Short-term rentals are popping up all over Utah. Many cities don’t know how to handle them.

(Leah Hogsten | The Salt Lake Tribune) Dale Carlile is fighting South Salt Lake over its refusal to grant him a business license for short-term rentals, July 3, 2019. He wants to abide by the law but says the city is throwing up all kinds of obstacles.

Dale Carlile sees himself as an honest man. But sometimes, honesty doesn’t pay.

After moving to Utah from Oregon two years ago, Carlile decided he wanted to enter the short-term rental business. Others advised him to run his operation under the radar, because obtaining a license would be too difficult.

But Carlile was determined to follow the law.

He made a deal with South Salt Lake’s new Ritz Classic Apartment Homes to lease a few units and applied for a license. The first time Carlile went into South Salt Lake’s office last January, the woman at the business license counter allegedly informed him that the city didn’t “want his kind” because short-term rentals cut into local hotels’ business.

Six months later, he’s still trying. Carlile has his appeal pending Friday before an administrative law judge after having every license application denied.

Compounding his frustration is the fact that unlicensed operators in South Salt Lake are making profits while he fights his case.

“They have unlicensed people doing the same thing scattered all over the city and they won’t give me a license to do it,” he said.

South Salt Lake is not the only place where unlicensed short-term rentals run rampant. Although Utah cities are aware that underground rentals are thriving, there appears to be little they can do to rein them in.

A quick search on AirBnb, and numerous other short-term rental companies, reveals dozens of listings in South Salt Lake City, and across Utah.

Paul Smith, executive director of the Utah Apartment Association, said his group has seen more and more people interested in short-term rentals, and that he expects the trend to continue even in cities that ban or refuse to license them.

“That doesn’t mean they don’t have them, it just means don’t go ask for a license because they’ll say ‘heck no,’” said Smith. “When cities are unreasonable it drives people to do it unlicensed, unfortunately. ... They shouldn’t require such a ridiculous, onerous process that people just throw up their hands and give up.”

Babs De Lay, owner of Urban Utah Homes & Estates, explained that short-term rentals can pose a concern to cities because Utah already has a rental shortage.

“Owners of properties have found out that they can make more money renting out their property on a nightly basis than they can renting it on a monthly basis,” she said. “That’s a fact.”

Smith acknowledged the Wasatch Front’s housing shortage, but said cities need to find other ways to address the problem besides throwing short-term rental operators under the bus.

“Almost anywhere you go in the world, short-term rentals are now extremely popular as vacation and business travel option,” he said. “It’s not going away; we can’t put the genie back in the bottle.”

A South Salt Lake business licensing employee declined to speak with The Tribune about the city’s short-term rentals policies or to comment on Carlile’s application. Mayor Cherie Wood and her planning division manager did not return multiple messages.

Salt Lake City also has plenty of AirBnB listings, even though the city does not provide short-term rental licenses in residential areas. The city receives a couple of complaints from neighbors each week about unlicensed rentals, according to Jennifer Madrigal, landlord/tenant licensing supervisor, and those are forwarded to enforcement. Further inquiries to the city about its policies were met with either no response or were directed to other staff who said they were not allowed to speak for the city.

It’s the law

Unlicensed landlords don’t have to worry about being tracked down and punished based solely on online advertisements because they’re protected by state law.

State Rep. John Knotwell introduced HB253 in the 2017 legislative session after he received reports that some Utah cities were scouring online ads for short-term rental listings and giving out citations.

Amid what Knotwell depicts as determined pushback from cities and hotels, the compromise that emerged and passed into law bars cities from tracking short-term rentals online. Cities can still go after these rentals if they receive complaints from neighbors.

Knotwell said his bill protects people who are not posing a nuisance with excess parking, noise or trash.

“But if you never know anyone’s there, then I don’t know how there’s a damage to the neighborhood or the property values,” the lawmaker says.

Jordan Garn, executive director of Utah’s Hotel & Lodging Association, confirmed that the hotels lobbied against the original version of the bill, but said the final version was a “reasonable compromise.”

Under the radar

Operating an unlicensed business can still result in fines if ads are paired with formal complaints to the city. So why are so many people still doing it?

Longtime real estate investor Brian Pitcher said people are driven to run unlicensed businesses because cities do not know how to properly regulate short-term rentals and their policies are confusing and inconsistent.

“Until a pathway is established, the public will continue to do it illegally and under the radar," he said.

Pitcher says he personally avoids the hassles by doing short-term rentals in Puerto Rico where they are welcomed as a way to draw tourists.

Several real estate investors who spoke to The Tribune anonymously confirmed that they are operating short-term rentals in different cities without licenses because obtaining them is too hard. Some blamed Utah’s hotel industry for lobbying against short-term rentals.

“The ones with the best lobbyists win the laws,” said Greg Zenger, a real estate investor who said he’s not currently operating short-term rentals.

Garn, of Utah’s Hotel & Lodging Association, said hotels have no problem with owner-occupied short term rentals, but object to businesses competing with hotels without having to comply with the same rules and regulations.

Facing the issue

Some cities are beginning to grapple with the trend, rather than turning their backs and pretending it doesn’t exist.

Faced with a housing shortage and a flood of tourists — 3 million a year at last count — Moab in February passed a temporary prohibition on building new structures for short-term rental use while the city catches up to its growth. Under the building freeze, people can still apply for licenses for existing houses in the permitted zones, said City Manager Joel Linares.

The city has to put restrictions on overnight rentals or else no one would build anything else, he said, adding he “wouldn’t blame them” the business is so lucrative.

Moab’s moratorium will end in August. In the meantime, the city has been engaged in long-term planning for how they can grow as a community in a responsible manner.

Another city trying to address short-term rentals is Sandy, which used to ban the practice but changed its laws last August to allow a certain number of them in each neighborhood.

Evelyn Everton, Sandy’s deputy mayor, said the ban began in the 1980s when residents were nervous about having strangers coming into their neighborhoods. But as AirBnb and others went mainstream, people became accustomed to the idea. Sandy continues to follow up on complaints against unlicensed rentals, but typically only issues warnings at first, she said.

Millcreek, which was incorporated as a city in 2016, passed an ordinance last year requiring short-term rentals to be licensed. Mayor Jeff Silvestrini said the city makes it easy to obtain a license as they are available across the city. When people apply, they must certify that they understand city parking codes and noise ordinances.

As his South Salt Lake appeal hearing approaches, Dale Carlile says he has looked at apartment buildings in other cities that might be more welcoming to his business, but that none of the locations have impressed him. He maintains that he will “stand his ground” and fight to run his rentals — with a license — in the city that so far has refused to budge.