UPDATE: House Bill 773, authored by Rep. Mike La Rosa of Osceola County, passed the Government Accountability Committee on Feb. 22 by a very narrow margin. Sources say the almost 50-50 split is an indicator the bill is faltering. The next stop in the House is the Commerce Committee. On the other side, Senate bill 1400 is set to be heard by the Appropriations Committee next. That committee’s vice chair is Sen. Anitere Flores, who represents the Keys. Again, sources indicate that is a plus for Keys residents who want the ability to regulate vacation rentals locally.
An issue brewing in Tallahassee could affect just about every corner of the Florida Keys. It’s about the character of Keys neighborhoods and property value and property rights and taxes. But for short, it’s referred to as “home rule.”
State vs. Local power:
Home rule is the ability of local governments — think the City of Key West or Monroe County — to tailor laws to fit their unique environment and constituents; that’s above and beyond what state law stipulates. It is a part of the state constitution, added in 1968 — Article VIII, Section 2(b). The opposite of home rule is called preemption — the legislature overturning home rule because it conflicts with state law, or is inconsistent with the majority of laws.
Companion Senate and House bills that, if passed, would gut the concept of home rule are making their way through committee. Senate Bill 1400, authored by Sen. Greg Steube of Sarasota, and House Bill 773, authored by Rep. Mike La Rosa of Osceola County, would effectively strip local governments of the right to dictate how vacation rentals are allowed. Currently, both bills have a provision that would allow local governments to keep their “grandfathered” rules in place, but that could change at the next committee stop. Current Keys laws state there shall be no rentals of less than seven days in Islamorada and Marathon, or 28 days in unincorporated Monroe County. In effect, the bills would pave the way for nightly rentals not only in the Keys, but throughout Florida.
According to the Sun Sentinel, Sen. Steube sought to change state rule on vacation rentals after he bought a home on Florida’s east coast that he cannot rent due to local rules.
“I have always believed in the premise that it’s my property and I will do what I want with it,” said Marathon Councilman Mark Senmartin. “That said, I also see myself as a responsible and courteous neighbor. The very thought of giving control to people in Tallahassee that have no idea about our community makes me angry. We are big boys and girls and are capable of managing our issues without their ‘help.’”
The House bill is set to be reviewed by the Government Accountability Committee on Feb. 22. The 23 committee members include Rep. Holly Raschein who represents the Florida Keys.
“While the issue of regulating vacation rentals is a concern to many local governments around the state, in the Florida Keys the challenges we face are even more pronounced,” Raschein said. “We are the only area in the state that operates under a ROGO system with a finite number of building permits remaining. We recognize the important role that tourism plays in our economy; however, it is critical that we find a way to balance these vacation rentals with the need to provide long-term housing for our workforce, especially in the wake of Hurricane Irma.”
The House bill would move to the Commerce Committee next before it can be heard on the floor and voted upon. The Senate bill has passed the Regulated Industries Committee and is set to move to the Appropriations Committee.
Many in the Keys oppose the idea of the state setting vacation rental law. To that end, Monroe County, Village of Islamorada and the City of Marathon have co-authored an amendment to the bills, or a “carve-out.” It would exempt state Areas of Critical Concern, which include the Keys. (There are four Areas of Critical Concern in Florida, but only Monroe County has a substantial population.)
The amendment sets out not only an exemption to the bill, but also the right to change its existing local law. Since 2011, state law dictates that no municipality may change its vacation rental law — at all — without losing its grandfathered status and reverting to state law.
Besides the Keys, organizations within Palm Beach and Longboat Key have expressed dismay. And Monroe County Attorney Bob Shillinger said regardless of whatever bill may or may not pass, this is simply a zoning issue, one that Monroe County is monitoring closely.
“Zoning laws have been in place since the 1920s,” he said. “This essentially is allowing a commercial enterprise in a residential district. It’s the equivalent of putting a hotel in a residential district.”
Value and taxes:
The implications of a preemption by the state to govern local vacation rental goes beyond the fear that a Keys homeowner may be subject to nightly, rowdy parties at the vacation rental next door. This is also about a home’s value and taxes.
Real estate professionals agree that a vacation rental home is easier to rent by the week than by the month. That means real estate investors would choose a home in Marathon over one, say, on Big Pine Key, and possibly pay a premium to do so. The other side of the coin is also true but less common — that a someone buying a second home who doesn’t intend to rent it out may wish to own in a neighborhood with a minimum of transitional neighbors.
In Monroe County, vacation rentals pay a so-called “bed tax” — 12.5 percent of the value of the rental. For example, a $1,400 per week three-bedroom, two-bath home rental on a canal would generate $175 in taxes. In December 2017, the Monroe County Tax Collector collected almost $3.5 million in bed tax. Of that, $1,036,000 was generated by vacation rentals, not hotel rooms. The county sends 7.5 percent of that to the state, and 5 percent stays local. The local money goes into the Tourist Development Council fund that advertises the Keys as a destination, and also pays for brick and mortar projects of a touristy nature.
Airbnb, an online service for people to lease or rent short-term lodging, is a proponent of the state exemption of vacation rental law. Airbnb reported that in 2017, some 40,000 Florida hosts earned a combined $450 million by renting out lodging to an estimated 2.7 million guests. However, the company has a checkered past in Monroe County when it comes to paying bed tax. Back in 2016, it offered an undisclosed monthly amount for bed tax, but refused to allow the county to verify the rentals by homeowner name and address. Monroe County declined and yet Airbnb still has a smattering of listings in the Keys. According to the tax collector, Airbnb tells owners they are paying the bed tax, but the county has received no money. The tax collector administrators report that similar companies, such as VRBO, are more compliant.
Of course, every homeowner is subject to property taxes and insurance costs. Those high costs, said real estate broker Brian Schmitt, compel some homeowners to rent their homes to tourists. He said that in his neighborhood, four long-time owners of second homes started renting after the recession of 2008.
“Even if you don’t have a mortgage, that’s a cost of $1,000 to $2,000 a month for the lawn service, pool service, running the a/c and paying taxes and insurance,” Schmitt said. “If they didn’t short sell, they had to change the way they thought about their houses or else sell into a depressed market and take a hit. They are renting today because it was the best option. And, remember, these people don’t enjoy the homestead tax exemption and have no ability to vote.”
Schmitt continued, “But at the end of the day for me, being in the real estate business, I have to respect property owners’ bundle of rights and I expect that they would respect, hopefully, me too — the people who are living here. And, by and large, that has been my personal experience.”
Some think the state’s preemptive strike against vacation rental law is too radical to come to fruition. But consider that last year, the state did the very same thing when it came to transportation network companies — Lyft and Uber. It struck down local government’s laws regarding the regulation and number of taxis to allow Lyft and Uber into every city. There are other bills challenging home rule afloat this session, as well. For example, House bill 521 would void local tree regulations.
The Senate and House bills are expected to be heard in at least two committees each before reaching the floor for a vote. There are only 16 days left in the legislative session.
Marathon City Manager Chuck Lindsey takes a philosophical view about the proposed changes to vacation rental law and quotes the 30th President of the United States Calvin Coolidge.
“It is much more important to kill bad bills than to pass good ones.”
Gabriel Sanchez contributed to this report