Orange Beach says it’s getting serious about limiting short-term rentals in residential neighborhoods.
“It’s getting to the boiling point,” Mayor Tony Kennon said. Council members expressed concerns about the noise, trash, loutish behavior and overcrowding units with people, which brings an overflow of cars.
On Dec. 5 the City Council voted in a moratorium on issuing short-term rental licenses and is taking the time to craft an ordinance that would restrict vacation rentals in neighborhoods.
Part of the proposed ordinance includes creating a new category for vacation rentals in neighborhoods for 14 days or less with a $1,000-a-year fee. The current short-term license, which will remain in place for all other vacation licenses, is for rentals of six months or less and cost $132 a year.
“The reason for the $1,000 is we’re stepping up enforcement because of the problems that we’ve had in the neighborhoods,” Community Development Director Kit Alexander said. “This $1,000 fee would help cover the cost of increased enforcement associated with vacation rentals.”
And enforcement is coming, Councilman Jerry Johnson assured an overflow audience. The council has already planned a hearing for one home that neighbors say has been a nuisance for years. During the meeting, Kennon encouraged residents to make repeated calls to police to document offenders so others can be brought in for a hearing with the possibility of having the license revoked.
“If we keep having complaints, we’re going to deal with it, I assure you,” Johnson said. “We’re not going to allow a rental in a neighborhood that’s going to tear down a neighborhood. And they do it all the time. There are few exceptions.
“People’s property has been invaded by these people. Not only are they on that property, they’re over on other properties using their pools, using chairs. There is no limit. We’re not going to allow it.”
At a Jan. 4 council meeting, the city invited local real estate agents and residents to discuss the proposed ordinance. Jennifer Foutch, government affairs director of the Baldwin County Association of Realtors, said the new rules would hurt sales to buyers looking for income-generating properties.
“For a lot of buyers who may be looking at a property in Orange Beach as a second home, if they’re not able to do short-term rental, that’s a deal breaker for a lot of transactions,” Foutch said. “If they can’t use a property and make a sufficient amount of income off of it, then you’re going to have a lot of buyers wanting to buy a second home in Orange Beach that just aren’t going to be able to do that.”
Under the proposal, owners currently with short-term rental licenses for residential properties — 250 or so — would be grandfathered in and can renew those licenses by Jan. 30 for the coming year. If the property is sold, the new owners would not be able to continue using the property as a short-term rental.
BCAR President Troy Wilson asked if the council would consider allowing transfer of those licenses to new owners. The 250 current licenses in residential areas represent about 2 percent of the total number of vacation units in Orange Beach.
“The sales price of the home as it currently has income would really conduct one price which would be 40 to 60 percent higher,” Wilson said. “Is there a modification you would consider in the ordinance that would allow those property owners to convey that only on those properties?”
Councilwoman Annette Mitchell said the city wants vacation rentals out of city neighborhoods.
“We are very, very serious about this,” Mitchell said. “We are very committed to the promise we’ve made to protect neighborhoods.”
Kennon said while those rentals might lose value as a business, they would retain value as a residence, which is exactly what the city wants to see.
“This is a business evaluation and a residential evaluation,” Kennon said. “The value of that home is safe. If they sell that, they will make money. It still has the intrinsic value of Orange Beach property.”
In 2009 Gulf Shores voted in a special district for short-term rentals in the beach area. The city also allows short-term rentals in areas zoned general business or multi-family outside of that district.
“The city adopted what is called single-family and duplex short-term rental overlay district,” City Planner Andy Bauer said. “That overlay district is in the beach area primarily down West Beach. All other areas of the city zoned single family and duplex are not allowed to rent.”
In 2017 Orange Beach generated about $2.4 million on all business licenses in the city with about $830,000 coming from short-term rental licenses. Short-term rentals in neighborhoods brought in $38,000 of that number.
A short-term rental period in Gulf Shores is considered 180 days or less, and yearly license fees are based on receipts gathered on the unit during the year before. Fees range from $180 if gross receipts are less than $49,000, with an additional $45 fee for each unit.
The city’s table for all business licenses goes up to $75 million in gross receipts, but the highest in the short-term rental category was $200,000-$249,000, which cost the license holder $590 plus $45 for each unit. Gulf Shores generated more than $580,000 on short-term rental licenses in 2017 with another $180,000 generated by the $45 per unit fee.
Gulf Shores revenue on all business licenses was about $2.3 million in 2017.