This house on Rubel Avenue was recently approved for a conditional use permit to operate as a non-owner-occupied short-term rental. | Photo by Caitlin Bowling

The conversation around what type of regulations short-term rentals should face is ripe for debate.

Some say city leaders have gotten it all wrong with their proposed changes to short-term rental rules, meanwhile scoffing at Louisville’s lack of enforcement of its existing ordinance. One short-term rental manager, who is in favor of some regulation, questioned how much dialogue is happening around the ordinance.

“I think it’s definitely worth exploring [regulations] both with neighborhood groups and city leaders,” said Jonathan Klunk, chief executive of Key Source Properties, which manages more than 60 listings. Key Source host more than 5,000 “trips” per year and has an after-hours call center for guests and others.

Despite having a big stake in the future of short-term rentals, he said: “I still have trouble even having constructive conversations with our city’s lawmakers. I definitely think we need to be more strict as a city.”

Justin Reid, left, and Jonathan Klunk of Key Source Properties

Louisville Metro is considering possible changes to its current short-term rental ordinance, including capping the maximum renters at one time to 10 and altering the fine schedule for those illegally renting properties without registering with the city. Develop Louisville staff are expected to present the changes to the Planning Commission at a public hearing at 1 p.m. on Dec. 6 in the old jail, 514 W. Liberty St.

Metro Councilman Brandon Coan, whose district includes the Bardstown Road corridor, helped Develop Louisville draft the proposed short-term rental ordinance changes.

“It is good suggestions, but it is really a starting point,” Coan said, noted that the city has received and reviewed more than 120 comments submitted online from residents, including “one of the best ideas” — requiring short-term renters to display their city-issued registration number on vacation rental websites.

It is unclear if Metro Council will host a public hearing about the short-term rental ordinance, similar to hearings recently held about regulations affecting food trucks.

By the numbers

As of Nov. 9, a total of 409 short-term rentals were registered with Louisville Metro Planning & Design Services, according to Louisville Metro Government. Those listed are just a fraction of the short-term rentals in Louisville, however.

The city has struggled to enforce its ordinance requiring property owners to register their houses as short-term rentals. Airbnb alone states that more than 1,000 properties in Louisville are listed on its site, which doesn’t include other properties that may be listed on HomeAway, Vacation Rental by Owner or other sites.

Screenshot from Airbnb website

While that doesn’t mean the houses are active rentals, it shows that many are or have rented their properties. Some may only rent a property for the Kentucky Derby, while others may rent sporadically throughout the year, and still others like the properties that KeySource manages are strictly short-term rentals; no one lives there full time.

Since August 2016, when Louisville Metro Government’s rules for short-term rentals first took effect, the Board of Zoning Adjustment has approved 71 conditional use permits to allow property owners to rent places that are not their primary residence — including five this month.

The majority are concentrated in the Old Louisville and The Highlands neighborhoods.

To date, property owners have filed 178 conditional use permit applications for short-term rentals. Some never moved past the pre-application, while others stalled for unknown reasons after a formal application was filed. Twenty-three applications were withdrawn by the property owners, and seven were denied by the zoning board.

Based on Board of Zoning Adjustment records, those that were denied had neighbors who spoke out against the rental because of distrust of the owner, noise, lack of parking or other concerns. A few of the property owners who had their applications denied had previously violated the city ordinance, including renting a property out without proper city approval.

Among the conditional use permit applications were also 31 for houses that were the owner’s primary residence. While most property owners only need a conditional use permit if they don’t live at the address the majority of the year, homeowners in Traditional Neighborhood Zoning Districts like Old Louisville and Limerick must obtain a permit no matter what.

Since August 2016, the Board of Zoning Adjustment has approved applications for 26 short-term rentals where the property was the applicants’ primary residence.

The map below looks strictly at short-term rentals in which the property is not the owner’s primary residence, meaning they are available to be rented all year round. The blue pinpoints denote properties that already have a conditional use permit, while the purple pinpoints are addresses where the owner appears to be actively moving through the permitting process.

Although not all short-term rentals are registered with the city, it is still reaping some of the benefits. Louisville-Jefferson County Metro Government signed an agreement with Airbnb so that the company collects an 8.5 percent transient room tax on behalf of the city. Revenue from the tax, which also is tacked on to hotel bills, supports Louisville Tourism.

Since that start of the agreement on April 1, Airbnb has collected $670,000, according to the company.

Residents weigh in

Short-term rentals have become a hot enough national topic to make it into popular culture.

A recent episode of the ABC show “Black-ish,” which is known for tackling current events, revolved around short-term rentals, with a neighbor encouraging the central character Andre to start calling the police when renters become a nuisance — hosting loud parties or parking their cars improperly. Some would view the show’s portrayal of short-term renters as an exaggeration typical of Hollywood, while others may not.

From Aug. 14 to Sept 14, Louisville Metro received more than 120 comments from residents about the proposed changes to the short-term rentals. A number of them focused on owner-occupied rentals, with residents complaining about just that — loud parties and other nuisances.

In contrast, some were homeowners who rent their houses who said the changes would negatively impact their ability to rent their property, with many asking the city to eliminate a proposed change that would limit the number of residents in a short-term rental to 10. Current city ordinance allows for short-term rentals to house two people per bedroom, plus 4.

A spacious, four-bedroom home in The Highlands, marketed as an executive rental or for families. | Courtesy Key Source Properties

One commenter wrote:

I have no issue with registering with the city, the city is already charging me 9 percent tax. I do however have issues with the city taking a 9 percent tax and telling me that my six bedroom house is only big enough for 10 people.

Some residents also want the city to allow them to rent their houses without registering as long as they rent it out fewer than 60 days a year.

Others specifically addressed non-owner-occupied rentals, or rather the fact that the proposed changes ignore them. A few also asserted that non-owner-occupied houses near them were operating illegally; however, that can be difficult to prove since short-term rental sites do not list properties by address.

A commenter wrote:

I keep seeing the same management company and/or investment companies proposing new short-term rentals. Can Louisville Forward and the Metro Council please look into restricting these properties to one or two offerings per individual homeowner? Otherwise, you’re going to have companies owning or operating dozens of rental properties. … People don’t buy a home with expectation a hotel will open up next door to them. I am concerned the city is allowing too many of these properties by corporations that are manipulating the local law. What happens when one company owns 50 or 100 short-term rentals? They are basically operating as a hotel and degrading neighborhoods at the same time.

A few argued that non-owner-occupied short-term rentals tighten the housing market. One commenter stated that it denigrates the neighborhood:

Every (conditional use permit) is a lost opportunity for a real resident (including long-term renter) who actually lives here, cares about the place, and those around them. I don’t like the few that already exist (and what they take away from our neighborhood), and I worry that allowing more will exponentially exacerbate the problem.

Larger metropolitans like San Francisco and New York City have adopted stringent rules about short-term rentals because they, for multiple reasons, have severely constrained housing markets that are preventing people from finding places to live.

Jay Gulick

“Louisville is not New York City, but that is a concern long-term,” said Jay Gulick, managing director of real estate firm Kentucky Select Properties.

Given that short-term rental locations are popular in urban neighborhoods such as The Highlands and Old Louisville, the transformation of single-family houses into non-owner-occupied rentals can make it more challenging for first-time homebuyers to find a reasonably priced property in desirable neighborhoods. While that has put pressure on the home-buying market, it is not significant at this point, he said.

“As is the case with most public policy, it needs to balance the interest of everybody. I don’t know what that solution is,” Gulick said. “We don’t want to discourage investment in real estate.”

Klunk argued that taking a home off the market for a short-term rental is no different from turning a single-family house into an apartment.

“People who purchase properties to rent out longer term, they don’t get this kind of flack,” he said. “You are still taking inventory off the market that could be sold. … People are concerned what could be. I don’t think it should be looked at any differently than another type of investment property.”

Common sense regulation

Klunk told Insider that he is in favor of reasonable regulations and questioned why the city hasn’t put forth the idea of density limits, which would cap the percentage of houses in an area that could be non-owner-occupied short-term rentals.

“Right now, it is a complete free-for-all,” he said.

That said, Klunk noted that short-term rentals are a key part of tourism, as some don’t want to stay in hotels. They also serve as housing for executives that come into town for longer periods than a leisure traveler would.

“It is an important part of the future of real estate and will only grow in popularity. If we don’t get ahead of it now, we will likely follow the path of other major cities who allowed it to roll out too quickly and with little governance, which led to its untimely downfall,” he said.

But Klunk also believes a number of residents have come out against short-term rentals without reason.

“You have the boy who cried wolf. People who are trying to end short-term rentals over the most minor of things,” he said, adding that people don’t have a choice over who buys a house and could easily end up with a nuisance neighbor who lives next door full time.

“It is fear of the unknown,” Klunk said, noting “in some areas, there have been bad actors.”

Several commenters listed out suggestions from the Cherokee Triangle Association, including one that the city require short-term rental operators to display their city registration number in their listing and strike a deal with popular rental sites including Airbnb to take down any listings without it. This could be an easy way to spot non-compliant properties.

Councilman Brandon Coan | Photo by Peter Campelli

“We could use many more code enforcement officers across the board in this city to deal with public space and property issues,” Coan said. But “we have not been able to sort of hire people our way out of this problem.”

It’s not about more people; it’s about smart ways to enforce city ordinances, he said.

Coan noted that the proposed changes won’t fit every situation, but the city doesn’t want to create a sprawling ordinance that attempts to anticipate everything. The goal is common sense law.

“What I am looking for in a final piece of legislation is the most effective mechanisms possible,” he said, adding: “People who really want to cheat the system will always be there.”

Louisville native Caitlin Bowling has covered the local restaurant and retail scene since 2014. After graduating from the Ohio University’s E.W. Scripps School of Journalism, Caitlin got her start at a newspaper in the mountains of North Carolina where she won multiple state awards for her reporting. Since returning to Louisville, she’s written for Business First and Insider Louisville, winning awards for health and business reporting and becoming a go-to source for business news. In addition to restaurants and retail business, Caitlin covers real estate, economic development and tourism. Email Caitlin at [email protected]


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