FAYETVILLE — Planning commissioners expressed disappointment last week when the owners of two new Housing units near the Historic District requested that their homes be used as short-term rentals. They denied both requests.

The commissioners said that when the city redeveloped about an acre on Fletcher Avenue northeast of Dixon Street in December 2020, they envisioned smaller, more affordable homes being built that could potentially provide workforce housing for permanent residents.

Ten houses were built – five two-story townhouses, each consisting of two apartments sharing a wall. However, two property owners want to use them as short-term rentals for most of the year, and a third request is pending at the commission’s March 13 meeting.

This means that 30% of new homes will function primarily as businesses, rather than easing the city’s housing market, the commissioners said. The development is indicative of a broader trend in the city, with out-of-town investors turning new homes into tenements rather than residences, some commissioners say.

One commissioner suggested that the city authorities introduce some kind of temporary restrictions on when the owners of a new house can rent out their housing for short-term rent.

The pool of working-class people who want to live in the city is smaller and at a financial disadvantage compared to a much larger group of investors from other cities who are in good standing and interested in visiting the city from time to time, Commissioner Porter Winston. said during a meeting on Monday.

“This is a David and Goliath situation and we have to find a way to level the playing field,” he said. “It’s just too unbalanced.”

What is the problem?

About 10 neighbors spoke out against a pair of short-term rental requests on Fletcher Avenue, saying they felt they were victims of some sort of bait and switch. Many of these neighbors also opposed the rezoning proposal, which allowed for the development of townhouses in 2020.

Justin Minkel, who lives northeast of the townhouses, said planning commissioners and city council members who backed the rezoning at the time presented the idea as worth the pain of neighbors because the development would increase the city’s available housing stock.

However, those houses were selling at a high price, and now three out of 10 can be rented out short-term, he said.

So far, nine out of 10 apartments have sold for an average price of $465,000, according to the Washington County Property Registry. The range ranged from $370,000 to $530,000. According to the latest report from Arvest Skyline, the average cost of a home sold in the city in the first half of last year was $388,208. The median cost of new building permits, more accurately reflecting the cost of a new home, was $413,174.

“I think we’ve all sort of come to terms with the idea that we’re making this sacrifice, whether we like it or not, for a good reason. We’re going to increase the amount of housing, we’re going to increase the amount of housing for the workforce, Minkel said. “It doesn’t look like that’s what’s happening.”

Sterling Hamilton, a townhouse developer, said the project gave the city what it wanted. Homes in the area, many in the Washington Willow Historic District to the west, typically cost over $1 million. According to him, by these standards, townhouses are relatively affordable.

According to Hamilton, there’s nothing a developer can do about what a property owner does after buying a home. Disappointment that the three townhouses are potentially available for short-term rental points to the city’s severe shortage of supply to meet housing demand, he said.

In order for developers to build smaller and more affordable housing somewhere near the city center, they usually have to rezone the land first. It can be a difficult process, Hamilton said, with developers stuck between what the city wants and neighbors who oppose new development.

“If rezoning wasn’t the standard for infill, then perhaps we would have enough infill where short-term rentals were a smaller percentage of it,” he said.

In-situ development refers to the practice of building on vacant or underutilized lots in the center of a city, typically a city center.

If it were easier for developers to build new homes near downtown, Hamilton said short-term rentals might not be such a problem.

“It’s like you say it’s caused by rezoning, and I’m saying restrictive land use is the cause,” he said.

There once stood two single-family houses, which are now townhouses. Even if the three townhouses were given short-term leases, that would leave seven for new homeowners, up five homes from before, Hamilton said.

The two owners who were denied short-term leases by the Planning Commission can appeal the decision to the City Council. It would take three council members to file an appeal.

Mike Scott of Little Rock is one of the property owners whose request was denied. He said that the arguments presented to reject his request made no sense. The commission on Monday approved six other requests for short-term property leases that are likely less valuable than his, he said. If the commission was concerned about a withdrawal from the available housing stock, it should have denied all other requests, Scott said.

Scott said he and his wife planned to stay at the residence when they were in town visiting their son, a freshman at the University of Arkansas. The couple were looking for a source of income to replenish the mortgage. Also, renting the house long-term would mean they couldn’t come in whenever they wanted, since long-term leases usually last a year, he said.

He saw his purchase as a positive for the city because using the apartment as a short-term rental would generate tourist dollars.

“I’m sure there’s an affordable housing issue, but it seems to be more about the zoning aspect rather than the short-term rental aspect,” Scott said.

Trusting the process

The city council adopted short-term lease rules in April 2021. Prior to this, the lease was illegal, although hundreds were in operation.

The City Code describes short-term leases as properties rented out to tenants for less than 30 days. The City classifies the lease as Type I or II. In a Type I rental, there is a permanent resident in the premises and the room is rented out. In Type II rentals, guests do not reside permanently for most of the year.

Short-term leaseholders must obtain a business license and building security clearance in order to work legally in the city. Type II rental housing owners must take the additional step of obtaining a conditional use permit from the Planning Commission.

A maximum of 2% of all housing units in the city can be short-term leased. However, property in a zoning area where hotels are allowed does not count.

According to the online map, there are 351 Type II rental units and 87 Type I rental units registered in the city, for a total of 438 units.

According to the US Census Bureau’s American Community Survey, there are 44,706 housing units in the city. The 2% cap results in a maximum short-term rental allowance of 894.

Among the total number of residential units in the city, 40,104 are occupied and 4,602 are vacant, making the vacancy rate in the city 11.5%. That’s about the national average, said Scott Bernstein, founder of the Neighborhood Technology Center, a national organization that advises cities on building fair, sustainable, and sustainable neighborhoods, according to its website.

However, “vacant” means that the living space is not occupied. Housing can be dilapidated, or in an inconvenient or undesirable location, or cost so much that most people can’t afford, he says.

The city has many more detached single-family homes than any other type of housing, and about two-thirds of households have one or two people, Bernstein said, according to the American Community Survey. This means the city’s housing stock is not meeting the demand of people looking for smaller homes, he said.

“For places, and Fayetteville is one of them, where you can end up having the majority of one-two-person households, do you need those big houses? The answer is no, you don’t need it.” – Bernstein said. “So you don’t build housing types that are appropriately sized for the population. I think this might be where short-term rentals can hurt you.”

The city doesn’t have the data to know what percentage of housing estates built in the past few years have become short-term rentals, said Jessie Masters, development analysis manager. However, it is happening. Planning commissioners said Monday they believe most of the short-term lease requests they considered that night were likely new developments.

Concerns such as the impact on affordable housing are why the city has adopted short-term lease rules and established a review process, Masters said.

“We’re lucky in Fayetteville that we have an ordinance that allows us to regulate short-term rentals and we can look at those things,” she said. “The conditional use authorization process does give the Planning Commission some discretion in deciding whether a short-term lease is appropriate. I think you’ve seen it happen in Fletcher.”

The Planning Commission voted 7-1 to deny two requests for short-term leases on Fletcher Avenue. Winston, Joseph Holcomb, Andrew Brink, Mary McGetrick, Matt Johnson, Mary Madden and Jimm Garlock voted against. Chairperson Sarah Sparkman was the only dissent. Quintin Canada was out on Monday.

Sparkman said she supports the requests because the city council has set narrow criteria for considering the appropriateness of a short-term lease, such as parking capacity, the concentration of other nearby short-term properties, and any previous zoning or city code violations related to the property. According to her, both requests met these requirements.

In addition, the City Council reversed the Planning Commission’s denial of past requests for short-term leases, and Sparkman said she wants to follow the council’s policy.

City rules regarding short-term rentals may not matter anytime soon. A bill sponsored by state senator Joshua Bryant, R-Rogers, that would bar cities from regulating short-term rentals, is moving through the Legislature. The bill has passed the Senate and is under consideration by a committee of the House of Representatives.

Johnson told his fellow commissioners that if the bill becomes law, people’s frustration with short-term leases will only deepen.

“It will be incredibly disruptive to our communities,” he said.

A row of duplexes is visible Thursday, March 2, 2023, on Fletcher Avenue northeast of Dixon Street in Fayetteville. The city’s planning commission last week turned down a pair of requests from individual homeowners to use two apartments as short-term rentals after several neighbors objected. Visit nwaonline.com/photo for today’s photo gallery. (NWA Democrat-Gazette/Andy Shoup)

Content Source