Council passes short-term rentals ordinance

LEXINGTON, Ky. — In a unanimous vote, the Lexington-Fayette Urban County Council passed a comprehensive ordinance on Tuesday, regulating the city’s growing short-term rental market. The new regulations aim to address concerns regarding the impact of short-term rentals on the availability of housing and community cohesion. The proposal received a vote of 14-0, with Councilmember Brenda Monarrez absent and Councilmember Chuck Ellinger recusing himself from the vote.

The ordinance, which was initially proposed in Fall 2022 by At-Large Councilmember James Brown and District 5 Councilmember Liz Sheehan, underwent multiple revisions based on public input, stakeholder feedback, and recommendations from the Planning Commission. The final proposal includes provisions such as licensing and registration requirements for short-term rental operators, zoning regulations, and occupancy limits.

Under the new regulations, unhosted units, where the operator does not reside on the property, will be required to obtain a conditional use permit if located in a residential zone. Hosted units, where the operator lives on the property, will not need conditional use permits. All short-term rental operators will be required to apply for and maintain an operation license and pay an annual fee. Most zones will have an occupancy limit of 12 occupants for short-term rentals, while certain zones, such as B-1 (Neighborhood Business), P-1 (Professional Office), and Mixed Use Zones, will not have occupancy restrictions.

To ensure a smooth transition, currently operating short-term rentals will have a six-month grace period to comply with the new licensing, fee, and permit requirements. The ordinance aims to strike a balance between promoting tourism and addressing concerns related to housing availability and community stability.

The decision to regulate short-term rentals comes as Lexington’s housing market faces challenges exacerbated by the growth of platforms like Airbnb and Vrbo. In a recent report, housing consultant Nick Gerli highlighted concerns about the saturation of short-term rental listings compared to available housing inventory in Lexington. With 1,250 active rentals in the city, 93% of which are entire home rentals, the availability of housing for residents has been affected. According to Federal Reserve data, the number of short-term rental units exceeds the available housing inventory in Fayette County.

The oversupply of short-term rentals in Lexington could lead to lower revenues for individual owners, as seen in other cities experiencing similar trends. Experts have warned about the potential impact on the local real estate market, as owners may be forced to sell or convert properties into long-term rentals due to revenue declines.

The Fayette County Neighborhood Council (FCNC), an advocacy group concerned about the negative impact of short-term rentals, has called for stricter regulations to protect neighborhoods and the public. The FCNC raised issues with the proposed ordinance, including the allowance for existing short-term rentals with fewer than twelve occupants to increase occupancy without notice or a hearing. They also advocated for a strict standard on short-term rental density and the implementation of a citizen complaint system.

While the passage of the ordinance marks a significant step toward addressing the challenges posed by short-term rentals in Lexington, stakeholders and concerned citizens will continue to monitor developments. The impact of these regulations on the city’s housing landscape and the balance between tourism and residential needs remains a critical focus for the community.

The new regulations will take effect immediately, and the city will work to ensure compliance among short-term rental operators as Lexington moves forward in managing its housing crisis and shaping the future of its neighborhoods.

Lexington’s short-term rentals ordinance passed 14-0, with Monarrez absent and Ellinger recusing. (LexTV screenshot)

Top photo: Vice Mayor Dan Wu (right) presiding over the Urban Council. At-Large council member James Brown is seated to his left. (LexTV screenshot)