Whitefish has adopted new regulations expected to help manage short-term rentals operating in the city.
The code amendment requires a short-term rental permit for each unit and creates a joint short-term rental permit and a business license. The change also includes the rental of a bedroom in a home for less than 30 days as a short-term rental. In addition, owners will have to register with the Montana Department of Revenue and be subject to the state bed tax.
About 50 short-term rental properties are currently registered with the city, but estimates place the total number of such rentals at about 300, according to the city.
Senior Planner Wendy Compton-Ring said the last update to the short-term rental regulations was in 2013.
“In the five years since the adoption of these regulations, the landscape of short-term rentals has changed significantly,” she said. “City staff, at the direction of Council, is updating several aspects of these standards.”
During public comment, Whitefish Visitor and Convention Bureau Executive Director Dylan Boyle said state law requires that vacation rentals collect bed tax.
“That will benefit us because a portion of the bed tax goes to us so we can promote Whitefish,” he said.
Rhonda Fitzgerald, who owns the Garden Wall Inn, said the short-term rental market is a “rapidly changing landscape.”
“The registration of short-term rentals and making sure they collect bed tax levels the playing field,” she said. “We need to make sure that someone is not operating as many units that they are practically running a hotel.”
The city Planning Board had recommended the addition of language for the regulations that would define short-term rental owners as a natural person rather than a corporation.
However, planning staff said the requirement wasn't a good idea noting that there are a list of reasons why someone may not want to put a short-term rental in their own name such as liability or joint ownership.
“Having it owned by a natural person doesn't guarantee compliance with the performance standards,” Compton-Ring said. “The standards apply to all regardless of the ownership.”
Councilor Frank Sweeney expressed concern that a corporation could have a number of short-term rentals and essentially have the same number of rooms to rent as a hotel.
“You can't limit ownership to persons,” Sweeney said. “I think we should deal with the issue of limiting the number of short-term rentals owned by one entity.”
City Attorney Angela Jacobs said other cities have created regulations dealing with corporations owning a large volume vacation rentals, and city staff could return to Council with potential solutions.
“If we define the problem,” she said. “I think we can find a solution rather than limiting ownership to natural citizens.”
City Manager Adam Hammatt acknowledged that because the short-term rental market is always changing, updates to the city's regulations will be necessary.
“We want to get compliance happening,” he said. “We know full well that there will be other things that we need to address.”
Short-term rentals are only allowed in the resort zoning districts and in the WB-3 commercial zones of the city. Changes to the short-term rental code expand the definition of short-term rentals to include a bedroom within a home rented for less than 30 days.
A short-term rental permit will now be required for each unit. In the past if a property manager managed more than one unit, the city did not require a permit for each unit.
Under the new structure, the short-term rental one-time application fee would be increased to $100, and the annual business license fee would be $100 plus $75 per each short-term rental unit. Other changes to the regulations include a requirement that an application be checked to ensure that the rental is in the proper zone before it is inspected by the Fire Marshall and before the Flathead City-County Health Department issues a tourist home permit.
In addition to updating its regulations, the city is also considering contracting with a short-term rental compliance company to track such rentals. By using the software, the city is looking to ensure compliance including that a short-term rental is licensed, operating in the correct zone, has been inspected and is collecting resort tax as required.
An owner operating an illegal short-term rental could face fines from the city.
Hammatt has said the city doesn't know how many short-term rentals units may be operating in zones where they are not allowed.