Should Lexington set a cap on the number of short-term rentals in neighborhoods?

More needs to be done to address the number of short-term rentals in Lexington neighborhoods, according to a majority of people who responded to an online, voluntary survey about Fayette County’s short-term rental ordinance.

The ordinance, which was approved in July 2023 and took effect in January, will likely be reviewed by a Lexington-Fayette Urban County Council committee in coming months.

Possible changes to the ordinance include setting distance requirements for unhosted short-term rentals, and reviewing verification processes of hosted short-term rentals, where an owner lives there.

Councilman James Brown, who has been working on short-term rental issues, said they will come back to a council committee with a revised ordinance later this fall, possibly as early as September.

During Tuesday’s council General Government and Planning Committee meeting, staff unveiled results from a new website tool — Engage Lexington — that collected information from 353 residents and short-term rental operators.

The vast majority of people who responded said they wanted to see the council do more to address the density of short-term rentals, said Jennifer Sutton, a research analyst for the council.

Top policy concerns on short-term rentals

The top policy concerns about short-term rentals according to respondents:

• 127 Density restrictions or number of short-term rentals

• 48 Affordable and availability of housing

• 28 Unhosted/hosted restrictions

• 21 Enforcement

• 20 Community impact concerns

• 17 Neighborhood type restrictions

• 16 Public safety concerns

• 16 Limit total number of STR in Lexington

• 15 STR ban

• 13 Neighborhood input and notifications

The vast majority —56 % —said they have not had complaints about the operation of a short-term rental; 44% said they had complaints or concerns.

The top concern was noise followed by parking and parties.

Should Lexington cap short-term rentals?

The short-term rental ordinance says the Board of Adjustment, a planning body, can consider if there are other unhosted short-term rentals-- where the person does not live there -- in the proximity when considering an application. Unhosted short-term rentals must get approval from the Board of Adjustment.

The problem?

The ordinance does not say what is considered in proximity. Other cities have specific guidelines such as limiting the number of short-term rentals in 500 feet or setting a cap by saying only 3 % of homes in a neighborhood can be an unhosted short-term rental.

Several members of the Kenwick and Mentelle neighborhoods, which have at least 41 short-term rentals, have proposed changes based on research from other cities.

Many cities now only allow short-term rentals if the person lives on the property or if it is their primary residence, called a hosted short-term rental under Lexington’s ordinance. That helps stop out-of-town real estate investors from buying, flipping and turning it into a short-term rental, the Kenwick group argued in a May 6 letter to some council members.

The group would like the city to consider a moratorium on unhosted short-term rentals moving forward. Existing unhosted short-term rental rentals would be grandfathered in for at least 10 years or when the property was sold, whatever comes first, the group argued.

If nixing unhosted short-term rentals is not possible, the group urged the council to change the ordinance so a business could only have one unhosted rental. There are multiple companies and individuals who own more than one unhosted short-term rentals.

The group also suggested a 1,000-foot buffer between new and existing short-term rentals to stop the concentration of short-term rentals. There should also be a cap on the number of short-term rentals allowed in a neighborhood such as 3 % of total residences, the Kenwick group said in its letter.

On Sherman Avenue in Kenwick, there are at least 12 short-term rentals, city records show.

The group also recommended eliminating unhosted short-term rentals in calculations for property taxes for residents of that neighborhood. Home prices in Kenwick and Mentelle have skyrocketed as many short-term rental operators have razed smaller homes and built large short-term rentals.

“I think we all realize that Lexington has a housing crisis and that STRs remove housing from the market,” said Walt Gaffield, president of the Fayette County Neighborhood Council, a consortium of neighborhood groups.

Gaffield said he would prefer a hard distance cap such as 1,000 feet rather than setting a percentage cap. Percentage caps would not stop clusters of short-term rentals such as the ones in Kenwick and Mentelle.

“A hard maximum distance between STRs boundary to boundary would work better and would set clear guidelines for the Board of Adjustment. It also would cross neighborhood boundaries and apply to everyone equally,” Gaffield said.

Going after scofflaws

The city’s department of revenue is tasked with rooting out illegal short-term rental operators.

Operators were given six months after the regulations were passed in July 2023 to come into compliance. The city also sent two notices of violations before sending citations, said Wes Holbrook, the city’s director of revenue. The city has also purchased a new software program to help it track and root out operators who are not licensed.

“We want compliance,” Holbrook said.

As of June, the city had:

• 625 licensed short-term rentals

• 339 first notices of violations were sent to operators who had not complied with regulations

• 154 sent notices of second violations

• 21 citations were issued

Holbrook the vast majority of those in violation had gone through zoning but had not been licensed by the city’s department of revenue.

Holbrook said the Board of Adjustment also now tells applicants they must be licensed and pay a registration fee of $200 per year for the first unit.

Holbrook said of the 21 citations sent, only 10 were fined. Many took their listing down or immediately came into compliance after being issued a citation.

The city can deny a license to an operator if they have failed to be licensed or had prior zoning or other complaints.

Complaints from operators, residents and Board of Adjustment

Councilwoman Jennifer Reynolds said she had heard from some operators that it had taken too long to go through licensing. Holbrook said some of that has to do with a difference between the owner and the operators. It must be the owner that licenses the short-term rental.

Other council members said some short-term rental operators said they did not know about the new regulations before they took effect.

Holbrook said the city hopes to have software soon that will make it easier for short-term rental operators to register and pay online.

“I think we do need to set some more perimeters” said Councilwoman Whitney Elliott Baxter of how many can be allowed in a neighborhood. Elliott Baxter said she recently watched Board of Adjustment hearings where short-term rentals were discussed and it appears the board needs more guidance.

“I want it addressed,” said Councilman David Sevigny of density restrictions.

Holbrook has said there have also been complaints about hosted short-term rentals where no one appears to be living there. Holbrook said revenue works with zoning compliance to determine if the host lives there. If the host does not live there, its license or registration can be yanked. But revenue and planning would like to see a better process to determine if a host is living there, Holbrook said.

Board of Adjustment statistics show the vast majority of short-term rentals —95%— are unhosted.