face.
• Exempting owner-occupied/homesteaded properties from the 20% limitation.
Short-term rental license ordinance
Short-Term Rentals (STRs) are generally defined as residential rental units being rented for fewer than 30 days at a time. Short-term rentals can serve as a viable alternative to an Accessory Dwelling Unit for additional income for property owners, including those who have a homestead exception on their property taxes because they live in the home most of the year.
Within the last decade, however, STRs have exploded as a substitute for traditional vacation and business travel lodging such as hotels, motels, and bed and breakfasts. State statute allows for short-term rentals to qualify to have the lodging tax applied. When the city is not able to register short-term rentals, it limits the ability for the Northfield Convention and Visitors’ Bureau (CVB) to be allocated the full municipal portion of the lodging tax.
Most importantly, without regulation and licensing of short-term rentals in Northfield concerns regarding life-safety, regulation, enforcement, and consumer protection cannot be addressed, potentially creating a situation in which a property owner may be able to rent out a unit on a fewer-than-30-day basis that does not meet the City’s requirements for a standard rental unit. The proposed ordinance is crafted to ensure all life-safety concerns are addressed and that short-term rentals are held to the same standard of all rented residential units, regardless of the renter’s tenure, without placing undue burden on the City’s ability to maintain, review, and enforce the rental licenses.
The proposed ordinance:
• Defines short-term rental in Chapter 14 - Business and Chapter 34 - Land Development Code.
• Adds parameters common to the regulation and licensing of short-term rental units to minimize potential negative externalities related to having lodging-style facilities in residential neighborhoods.
• Licenses these rentals like any other rental property in the City. This process affords for neighbors and officials to address any potential violations. It also minimizes the burden on City staff to enforce such license and has the potential to prevent additional burden on city staff or resources regarding building, fire, and police protection and prevention.
Alternative Options:
The HRA could recommend one, both, or neither of the proposed ordinance updates. The HRA could also recommend adoption of the ordinances by Council with identified comments and feedback for consideration.
Financial Impacts:
Potential cost: Staff time
Potential benefit: Rental license income; lodging tax revenue for CVB
Tentative Timelines:
August 1, 2024 HRA review and feedback
November 7, 2024 HRA review and potential recommendation
November 21, 2024 Planning Commission public hearing and review
November 26, 2024 First reading at City Council
December 2024 Second reading and summary publication
Q1 2025 Implementation