Subject
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Work Session on Zoning Text Amendment TXT2024-00264 and Proposed City Code Chapter 18.5, to Provide Regulations for Short Term Residential Rentals; Mayor and Council of Rockville, Applicants
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Department
CPDS - Zoning Review & Other
Recommendation
Staff recommends that the Mayor and Council discuss the topic and confirm the content of both amendments as appropriate for public review. Staff further recommends that the Mayor and Council provide any changes to the legislation.
Change in Law or Policy
The addition of Chapter 18.5 to the City code and an amendment to the Zoning Ordinance will put regulations in place for short-term rentals.
Discussion
Background:
On March 27, 2023, the Mayor and Council authorized the filing of a Zoning Text Amendment as well as a new chapter of the City code to address the regulation of short-term residential rentals. This ZTA was delayed due to several other pressing ZTAs and work on the Zoning Ordinance Rewrite. Since the current Mayor and Council did not authorize the filing of the ZTA, the staff is holding a work session to receive feedback on the existing ZTA. Based upon the feedback, staff will modify the proposed regulations and return the item to a future Mayor and Council meeting.
Short-term residential rental units, which are defined as all or a portion of a dwelling unit rented for a short time, are not currently addressed by the Rockville City code. However, if a property owner desires to rent an entire home, or a complete living facility with a separate kitchen and sanitary facilities within a home, Chapter 18 of the City code requires that the rental home be licensed and that the rental lease must be offered initially for a full-year term, which is longer than any short-term rental occupancy would be.
Any existing short-term rental units in the city are operating without sanction or approval, as they are out of compliance with City requirements for when a complete living facility or entire home is rented without a rental license and in a manner that violates Chapter 18 of the City Code. In addition, short-term rentals are not currently addressed within the zoning ordinance.
Proposed Regulations
This section provides an overview of the draft Chapter 18.5 (see Attachment 1 above - Ch 18.5 - as Introduced) that would regulate short-term rentals, and the accompanying Zoning Text Amendment (see Attachment 2 above - TXT2024-00264 as Filed). Although Chapter 18.5 and the Zoning Text Amendment must work in tandem to regulate short-term rentals, these two amendments must go through different review and approval processes. Both Chapter 18.5 and the Zoning Text Amendment are recommended by staff to be timed so they jointly return to the Mayor and Council for public hearing and consideration to adopt at the same meeting.
Chapter 18.5: Residential Short-Term Rentals
A summary of the proposed regulations included in Chapter 18.5, is listed below.
Definition:
• Short-term rental means the rental of lodging accommodations in a dwelling unit for periods of less than 30 consecutive days to transient guests.
Licensing Requirements:
• Only property owners are permitted to operate short-term rentals.
• A license will be valid for a one-year term.
• An operator’s license will be suspended after the third violation occurrence within a 12-month period.
• Renewal or reinstatement of licenses must follow procedures established by the City Manager.
Application Requirements:
• All local taxes and fees must be paid.
• The same building code and safety standards that are currently required for a single-unit rental license must be met, including the installation of smoke detectors and carbon monoxide detectors as appropriate.
• Applicant must certify that the use is not prohibited in the homeowner’s association or condominium documents. Any association fees must be no more than 30 days past due.
• There must be no open zoning, building, or fire code violations for the property.
• Contact information must be provided for the owner (to address maintenance issues and complaints during the operation of a short-term rental).
• A short-term rental shall not be permitted in an accessory dwelling unit or a Moderately Priced Dwelling unit.
Informational Notice:
An informational notice shall be provided by the applicant to:
• All properties that are adjacent to the short-term rental property.
• Neighbors living across the hall and those that share a ceiling, floor, or walls with the applicant’s unit in a multi-unit building.
• Any applicable homeowner’s association, condominium association, or housing cooperative.
Residency:
• The short-term rental may only be operated by the property owner, and no other rentals are permitted on the property. In addition, one of the property’s owners must be included on the application.
• When the owner is not present, a designated emergency representative must be accessible for the entirety of any short-term rental contract period.
Tax Structure:
• Short-term rental operators must remit both the Montgomery County Hotel Rental Tax (7%) and the Rockville Hotel Rental Tax (2%).
Restrictions:
• Licensee may not operate a short-term rental for more than 120 days per calendar year.
• Guest capacity is limited to 6 adults, or a maximum of two adults per bedroom, whichever is less.
Guest Registry:
• Operators must maintain a guest registry that includes the number of guests, check-in/checkout dates, and amount paid.
Parking:
• The property shall have two off-street parking spaces. The parking requirement can be reduced to 1 space when the unit is located within 7/10ths of a mile walking distance to a Metro station.
• Short-term rentals with no parking provided must be advertised as such.
Suspension, Revocation, or Denial of a Renewal
• The City Manager may suspend or revoke a short-term rental license for up to one year or deny renewal if the licensee, after ten working days written notice, fails to eliminate violations of the ordinance, the terms of the license, or any related regulations.
Appeals
• Appeals of a decision by the City Manager to suspend, revoke, deny, or approve a license are made to the Board of Appeals. Appeals of the Board’s decision are taken to the Circuit Court for Montgomery County.
Change in Ownership
• Licensees must notify the City Manager of a change in address or ownership within ten days of the change.
• A short-term rental license is not transferrable, and a new license must be obtained by the new owner when a property transfers.
Inspections
• A short-term rental must be inspected for compliance with Chapter 18.5 and any other applicable sections of the City Code upon receipt of a completed application for a license and prior to issuance, renewal, or reinstatement of a short-term rental license.
• As a condition of receiving a short-term rental license, the licensee must also allow the short-term rental to be inspected by City staff upon reasonable suspicion of a violation and to verify that a violation has been abated.
Existing Short-term Rentals
• Any person operating a short-term rental existing prior to [enactment date of ordinance] must receive a short-term rental license by [enactment date plus six months]. A person who fails to receive a short-term rental license by [enactment date plus six months] and operates a short-term rental is in violation and will be provided written notice and be subject to fines.
Zoning Text Amendment
The proposed Zoning Text Amendment defines a short-term rental as:
Short-term Rental means the rental of lodging accommodations in a dwelling unit for periods of less than 30 consecutive days to transient guests.
The Zoning Text Amendment proposes that short-term rentals be permitted in all zones where residential dwellings are permitted, including single-family residential (R), residential medium density (RMD), and mixed-use (MX) zones.
Third-Party Monitoring and Enforcement
A third-party vendor will be necessary to assist with the management and enforcement mechanism of short-term rentals. Generally, third-party systems provide key services such as address identification. Vendors examine between 80-100 different short-term rental websites, such as AirBnB, VRBO, Homeaway, and similar providers to compile a list of addresses and owners of all identifiable STRs. The system reviews listing status (availability) and screenshots of pictures, reviews, and the like to create a record showing that a unit is being actively advertised.
Montgomery County currently uses the firm Host Compliance, which is one of the leading providers of this service. In discussing their experience with County staff, they indicated that the company excels at identifying properties, generating letters for enforcement and renewal purposes, and providing a portal that helps property owners achieve compliance through licensing. The County does not use the service for tax collection purposes. The City of Gaithersburg does not use a company to provide this service.
Montgomery County and City of Gaithersburg Regulations
Montgomery County and the City of Gaithersburg have similar requirements for STRs. Both limit rentals to less than 30 consecutive days and the days the unit is collectively rented out as a STR to no more than 120 days during the 365-day license term. The regulations require one off-street parking space unless the online listing indicates that vehicle parking is prohibited.
Montgomery County allows STRs as a limited use in all zones except for industrial and permits up to six total adult occupants with a limit of two adults per bedroom. The City of Gaithersburg allows STRs in many residential and commercial zones, but not all, and permits up to two adult occupants per bedroom.
Table I. Comparison of STR Regulations in Montgomery County and the City of Gaithersburg
|
Issue |
Montgomery County |
City of Gaithersburg |
|
Rental Length |
Less than 30 days |
Less than 30 days |
|
Maximum Days of Use |
120 days if property owner or owner-authorized resident is not present in the residence. If present, then there is no limitation. |
120 days |
|
Use |
Limited Use |
By Right |
|
Zones Allowed |
All zones except Industrial |
R-A, R-90, RP-T, R-20, R-18, CBD, CD |
|
Occupants Allowed |
Six total adults; two adults per bedroom |
Two adults per bedroom |
|
Parking |
One off-street parking space unless the online listing indicates that vehicle parking is prohibited |
One off-street parking space unless the online listing indicates that vehicle parking is prohibited |
Mayor and Council History
The Mayor and Council discussed short-term rentals at several meetings in early 2023 and authorized the filing of a Zoning Text Amendment as well as a new chapter of the City code to address the regulation of short-term rentals on March 27, 2023.
During those discussions, the Mayor and Council discussed several related topics, including compliance enforcement including the use of third-party enforcement; the cost, taxes, and fees associated with short-term rentals; the impact of short-term rentals on the availability of long-term rental units; and the amount of parking that should be provided with the units.
Public Notification and Engagement
For the March 27, 2023, Mayor and Council meeting, notices were provided to homeowner associations, civic associations, and through Nextdoor. Once the Planning Commission date for recommendation is set, staff will undertake similar outreach to the community.
Boards and Commissions Review
The Planning Commission received a briefing on the Text Amendment at its meeting on June 12, 2024. The Commission’s practice is to hold a briefing for ZTAs, which is an opportunity to ask questions and request additional information prior to making a recommendation at a subsequent meeting. The recommendation meeting has not been scheduled pending any changes by the Mayor and Council to the ZTA and Chapter 18.5.
Fiscal Impact
If the proposed Chapter 18.5, Short-Term Rentals, is adopted, this will likely result in the need for a third-party vendor to monitor short-term rental activity in the city. Based on staff discussions with vendors, this service would cost approximately $15,000 to 20,000 per year, depending on the array of services to be provided. This expenditure is expected to be offset by the proposed $250 rental license fee for short-term rentals, which is more than the regular rental license fee, as well as by the hotel rental tax to be paid to the city by short-term rental operators.
Next Steps
Staff recommends that the Mayor and Council provide feedback on the content of the City code amendment and ZTA that have previously been introduced and authorized for filing, respectively. Staff will make any proposed changes made by the Mayor and Council to either draft amendment (Chapter 18.5 and the ZTA) or bring the amendments back to a future meeting for a public hearing and ultimately a decision. The Planning Commission will be scheduled to review and provide a recommendation on the ZTA for the Mayor and Council to consider.