Thought Leadership

Short-Term Rental Restrictions Gaining Popularity in Minnesota

Over the past few years, short-term rentals – often vacation rentals through sites like Airbnb.com, vrbo.com, and HomeAway.com – have become extremely popular. For the short-term tenants, it’s an easy way to get lovely accommodations, generally in less-commercially-focused areas of a town or city. For the short-term landlord, it’s another “side hustle” that has become more common every day as a flexible way to increase income.

But for those who live in the neighborhood of short-term rental properties (“STRs”), life may not be so rosy. Since the restrictions imposed because of the COVID-19 pandemic, people have turned to STRs for parties, weddings, reunions and other events that involve a number of people. In many cases, neighbors of STRs complained to city officials that the celebrations spilled outside with drinking games, marijuana use, sexual activity, campfires and, of course, noise. Conversations between the neighbors just wasn’t working. The cities needed to act.

This isn’t just a “Twin Cities problem.” Cities and counties adopting STR restrictions include Duluth and Two Harbors to the north, Brainerd, in the heart of cabin country, and Rochester to the south, as well as St. Louis and Crow Wing counties. By and large, though, most of the cities adopting STR regulations are scattered throughout the Twin Cities metro area: Roseville, Prior Lake, Spring Park on Lake Minnetonka, Bloomington—and of course Minneapolis and St. Paul. Edina and Eagan have banned STRs for years; Edina’s ban is several decades old, and Eagan’s was put into place in 2018, after the city council determined there was no good way to allow STRs in neighborhoods.

Cities Take Action

The actions cities took varied widely.

  • Many cities imposed licensing requirements, treating STRs like any other rental property. Licensing requirements may include annual property and fire inspections in addition to payment of fees.
  • Spring Park on Lake Minnetonka adopted restrictions limiting where STRs could be located, such as near commercial areas rather than quieter neighborhoods.
  • In an effort to target “party houses,” some local governments like Roseville and Crow Wing County imposed minimum stay requirements of anywhere from 7 days to 30 days, with some variations depending on seasons. Prior Lake’s updated its 2015 ordinance allowing STRs to ban new STRs from being rented for less than 60 days.
  • Rochester treats STRs with five or more beds as “lodging” or “hotel” property, which requires a lodging license that imposes inspection requirements more strict than is the case for traditional residential rentals. Both Rochester and St. Paul require the owners of STRs to pay lodging taxes.
  • Prior Lake’s updated its 2015 ordinance allowing STRs to ban new STRs from being rented for less than 60 days.
  • Owners of STRs in Duluth must get City Council approval before listing the property for rent.
  • In Minneapolis, STRs may comprise no more than 10% of the units in a building with more than 20 apartments. (The restriction does not apply to condominium communities.)

Some cities’ regulations apply only if the owner of the property does not reside in the property while the guests are present.

Because the regulation and restrictions vary greatly from one city to the next, City Hall should be the first stop for any property owner thinking about using their property as an STR.

Homeowners Association Restrictions on Short-Term Rentals

Even if a given city doesn’t specifically regulate STRs doesn’t mean a property owner can go full steam ahead. If the property is part of a homeowners association, it’s important to check the association’s declaration of covenants and rules. It is typical for homeowners associations (including condominium, townhome and traditional single family communities) to prohibit rentals of less than 7 days. Violation of the association’s covenants can subject owners to fines or court action. Those fines, of course, reduce the income owners net from short-term rental of their properties.

Operating a property as an STR can be a great way to make full use of a property and generate additional income. Property must, however, do their homework to be sure their planned STR is permitted and meets all regulatory requirements of the city and, where applicable county and homeowners associations.

If you have questions regarding regulation and restrictions of short term rentals or any other questions related to real estate, feel free to contact Nancy Polomis at [email protected] or 952-746-2105.

ABOUT THE AUTHOR

Nancy T. Polomis
Phone: 952-746-2105
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