October 30, 2022

Legislation across the country has been scrambling to keep up with the rising popularity of short term rentals, and the Northland is no exception to this trend. At the September 9 meeting of the Northland Connection Advisory Committee, we heard from a panel addressing this controversial and fast-moving topic: 

  • Beth Pierce, Executive Director of Iron Range Tourism, which serves 10 communities in the heart of the Iron Range
  • Jenn Moses, Senior Planner with the City of Duluth and lead for the current and long-range planning team 
  • Tim Nelson, Director of Land Services for Cook County

How Many Are There?

The panel first shared estimates on the number of STRs in their areas of focus. 

Moses and Nelson both noted the difficulty of quantifying STRs due to the various ways they’re defined. People in the City of Duluth can have three types of STRs based on the number of allowed guests and the duration of stay. The city imposes a cap on all three types. On the Iron Range, the number of STRs has grown in recent years from fewer than a dozen to over 40. In Cook County, there are approximately 358 rental operations with 286 STRs now licensed.

All three areas have seen an influx of land use permits, including a combination of secondary home permits, rental permits, and renovation permits.  

What Are the Pros and Cons? 

There’s no question STRs impact our communities. Panelists were asked to share some of the advantages and disadvantages. 

On the positive side, STRs can help areas position themselves as destination communities. STRs create local job opportunities and bring income from other areas through tourist attraction. During the pandemic, we’ve also seen a related trend in upgrades of housing in neighborhoods that haven’t received much attention in recent years, including renovations of historic properties. As an alternative lodging option, STRs also provided a convenient and cost-effective option for those who wished to travel during the pandemic.  

However, STRs can be problematic. Neighbors cite complaints about noise, trespassing, garbage disposal, and other issues. There’s also concern that STRs can change the character of a neighborhood, with non-locals coming and going, and uncertainty about who your neighbors are. Issues like these are further complicated in cases where the homeowners are not always on-site, or live elsewhere. 

The hospitality industry has also asked for a level playing field, leading to new regulations on lodging taxes and other fees. However, compliance is an issue when it’s difficult to track STRs unless owners use an online platform or report the rental, themselves.

Is Local Housing Stock in Jeopardy?

As the market for lucrative STRs grows, some communities have also expressed concern about housing stock disappearing. This trend sees units purchased and transformed into STRs, reducing housing options for locals and aspiring residents.

In Cook County, a recent study showed that more primary homes were lost to individuals purchasing secondary homes for themselves, rather than a loss of homes being purchased for vacation rentals. The City of Duluth has seen the same trend, with the impact of secondary homes exceeding the growth of STRs. 

“Be careful with regulation,” cautioned Moses. “Just because rentals are new does not mean they are responsible for housing stock.” 

How Is Regulation Evolving? 

In Duluth, STRs don’t have an insurance requirement, but they must comply with the same regulations as hotels and B&Bs. That includes an interim use permit from the planning commission for zoning code, tourism tax, applicable inspections, and categorization as a commercial enterprise. The permit is good for six years at which point owners are eligible to renew. The permit is also not transferable, meaning the owner cannot buy and sell vacation units at an inflated price. Duluth increased zoning fees substantially with funds going toward a housing trust. 

Cook County’s planning commission sees up to 24 cases of interim permit requests per year. The County opted for annual licenses at a lower price to encourage people to sign up for the licenses. The rate will eventually increase, but currently pays for the host compliance site, and staff for enforcement and administration. Multiple communities in the area have interest in participating in a lodging tax collection system, as well. Representing members of the public and various other entities, a committee of 20 is working to address ordinances currently in place. Property owners in Cook County must carry home insurance as a requirement to the permitting process. 

On the Iron Range, Chisholm adopted an ordinance in response to concern about housing stock and the community population dropping below 5,000, which would lead to a loss of state funding for various programs. The city requires owners to purchase an annual license to operate an STR.

Where Do We Go from Here?

STRs are a relatively new trend as well as a fast-moving target. Although they face opposition for a variety of legitimate reasons, the data does not yet support the case against them across the board.

Nelson pointed out that STRs are highly situational. In Cook County, certain vacation operations that would normally be restricted are allowed, due to the nature of the county and its support for remote lifestyles, such as using yurts.

“Look at it and do something, it’s better to be on the offense,” recommended Pierce, adding: “Communication with residents is key.”

For more information on housing trends, contact Northland Connection Program Manager Miriam Kero at mkero@northspan.org.