For first time ever, Lexington will regulate Airbnbs and VRBOs. What happens now

After four years of meetings, studies, discussion and more discussion, the Lexington-Fayette Urban County Council voted Tuesday to license short-term rental properties like Airbnbs and VRBOs for the first time.

The new regulations, which passed unanimously, would dictate where short-term rentals can go and require an annual registration fee. Lexington now joins most similar cities, like Louisville, which adopted such regulations in 2015. Lexington currently has no idea how many short-term rentals there are in the city, but there have been growing complaints about them in numerous neighborhoods, which led to the action.

Like a lot of public policy, the measures have pleased neither those who want short term rentals more strictly regulated nor operators who want no regulation at all.

“We’ve heard feedback from residents and operators,” said Liz Sheehan, the District 3 council member who helped craft the new rules with council member James Brown. “We’ve really tried to arrive at somewhere in the middle.”

The regulations would require all short-term rental operators to pay a $200 license fee, although operators with multiple properties would pay $200 on the first property and $100 on remaining properties. The annual fees will help the city pay for software that will assist in managing short-term rentals.

The new rules would govern where short-term rentals could be located and how big they can be. In residential areas, they will be confined to a maximum occupancy of 12. If they wish for a larger occupancy, they would need to apply for a conditional use permit.

The regulations also make clear where short-term rentals are allowed and what types of short-term rentals will need city sign-offs. If the short-term rental is part of an owner-occupied home, it will be allowed without a conditional use permit. Conditional use permits, which are granted by the city’s Board of Adjustment, will also not be required in certain business zones that allow for homes and other residential properties and hotels.

Operators will have six months after the ordinances and zone text amendments are passed to become licensed. Current operators in zones that would require conditional use permits would be grandfathered and would not need to apply for a conditional use permit, city officials have said.

What’s more confusing is that these rules apply only to properties inside the urban service boundary. The Rural Land Management Board, which oversees policy in the area outside the boundary, is developing policies for short-term rentals in the county.

The licensing will allow the city to see not just how many short-term rentals there are, but how often they are being rented. Brown said that baseline information will let them know if the rules need to be adjusted.

Third District resident Amy Clark said the council will have to return to the issue of affordable housing and how it’s affected by short-term rentals. Looking at Airbnb and VRBO websites for Lexington, she calculated there are at least 1,170 short-term rental units. “People are buying fixer uppers in great part to improve them for short-term rentals,” she said. “To cede housing land to wholly business purposes ensures they will be with us forever.”