Cities weigh harsher penalties for short-term rentals

BY NATHAN GRANGER | LINK nky REPORTER

While an increase in tourism can be a revenue booster, the increase in short-term rentals in the region is raising alarms for officials and rent for residents.

Short-term rental property, in contrast to conventional rental property, is private, non-commercial housing whose owners rent out rooms for short stays, often only a few days. Popular online platforms for facilitating such rentals include websites like Airbnb and Vrbo.

Their presence in a region can attract vacationers, which in turn attracts valuable revenue. However, officials worry that leaving them unregulated poses a safety risk, and leaving them unmonitored could translate into an oversaturated market, removing valuable housing options for permanent residents. Studies also show that the presence of short-term rentals can drive up rent prices, and Northern Kentucky is facing a series of closures of affordable rental properties.

for people traveling to the region for large events across the river, like Cincinnati Bengals games, conventions and concerts.

Kentucky considering regulations for these properties, either.

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The Covington City Commission is considering escalating penalties for short-term rental property owners who have failed to obtain proper licensing from the city. Officials discussed policy changes for shortterm rentals during a caucus meeting on Tuesday, Feb. 7.

City Solicitor David Davidson said the proposed change in ordinance would penalize unlicensed Airbnb or Vrbo property owners with a one-year suspension from applying for a license.

As it stands, Covington ordinance does not allow for unrestricted short-term renting, and it’s illegal to post advertisements online for short-term stays without obtaining proper licenses from the city.

A woman walks by The Kimberly, a short-term rental property in Mainstrasse. Photo by Alecia Ricker

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“It provides that if anyone is currently leasing or engaged in short-term rentals without a license or without proper conditional use permit that they would not be able to apply for a license for a period of a year from the date that they’re notified that they’re operating in violation of the ordinance,” he said.

The commission first began regulating short-term rentals in 2021 in the face of their growing popularity in Covington. The city offers an affordable place to stay

At an emergency meeting in December, the commission declared a freeze on all new licenses to assess if new regulations and enforcement measures were necessary in the face of the seemingly unabated increase of short-term rentals. A quick search of the river district shows more than three dozen short-term rental properties dotting the map, competing for guests with Cincinnati stays.

The consideration at Tuesday’s meeting was the newest penalty that could be leveled against delinquent landlords. Other penalties include fines of up to $1,000 for every day of operating without a license, tax audits and, in extreme cases, the use of property liens and foreclosures.

Covington isn’t the only city in Northern

Last year, the Union City Commission started having conversations about requiring short-term rental owners to obtain a business license. At the time, commissioners were divided on whether the policy was necessary considering there are only a handful of properties available for shortterm rent in Union.

While City Administrator David Plummer, who has since moved on to work for the city of Fort Mitchell, said licensing the properties could net the city revenue, Commissioners John Melford and Jeremy Ramage said they felt a policy would go too far.

“In my opinion, we need to research this very carefully on our own. We should not just pick up what a community like Florence is doing or what Boone County is doing,” Melford said during the May 2021 city commission meeting. “I have a real hard time telling a private homeowner what you can and cannot do on his own property, in his own house. I have a real hard time with that.”

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Ramage said, “it’s almost like an HOA overstepping,” with restrictions on how they want to use their property. The policy was approved in its first reading 3-1, with former Commissioner Eric Dulaney voting no.

Union ultimately decided in January to not adopt a policy for short-term rentals. City Communications Coordinator Amy Safran said the mayor and commissioners decided that because there are so few rentals in the city, creating a policy doesn’t make sense.

“If in the future, short-term rentals become an issue, we would turn them over to the code enforcement officer,” she said.

Cities like Newport and Covington have a higher density of short-term rentals, though.

In Newport, property owners with Airbnb or Vrbo listings are required to obtain a business license, according to city ordinance. City Manager Tom Fromme said the only ones not required to obtain a license are hotels that file gross receipt occupational taxes.

In Covington, people who wish to rent out their housing for short periods must first obtain a conditional zoning permit from the city’s Board of Architectural Review and Development.

Upon obtaining a permit, the property owner must then apply for a short-term rental license. Licensing fees cost anywhere from $30 to $150, depending on the size of the property, and must be renewed annually. Landlords must also obtain a $50 business license before they can begin renting out space.

Finally, city officials must inspect the property to ensure there aren’t any fire or other safety hazards in the building structure.

While Union officials decided that a policy was unnecessary at this time, the City of Covington believed it was necessary to regulate them in order to ensure they were safe and to avoid a market overrun with vacation stays that take away housing for permanent residents.

At the recent February meeting, Commissioner Ron Washington emphasized the need for proper safety measures.

“It’s a safety issue because basically a short-term rental is a form of hotel,” Washington said. “It’s not like an apartment where people are familiar with the exits and the building.” Accordingly, inspections and other precautions were necessary, he argued.

What’s more, city-issued press releases from last year indicate that the decision to require a zoning permit was instituted to prevent high concentrations of short-term rentals in certain areas. Officials wanted to prevent neighborhoods originally designed and zoned as residential districts from turning into de facto hotel districts through short-term rental websites.

Board approval also enables city residents to publicly voice either their approval of or opposition to a potential increase in the number of vacation renters in their neighborhood.

Increasing numbers of short-term rental property has numerous impacts on the local economy as well as the availability of housing.

Studies show short-term rentals have the potential to disincentivize longer-term rentals for local residents by drawing in out-of-towners who are willing to pay high amounts of money for brief stays.

This can in turn drive up rent and push out local, long-term residents over time.

According to a 2020 study from the National Bureau of Economic Research, the University of Southern California and California State University, which used Airbnb listing data from around the country, determined “a 1% increase in Airbnb listings leads to a 0.018% increase in rents and a 0.026% increase in house prices. Considering the median annual Airbnb growth in each zip code, these results translate to an annual increase of $9 in monthly rent and $1,800 in house prices for the median zip code in our data.”

What’s more, the increase in popularity of short-term rentals happened in tandem with the decline of available housing in Kenton and Campbell counties. According to data from the US Census Bureau, the number of housing units available for rent in Kenton County declined from 2,399 units to only 848 units from 2010 to 2021.

The Northern Kentucky Atlas, a digital data tool that centralizes information on Kenton, Campbell and Boone counties, shows that an average of 40% of residents in the region are spending more that 30% of their monthly income on rent. That number is as high as 43% in Covington and 50% in Newport – and more short-term rentals are another factor driving up rent as properties for long-term residents become scarce and less affordable.

Overall, the Covington officials believe that landlords are not complying with the new regulations.

According to a Feb. 2 press release from the city, since the introduction of the licensing measures “only 43 short-term rental licenses have been sought and issued.”

To judge the discrepancy between the number of short-term rentals advertised in the city and the number of licenses issued, the city contracted with software company Granicus, whose proprietary software regularly crawls websites sites like Airbnb and Vrbo for current short-term rental ads.

Mayor Joe Meyer reported on Granicus’ findings at the meeting, saying when he checked the numbers, “there were over 400 apartments available … in Covington, almost all of them without a license.”

Granicus’ software updates regularly, so that number could change in the future.

The commission held a first reading of the proposed ordinance at its legislative meeting on Feb. 14. The commission will meet again on Feb. 28 for a final vote.

LINK nky reporters Grace Tierney and Haley Parnell contributed to this report.