Whitefish Stops Short of Enacting Emergency Embargo on New Vacation Rentals

As tourist towns across the intermountain west grapple with a workforce housing shortage, local municipalities have begun taking a hard look at what tools are on hand to better regulate and enforce a short-term rental industry run amok.

From fabled resort destinations like Vail and Breckenridge in Colorado to newly discovered tourist hubs like Dillon, Montana, the proliferation of short-term rentals has become synonymous with the worsening affordable housing crisis, even if there’s a growing consensus that the booming vacation-rental market is more a symptom of the problem than its source.

Indeed, the broader issue of affordable workforce housing shortages has been a fixture of resort communities for years, tightening its grip like a Gordian knot as members of the local workforce struggle to gain purchase in an expensive and competitive housing market. But the COVID-19 pandemic fomented the issue from crisis to catastrophe, accelerating a dire set of socioeconomic consequences that are now reverberating across the Flathead Valley.

In Whitefish, for example, where paying anything less than $1,000 for a windowless basement room in a shared rental unit has become a bargain for many members of the local workforce, a glut of 487 active short-term rentals were available in August 2021, compared to 232 vacation rentals in February 2020, shortly before the pandemic arrived in earnest.

The exponential growth of short-term rentals in Whitefish coincides with the pandemic-spurred exodus of COVID refugees fleeing coastal nerve centers in favor of the cozy seclusion offered by towns like Whitefish. And it has certainly aggravated the already lopsided catalog of long-term rentals sought by local workers and the growing roster of short-term options fueled by demand from cash-rich, pro tem asylum-seekers.

But how big of a role do short-term rentals play in the over-arching issue of access to affordable housing? Would a moratorium on new vacation rentals temper the spike in property valuations that have skyrocketed in the last two years? And how would the city enforce an embargo on new short-term rental licenses when it can’t even enforce its existing regulations?

Whitefish city leaders weighed those questions when considering a proposed 90-day emergency moratorium on new short-term rentals at an Oct. 4 council meeting, ultimately backing away from the proposal but agreeing to drill deeper into how short-term rentals adversely affect residential neighborhoods, city infrastructure, affordable housing, over-visitation, and tourism.

“Short-term rentals are not the reason for our affordable housing issue,” Jeff Raper, a Whitefish resident and real estate agent with National Parks Realty, told council members during a public hearing on the proposed moratorium. “Just a quick look at sales over the last three years, which include residential, single-family residences, condos, and townhouses, less than 10% are utilized for short-term rentals. Ninety percent of our growth here and our price appreciation is due to the sale of standard residential product — condos and townhouses with 30 days or more per use. In the 489 units that have sold year to date, just looking at residential product, only 58 of them are in zones that can be used for short-term rentals. So before you adopt a moratorium you might want to take a deeper look at the overall aspect of what is going on across the U.S. Property valuations have spiked within the last 24 months not because of short-term rentals but because of the pandemic, and because of people coming out of metro areas flush with cash.”

Lauren Oscilowski, a Whitefish business owner and chair of the Sustainable Tourism Management Planning Committee, said the proposed moratorium is designed not as a silver bullet, but as a measure to allow city leaders time to better understand the short-term rental phenomenon and its role in the broader context of the affordable-housing crisis, as well as problems related to over-visitation and an unsustainable degree of tourism.

“I see this proposed moratorium as addressing both of those issues,” she said. “This isn’t a new problem for us in the way it is for other parts of the country as a result of [the pandemic]. COVID just sped up a problem that we were already starting to face. Our community and other mountain communities are already feeling the impact of short-term rentals and visitation issues more acutely than other areas in the country.”

Regardless of council’s decision on the moratorium, Oscilowski urged its members to heed the recommendations of the Sustainable Tourism Management Planning Committee she chairs, which recently directed city staff to consider addressing five key items — redefine long-term rentals from 30 days to 90 days; require license numbers on all short-term rental listings; raise fees and fines for violators; draft a three-strike program; and hire an outside consultant to help with regulation and enforcement.

“The city needs short-term rental regulation and enforcement and until then there will continue to be short-term rentals operating illegally, either unlicensed or in undesignated zones,” she said.

Acknowledging the need to better regulate and enforce short-term rentals, council members ultimately deadlocked on the proposed moratorium in a 3-3 vote, with Mayor John Muhlfeld casting a tie-breaking vote to defeat the temporary emergency ordinance.

Even the councilors who voted in favor of the measure acknowledged that it is likely too effete, and wouldn’t help the community gain ground on the larger problem.

“There is part of me that thinks the short-term rental problem is really just a red herring, that it’s not a big contributor to our overall housing problem,” Councilor Steve Qunell said. “But I am convinced that it is a contributor to our sustainability, and I think that’s the lens we need to view this through. Because issues like over-visitation, stress on infrastructure, community perception, and just simply things like going to the grocery store and finding half the shelves empty, that’s going to persist. It’s things like that that short-term rentals really stress and I don’t think we have a lot of information on what that has done to our community.”

In opposing the ordinance, councilor Andy Feury noted that the city of Whitefish only issued 10 licenses for new short-term rentals in October, November and December of 2020 — the same three-month period during which a 90-day moratorium would have taken place this year if enacted — and said an embargo on new licenses might actually hinder more than help the city’s long-term efforts to seek solutions, mainly by inviting litigation.

“I don’t see [a moratorium] as buying us a lot, even if I think there is a tremendous need in our community for people to just take a breath for about 10 seconds and go, ‘woah, Wilbur, this is too much,’” Feury said. “My biggest concern with a moratorium is the blowback on us in the long term. We enjoy a fair amount of control currently by not allowing short-term rentals in many zones in our community, and I don’t think we have a state legislature that is particularly amenable to those kids of local regulatory actions.”

Muhlfeld agreed with Feury’s concern over the potential backlash from the legislature, saying that part of his responsibility as mayor is “keeping us out of unnecessary litigation.”

“I see this as reaping more negative effects on our local ability to control short-term rentals in our city than what we would have gained through a moratorium,” Muhlfeld said.

Whitefish Stops Short of Enacting Emergency Embargo on New Vacation Rentals