Real estate industry criticizes proposed restriction, offers alternatives

Forcing Key West homeowners to rent their properties for at least 6 months at a time — rather than a month at a time — will do nothing to preserve long-term rentals for full-time workers in Key West. So said scores of real estate agents, vacation rental owners and rental property managers, who shared their concerns with city officials during a three-hour meeting on Sept. 8.

The proposed rule that prompted opposition from the real estate industry — and the Sept. 8 workshop — states that in order to rent out a home for 1 to 6 months, an owner must have had a monthly rental license, also known as a city-issued business tax receipt, in place by May 3, 2022. 

Anyone who did not have a monthly rental license prior to May 3, 2022 would be prohibited from renting their home for fewer than six months at a time, according to the proposed ordinance, which has not yet been approved, or even formally discussed by the city commission.

That ordinance was scheduled to be considered at the Sept. 20 city commission meeting, but Mayor Teri Johnston said that based on the discussion, concerns and ideas generated at the Sept. 8 workshop, the commission will likely vote to further postpone its consideration and perhaps amend it. 

In addition to the mayor, Commissioners Sam Kaufman, Greg Davila and Mary Lou Hoover were in attendance or listening via Zoom. 

“We’re in the midst of the worst housing crisis ever,” Kaufman told the real-estate industry crowd at the start of the workshop. “Since this ordinance was first proposed, the city has received 567 applications for new business tax receipts — that’s a potential 567 more short-term, or monthly, vacation rentals. We all have to understand that we have to put some limit on this. Otherwise, how will we sustain our community? I know you all have customers from out of town who want a return on their huge investment in a Key West home, but we have to put our community first.”

One speaker echoed Kaufman’s community concerns.

Local business owner R.J. Hasty replied to one speaker who attended the meeting via Zoom. She lives in Indiana, and owns a rental property in Key West. “Patti, you don’t live here,” Hasty said. “We don’t owe Patti in Indiana anything. We don’t owe her anything for her own retirement plans that require her to rent out her Key West home a month at a time.” 

Demetria Simpson, the city’s new housing and community development coordinator, facilitated the rest of the workshop and solicited questions and input from the attendees, who were not shy in speaking their minds.

Why real estate agents, attorneys & homeowners oppose the new rule

Derek Epperly, president of the Key West Association of Realtors (KWAR), told officials that the 567 new applications referenced by Kaufman “are from people in a panic because you told them they couldn’t rent their properties out if they didn’t have a license to do so before May 3. That’s where those applications are coming from.”

That May 3 deadline was a repeated concern by the audience, who, at the end of the workshop, applauded with support and relief when officials said the date could easily be changed.

“I think the goal here is something that’s fair with a joint effort among stakeholders,” said attorney Greg Oropeza. “You don’t get to fair with a May 3 deadline. We probably wouldn’t be here today if not for that May 3 date. That’s the elephant in the room and the easiest to change. Attendees repeatedly told city officials that the proposed ordinance will do nothing to preserve or increase the number of long-term rentals available for full-time resident workers in Key West.

“The big question that needs to be asked is how many homeowners, if you eliminate monthly rentals, will rent their place out long-term at a significantly discounted rate than they can make with monthly rentals,” one property manager said. “Ninety percent of my property owners said they would choose to not rent their home out at all.”

Several people also pointed out that local workers can’t be expected to rent a place that’s only available for six months, as they would have to move twice a year. 

Also, attendees said, homeowners want to be able to use their Key West home for part of the year, whether it’s for a few weeks or a few months. Providing annual leases to local workers will render that property unavailable to the owners who bought it to use occasionally and to rent out monthly in the interim.

Some homeowners do rent to the local workers for a year at a time, but they do so with a month-to-month lease, given the difficulty some owners have had when trying to evict bad tenants. Under the proposed ordinance, those month-to-month leases would not be allowed.

“Businesses should be incentivized to provide employee housing. It doesn’t need to come from taking away people’s property rights. And doing something retroactively to May 3 is not right. Don’t regulate; incentivize,” said attorney Bart Smith, whose family owns several businesses that offer employee housing as well as 150 units of affordable housing. 

Real estate broker Bascom Grooms pointed out that the proposed rule would penalize local homeowners who have never previously obtained a monthly rental license because they actually live in the home they own. 

“We’ve never rented our homes out because we live there so we’ve had no reason to get a rental license. But now, suddenly, my neighbor who doesn’t live here, but has a rental license, her property value goes up because she’s previously rented out her home and had the license in place, but my property value goes down because it doesn’t have that license. Locals are being penalized for living in their homes and not renting them,” Grooms said. “Houses that must be rented for six months will just stay vacant. The owners will let friends and family use it, and they’ll just Venmo money to the owner under the table.”

Grooms agreed with suggested incentives for long-term leases and for businesses that provide employee housing.

Wendy Zintsmaster told city officials, “The potential negative consequences far outweigh the positives. Our rising frustration comes from not understanding why this would be effective. We need more facts, more data to support the effectiveness. We’ve done our homework on this, but it seems evident the city hasn’t done theirs. With fact-based evidence, perhaps we can reach a compromise, but we need more data. This is way too soon.”

Simpson, the city’s new housing coordinator, acknowledged that housing and vacation rental data is incomplete. Many of the figures cited pertain only to 2020 and 2021, when tourism and rental figures were artificially inflated by the pandemic, when people couldn’t go to the Caribbean or Europe and instead came to Key West.

Industry offers ideas, alternatives 

Oropeza suggested significantly increasing the annual license fee for monthly rentals, “and using the money to help people with down payment assistance and rental support. Let’s have some attorney collaboration and work out something that’s fair and equitable.”  

The suggestion of a local housing committee that includes real estate agents, renters, attorneys and homeowners garnered a great deal of support during the meeting. 

A few speakers suggested the city put the issue of short-term rentals to a voter referendum, which prompted another discussion of who should have a say in such decisions: full-time residents who live and work in Key West, but don’t own property here, or out-of-town owners who pay property taxes, but don’t live here. 

Another speaker suggested a moratorium on the conversion of multifamily dwellings to single-family homes. For decades, such conversions have displaced workers whenever a property that includes four small apartments and houses four working couples is sold, then renovated to become a single-family home that’s typically used as a vacation rental. 

Former city commissioner Margaret Romero reminded the audience that she had long ago proposed a program called Save Our Affordable Rentals, which would provide a tax incentive comparable to a homestead exemption for owners who rent their properties annually to local residents. 

Although their property isn’t the owners’ primary residence, they’re providing a primary residence for the renters, and the owners should be rewarded for that, Romero has said for years.

Her suggestion received enthusiastic applause from the crowd, but, she said, it never got any support or consideration from her fellow commissioners when she was on the dais. 

One speaker then suggested the city use some of the Tourist Development Council’s bed tax money for affordable housing. 

The state legislature currently prohibits tourism money from being spent on affordable housing, and tax incentives would have to be approved by the legislature as well. 

Kaufman said, “You all have a strong lobby in Tallahassee. Please talk to your lobbyists. If they can join forces with the city’s lobbyist to change the TDC laws, I think that makes a lot of sense.” 

Johnston wrapped up the meeting by saying, “I’ve heard more proposed solutions in the past three hours than I’ve heard in 20 years. Clearly we need more conversations about this. We do have a problem. And if a family comes here and spends $1,000 a night for a week’s vacation and they can’t get service anywhere in town, then they’re not coming back. So let’s come back to this. I do think this item needs to be pulled from the Sept. 20 agenda. No one wants to enact a bad ordinance. “

Mandy Miles drops stuff, breaks things and falls down more than any adult should. An award-winning writer, reporter and columnist, she's been stringing words together in Key West since 1998. "Local news is crucial," she says. "It informs and connects a community. It prompts conversation. It gets people involved, holds people accountable. The Keys Weekly takes its responsibility seriously. Our owners are raising families in Key West & Marathon. Our writers live in the communities we cover - Key West, Marathon & the Upper Keys. We respect our readers. We question our leaders. We believe in the Florida Keys community. And we like to have a good time." Mandy's married to a saintly — and handy — fishing captain, and can't imagine living anywhere else.