Most neighborhoods will experience the occasional problem resident. There’s the person who throws a loud party late into the night, leaves junk in the front yard, lines the street with cars, parks that massive RV or boat in front of someone else’s house, argues loudly or behaves in a manner that otherwise annoys the neighbors.

Municipalities deal with such disputes by enforcing ordinances that impose limits on noise, trash and parking spots. Unfortunately, when it comes to the noise and trash generated by short-term renters, the first-reach solution of many localities is to restrict severely or even ban these arrangements altogether.

Short-term rentals (STRs)—typically defined as stays of 30 days or less—are thriving these days, particularly in vacation-oriented communities, thanks to the rise of online services like Airbnb or HomeAway. But some claim these services cause problems for long-term residents by making it easier to rent out rooms or even entire homes to travelers, who create noise or park too many cars on the street. Local and state governments struggle to balance owners’ right to rent their homes with the neighbors’ right to live without excess disturbance.

Sometimes, there’s hardly even an attempt at balance, as cities like Anaheim, California, have imposed virtual bans on STRs. But Idaho appears to have found a workable solution. Early last month, Idaho Gov. Butch Otter signed a state law that could be a model for the nation. H.B. 216 allows local and county governments to regulate, but not ban, short-term rentals, and forbids counties and cities from regulating a “rental marketplace” – i.e., a website that advertises rentals.

All neighborhoods can have occasional noise problems, whether they come from homeowners, long-term renters or short-timers. The key is to deal with what economists call “externalities” – those activities that impose costs (noise, parking, trash) on others, rather than pre-emptively banning some type of business. The bill does this artfully.

While the bill requires owners of short-term rentals to pay state sales and hotel taxes, it forbids localities from imposing special additional taxes or fees only on STRs. The taxes will be collected by “marketplaces” such as Airbnb. It allows property owners to register with the state tax commission 45 days after their first lodging transaction, whereas a previous version had called on them to register before engaging in any transactions.

In other words, the bill uses state authority to stop local bullies from singling out STRs for special mistreatment. It’s a perfect use of the right of state governments to pre-empt the locals from using their tax and regulatory authority to abuse individual rights.

“This act is designed to promote access to short-term rentals and vacation rentals by limiting local governmental authority to prohibit these beneficial property uses, or to specifically target them for regulation, except in circumstances necessary to safeguard public health and welfare,” according to the bill’s statement of legislative intent.

Idaho is home to vacation destinations, such as Sun Valley, that have insufficient hotel space. The tourism industry in these areas relies on the ability of local homeowners to offer short-term rentals for vacationers, according to one of the bill’s backers quoted in The Spokesman-Review. During the hearings, legislators also pointed to the importance of allowing Idahoans to supplement their income and the benefits STRs can offer homeowners who are unemployed.

“The Legislature did a good job – they really worked at it and struck a balance,” said Wayne Hoffman, president of the Idaho Freedom Foundation, a Boise-based think tank that was involved in the bill’s drafting. “For a lot of legislators, it really came down to private property rights. … The argument that private property and economic opportunity should prevail – those were the compelling components.”

Now let’s hope that other states see the wisdom of taking such a balanced approach to an increasingly contentious issue.

Image by Luis Boucault

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