The Santa Fe County Board of Commissioners will host two public hearings to let residents weigh in on a proposed ordinance to impose fees and other rules for operating short-term rental properties.
Platforms such as Airbnb and Vrbo have made home rentals in tourism markets easy, and city officials have labored for years to regulate the practice. While early city rules had a much lower cap, in 2021 Santa Fe limited the number of rentals within residential areas to 1,000 and declared an unlimited number would be allowed in commercially zoned areas.
In the county, commissioners would be regulating short-term rentals for the first time and are eyeing a cap on the number of rentals. But Growth Management Department staff said at Tuesday’s meeting that more data is needed to determine what kind of homes are being rented out, how many are in a particular area and how often they’re being used. Answers to those questions would come from a permitting process for the rentals.
The proposed ordinance would require individuals to secure business licenses to operate rentals for periods of less than 30 days in addition to paying a $375 fee for a first-time license and $300 for annual renewals.
With the city and county facing a long-term housing shortage, officials worry about an already tight housing market. Because short-term rentals are typically found in residential areas, tourists use up space that otherwise could be used for living. According to the county, this has resulted in a drop in available homes in some places.
“When I asked some of my constituents, everybody was in favor of some kind of limit, because I think people are concerned about what’s happened in other communities and even in downtown Santa Fe, where it’s much more of a problem,” said District 5 Commissioner Hank Hughes. “It’s not a problem as we can see in the county right now, but of course the time to address it is before it’s a problem and not after. I’m fine with getting the data first and setting some kind of limit later on if we can see what might be appropriate.”
While the county is hoping to collect data, some of the concerns to which Hughes hinted are reflected in a 2019 study from economist Kelly O’Donnell conducted for the nonprofit Homewise. “Recent proliferation of short term rentals (STRs) marketed on platforms like Airbnb has contributed to the rapid escalation of home prices and rents,” she wrote, concluding “the conversion of houses and apartments into short-term rentals reduces the supply of housing, putting upward pressure on rents and home prices citywide. Since December 2014, the number of STRs in Santa Fe has increased by an average of 50 percent per year. During that same period, rents increased by an annual average of 4.9 percent and median home prices rose by an annual average of 10 percent.”
According to estimates compiled for the county by Host Compliance, which specializes in analyzing data across all hosting platforms, Santa Fe County already has a variety of dwellings advertised as short-term rentals, including single-family homes, cabins, campers and hotels. The proposed ordinance would capture most types of dwelling units, but short-term rentals that don’t meet new requirements would likely need to shut down, department staff said.
The funds from permit application fees would pay for enforcement and compliance, according to County Manager Greg Shaffer, including to the Santa Fe County Fire Department, which would conduct fire inspections. The county would also receive monies from the gross commercial receipts tax.
Santa Fe County Assessor Gus Martinez says the ordinance could impact the taxable use of some properties, changing their categorization from residential to commercial, which would increase tax rates.
“Different types of short-term rentals will be affected differently,” he said. “If you’re from out of state and you don’t actually live there, it could be a commercial use. If you reside in your home, it could still remain residential. If you have a guest house, it comes down to the size of the guest house.”
Commissioners asked the Growth Management Department to provide an overview of positive and negative impacts short-term rentals have on communities. Some of the benefits, a memo to the board noted, include providing a source of income for residents, addressing a demand for this type of rental and allowing more tourism dollars to flow into the local economy.
The department also found, though, that short-term rentals can cause an increase in home prices, put pressure on the lodging industry and be a hassle for neighbors. Department Director Penny Ellis-Green told commissioners at a June meeting that there were 541 active listings in unincorporated Santa Fe, with clusters of holiday rentals in Madrid, Cerrillos, Chimayó, Pojoaque Valley, Eldorado and the communities surrounding city land.
If passed, officials expect to see a flood of applications in the following four months for short-term rentals, and after another six months county staff expect to have enough data to determine what sort of restrictions should be placed on the market, if any.
The next step in the process requires the county to publish notice for the upcoming hearings, the dates for which are not yet determined.