Four years after a contentious fight over short-term rentals, how have the regulations played out in Minneapolis and St. Paul?

Just over four years ago, right before the Super Bowl was held at U.S. Bank Stadium, Minneapolis and St. Paul adopted regulations on short-term rentals through online platforms.

Short-term rental platforms like Vrbo and Airbnb had been operating in an unregulated fashion for years. The 2017 regulations made it officially legal to rent out a spare bedroom, a whole apartment or a home to people through an online platform — but they also set some ground rules.

At the time, such  short-term rentals and regulations on them were contentious — not just in the Twin Cities, but all over the country. Opponents of short-term rentals raised concerns about preserving neighborhood character, restricting affordable housing supply and whether and how the properties should be taxed. But supports of the rentals were wary of regulations that might put an unnecessary burden on people trying to earn extra money, plus the challenges of enforcement.

Four years later, Minneapolis and St. Paul list hundreds of short-term rental licenses between them.

Adopting short-term regulations

Minneapolis passed short-term rental regulations in 2017. It required hosts that rented a property they didn’t live to obtain a standard rental license. Hosts that lived at a property they rented short-term but left during guests’ visits had to pay a $46 annual fee. Hosts who lived and remained in the unit during short-term guests’ visits didn’t have to get a license.

In late-2020, the city amended its ordinance to cap short-term rentals to one property per host other than the one they live at, and cap short-term rentals to no more than 10 percent of units in a building more than 20 units. Council members cited the impact of short-term rentals on housing supply, as well as complaints about the way property was managed.

By March 1 of this year, most hosts will be required to have a $50 short-term rental license (not the standard license formerly required), which also carries requirements of filing a management plan, having liability insurance, notifying neighbors of the short-term rental, posting a floor plan in the unit and including the rental license number in any online listings. Hosts who rent a room are not required to register or be licensed.

Data from the city of Minneapolis showed 355 rental licenses used as short-term rentals at some point in 2021, and 220 owner-occupied properties that had active registrations in that period.

Jeff Lin, who rents out a house in Uptown, gave a talk at a local tech conference last year about the trials of being an Airbnb host, but also about how it’s enriched his life (and helped him master the art of folding a fitted sheet).

Overall, he said, it’s been a good experience. Guests can stick pushpins on a map in the house to show where they’re visiting from. There are pins on every continent except Antarctica.

Lin has made some adjustments that he said has made the hosting experience better: among them, increasing the minimum length of stays, allowing dogs and raising prices.

Lin said he and his wife, who is a lawyer, have found some of the new licensing paperwork in Minneapolis unclear. He’s heard from friends who are unhappy with the City Council’s decision to cap the number

“You can only operate one house, one property in the city of Minneapolis,” Lin said. “There are people, like a friend of mine who was trying to quit his job and become a full-time Airbnb host and wanted to buy multiple properties to do it. Can’t do it anymore.”

From the city’s perspective, short-term rentals have run fairly smoothly.

“We have a pretty active community who will let us know if they believe there’s an unlicensed unit next to them,” said Kellie Jones, Minneapolis’ director of housing inspection services. Likewise, Jones said the city gets the occasional complaint from a short-term rental user about a property.

“They are held to the same standards as any rental license. So they need to meet our housing maintenance code, they need everything to be in working order,” Jones said.

St. Paul

St. Paul’s short-term rental ordinances were a bit different from Minneapolis’ from the get-go. In 2017, the capital city’s new short-term rental ordinance set up an annual fee of $40 per unit, regardless of whether the hosts were living on-site or not. Caps set the maximum number of units allowable by building type. Hosts needed proof of insurance. Units that weren’t owner-occupied needed a fire certificate of occupancy.

Data from St. Paul list 174 owner-occupied licenses and 112 non-owner occupied ones as of November. St. Paul also lists three platforms that are registered with the city.

“St. Paul’s experience administering these licenses has been uneventful. The number of licenses issued each year has been fairly constant with no significant fluctuations,” said Suzanne Donovan, a city spokesperson, in an email. Enforcement of these licenses, as with all license-types, is complaint-based, and few concerns have been raised, she said.

Beth Ulrich became a short-term rental host in St. Paul in 2019, when she and her husband listed the apartment above the Spectacle Shoppe, a St. Paul eyeglasses store, as an Airbnb.

Ulrich said they made the decision to go the short-term rental route after realizing that not having a garage made it harder to rent out long-term. The process to get licensed was easy, Ulrich said; the city set up supports and helped walk them through the whole process.

Many people who come to stay at the apartment are parents of students at Macalester College or people who moved away from Minnesota but want to come back — sometimes for a whole month — in the summer.

Running a short-term rental has been a different experience in St. Paul compared to Miami Beach, where the couple also have a short-term rental. Airbnb collects taxes in St. Paul but Ulrich has to pay resort taxes monthly in Miami Beach. The clientele are also different — in Miami Beach, damaged property is a much bigger issue, Ulrich said.

“We just hired a management company down there because we just couldn’t deal with all of the problems that we were having,” she said.

Different cities; different rules

Cities are still figuring out short-term rentals. It’s still in the news, it just tends to be smaller cities now, said Kellen Zale, an associate professor of law at the University of Houston Law Center.

Short-term rentals have been part of the local economy in places like Aspen or Carmel, for a long time. But the advent of platforms like Airbnb and Vrbo massively scaled up what had before them probably been a few small transactions.

“Most [communities] didn’t have anything in their zoning or land-use codes about somebody using their home as a short-term, transient, for-profit activity at the time,” Zale said. At the same time, when those peer-to-peer transactions increase, “the scale of the good and the bad goes up, basically.”

That included noise from parties, a squeeze on neighborhood parking and in some parts of the country, pressure on housing prices as units were taken off the long-term rental market in favor of the short-term market.

In Minnesota, cities have taken all kinds of different approaches to regulating Airbnbs, said Nancy Polomis, an attorney at Hellmuth and Johnson who specializes in real estate law and homeowner associations and has followed short-term rental regulations in Minnesota.

Edina’s ban on short-term rentals has been on the books for decades, while Eagan passed a ban in 2018.

While much of the buzz around short-term rentals has passed with large cities like Minneapolis, St. Paul, Rochester and Duluth already having passed regulations, other cities are still adding them to their books.

These days, she said, many cabin country jurisdictions have been looking at regulations because so many properties in their region are being purchased with the intent to list them as short-term rentals, Polomis said.

While the fights of the last decade as big cities placed regulations on short-term rentals seem to have quieted down,the regulation of short-term rentals continues, just at a smaller scale, as more places adopt regulations and others make changes to theirs.

One thing that seems pretty clear, Zale said, is that short-term rentals aren’t going anywhere.

“There was this existential debate a couple years ago,” Zale said. “Now we just have to appropriately regulate the effects that they have, because they’re not going away.”