March 26, 2023

Dear Neighbors,

The Urban County Council voted on Thursday, March 23, to advance an Ordinance that would greatly increase extremely high occupancy Short-Term Rentals (STRs) in Lexington’s neighborhoods. [A Short-Term Rental is defined under state law as occupancy for thirty (30) days or less]. A Council resolution (#39 in the docket) has now sent the ZOTA—an amendment to the current zoning ordinance—to the Planning Commission (PC) to get the PC’s review and recommendation before it is be returned to the Council for final action. Council is now on spring break and will return on April 18. Going forward, Fayette County Neighborhood Council (FCNC) and interested neighbors will need to work in the near term with both Council and the Planning Commission to arrive at the best result possible to ensure neighborhood integrity.

Will the ordinance affect your neighborhood, your district, and the larger city?

The ordinance as currently proposed would have a tremendous impact on neighborhoods that have one- and two-family zoning. It would allow high-occupancy rentals to different groups (one and sometimes two groups per house-lot) as often as once a night, in areas currently not designated for transient rental use.

In other areas,

a. Areas zoned for apartment houses, the ordinance would allow up to 3 Short-Term Rentals per lot.

b. Shopping center and downtown-business zones could have unlimited short-term rentals as well as long-term rentals and licensed hotels (that includes even the B-2A downtown “frame” zone that borders and embraces several historic residential and mixed-use neighborhoods).

c. Neighborhood-business and professional zones closely bordering residential neighborhoods could use up to 25 percent of their residential units for short-term rentals. In the case of many larger 1960s-vintage complexes in B-1 and P-1, or B-1 “form-based projects” like the HUB with its Target store, could divert a great many apartments, some relatively affordable, to short-term rental use.

What’s the timing:

The Council developed the Ordinance and must receive it back from the Planning Commission, ideally with changes and improvements, in 60 days. We must ask: Why this hot haste in advancing the short-term rental ZOTA? But wait: Logistically, for the Commission to return the Ordinance to Council by Council’s 60-day May 22 deadline, the Commission must act by its scheduled hearing date of May 11. However, the Council Committee that next reviews the PC report would have to receive the report from the Commission still earlier, by May 2, in time for committee review on May 9. The next committee meeting is not until August 28, after the Council’s summer break. The PC could decide to return the proposal quickly so as not to disturb established schedules, or the Council could decide to expedite consideration upon its return from summer vacation, giving less time for receiving input from neighborhoods. The schedule is not set at this time, and therefore objections to the ZOTA need to be entered as soon as possible.

(Also to be passed is a separate companion Ordinance for the Division of Revenue to govern Short-Term Rental licensing, its regulations, taxing, and fees. Council has tabled the Revenue/licensing Ordinance until the zoning component returns from the PC for further Council consideration.)

Below is a summary of what is in the ZOTA being advanced.

1. Short-Term rentals would be limited in the Ordinance to two (2) renters per bedroom + four (4) others + two (2) per accessory dwelling unit (ADU) on the property + children with the ADU. If the Short-Term Rental requires a conditional use permit from the Board of Adjustment because no long-term “Host” is resident on the property (explained below), the Board may increase the occupancy still more at its discretion. A four-bedroom house next door with an ADU could have 14 adult short-term renters (eight + four on the floor + two for an ADU), plus additional children with the ADU; and the Board of Adjustment could sometimes approve a higher occupancy limit. With such a high occupancy limit and short rental duration, the occupancy maximum would sometimes be damaging and virtually unenforceable.

2. Except in our agricultural zones, the current maximum occupancy for single-family and duplex rental properties, per principal dwelling unit, is generally a legally recognized family of any number or a group of four (4) unrelated renters, who live together and share common living and kitchen facilities. Lexington’s current zoning ordinance define a boarding or lodging house as a residential building, or part thereof, for five (5) or more adults living together, not as a family or housekeeping unit; individuals living there cannot share meal or food costs. Currently the State does not license any boarding or lodging houses in Lexington. [Again, a Short-Term Rental is defined under state law as occupancy for thirty (30) days or less.]

3. The draft Short-Term Rental Ordinance distinguishes between “Hosted” and “Unhosted” STRs. Rentals with a Host on the property would be a use enjoyed by right (i.e., automatically) on a property. Only “Unhosted” Short-Term Rentals would require a Board of Adjustment Conditional Use Permit, with a public hearing and mailed notice to owners of properties within 500 feet. (“Unhosted” Short-Term rentals also would be allowed without any conditional use permit in zones that currently allow licensed hotels—with no resident or employee oversight, and no limit on the number or percentage of short-term units.)

a. The “Host” of a Short-Term Rental need not be a resident homeowner: the property owner must hold the STR License but need not live on the lot. The Host is any long-term resident, who lives in one or another dwelling on the lot, in whole or in part, for at least 275 days a year and for the duration of the Short-Term Rental. S/he may be the property owner and Licensee, or the designated Operator, or (by agreement with either one) any resident, whether tenant or guest or employee.

b. Both Louisville and Covington require a notice and hearing for all Short-Term Rentals. Louisville requires a public meeting, with notice, near the STR site, as part of its licensing process. In Lexington, the public would be cut out of the process of review and decision in many cases. All Short-Term Rentals in Louisville and Covington are conditional uses and are not by-right.

4. Where a conditional use permit is required, how much confidence can be placed in the Board of Adjustment process that a Short-Term Rental will be granted only if compatible with the vicinity, and that fair and reasonable conditions will be attached to the use? With the Board of Adjustment traditionally maintaining a sound voting majority of real estate and development interests, one cannot expect that many such enterprises will be denied. Likewise, enforcement of the terms of conditional uses, at best, has not been encouraging or robust within our city.

5. The proposal does not adequately deal with the density of short-term rental properties. Louisville prevents them from being within 600 feet of each other, property line to property line. That’s clear to decide and offers some protection to neighborhoods. Lexington’s Ordinance would direct that the Board of Adjustment “shall consider” the number of short-term rentals within 1,000 feet, and their occupancy. More definite protective language would direct that the Board “shall find” that no other STR exists within 1,000 feet. The density of the use is not considered at all unless the use is conditional.

6. Council removed an important condition that a conditional use permit would be granted to the Licensee only and would became null and void when the property transferred to a new owner. The change gives every reason to expect that most Short-Term Rentals, once granted in a neighborhood, would be there for good: Properties approved for permanent transient and commercial use would be passed on from one investor to the next. The Ordinance would still provide that a conditional use shall become null and void if the short-term rental license lapses or is revoked, but Council discussion has already clarified that interpretation of a “lapse” of use shall give a degree of indulgence to the Licensee. Additionally, if the Division of Revenue revokes a License, the property could be sold to another corporation and brought back to life almost immediately via a new License application. Presumably the old ownership could own all or part of the new corporation.

7. There’s a very real concern that when (if) Council adopts the proposed legislation, staff could “grandfather in” a large majority of existing Short-Term Rentals without guidelines or restrictions and without conditional use permits, via a process wholly dark to the public with no recourse for appeal.

8. By relaxing zoning regulations and increasing opportunity for transient rental use in residential zones, the Short-Term Rental ZOTA gives landowners and investors a very great regulatory incentive to turn Lexington’s residential land from housing to commercial use—offering lodging to more lucrative vacation and business travelers. Councilmember Worley observed in committee Tuesday, March 21, in support of the dedicated affordable housing fund, that Lexington’s primary strategy for increasing affordable housing has been to reduce the cost of its development for housing providers through financial incentives. This support has come chiefly in the form of loans to developers at reduced interest rates. Although we do not object to holding down the cost of affordable housing so that new affordable housing can be built there, maintaining the supply of existing affordable housing and neighborhoods is equally important. Encouraging short-term, investor-owned rental housing is counterproductive at best.

Where does all of this leave us?

Now is not the time for the Council to advance a ZOTA that reduces the land and lodging for Lexington’s permanent residents in favor of short-term, transient renters. Lexington is already thought to offer some 1,100 to 1,400 listings for transient lodging, dwellings in whole or in part. In 2021 the net profits of corporations and individuals derived from Lexington listings through Airbnb and VRBO alone amounted to approximately $11 million. On the other hand, for the approximate nine years between FY 2014 to 2023, local allocations for affordable housing totaled only $26.375 million, not including an allocation of ARPA funds of over $13 million, a total standing much shy of $11 million in one year.

Ultimately, responsibility and authority to create a Short-Term Rental Ordinance rests with the Urban County Council. However, neighborhoods need to participate in the process and work with the Planning Commission and staff. Neighborhoods clearly have not engaged in the process, and the available time based on current actions is very limited. A change is necessary.

Whatever comes out of the Planning Commission will go back to the Council thereafter, so it is important for neighbors to communicate with both Council Members and Planning Commissioners and furnish their input on how Lexington should deal with the short-term rental issue.

What can you expect from Fayette County Neighborhood Council in the near future?

FCNC will let you know when meetings will occur, will encourage you to attend, and will track how decision makers vote and speak to the issues involved. Do not be surprised if you are not familiar with the proposed Ordinance. Specific information simply has not been readily available to the public.

FCNC views the short-term rental ordinance under consideration as critically important. We ask that you distribute the information in this correspondence to your neighborhoods and that you engage in this issue. As you can tell STR is not a simple issue! Your neighbors need your help in defining and understanding the issue, and it’s important that it be understood. The greater the volume and the more citizens and neighborhoods who share their thoughts on the matter, the greater will be the response from the Urban County Government. Because this is a Zoning Ordinance Text Amendment (ZOTA), and not a zone change, citizens are allowed legally to communicate with both the Planning Commission members and Urban County Council members. Direct personal contact is always best. However, you may also send correspondence via email to councilmembers@lexingtonky.gov and to planningmailbox@lexingtonky.gov.

FCNC will be developing model correspondence to be of assistance, and you will see it directly.

Sincerely,

Walt Gaffield, President

Fayette County Neighborhood Council, Inc.