Olympia City Council approves rules for short-term rental properties

The Olympia City Council has approved new regulations for short-term rentals that will limit how many properties owners can rent out.

The new regulations were created in part to protect the city’s affordable housing supply and targets two kinds of short-term rentals: vacation rentals, where an entire property is rented out, and “homestay” rentals, where the guest stays in the same property as the owner or another permanent resident.

The new rules will have owners operate their rentals more like businesses and have them get proper permits, licenses and insurance to operate in the city.

In 2019, the State Legislature passed laws regulating short-term rentals. The ordinance the city voted on is similar to the 2019 laws that require property owners to buy liability insurance, register with the state, meet safety requirements and pay sales and lodging taxes.

Leonard Bauer, the city’s Community Planning and Development director, said the regulations were created after residents voiced concern about losing homes and rental units from the housing market. But Bauer said short-term rentals currently make up just 0.8% of housing units in Olympia.

Council member Dani Madrone said the regulations would prevent Olympia’s permanent housing supply from falling. “There is a role for these types of units in our community and there’s not enough of them right now to have a huge impact on the availability of housing, but with these changes we’re not going to get there.”

Other towns and counties in the state have created their own regulations for short-term rentals. The town of Steilacoom in Pierce County recently voted to ban all short-term rentals and Chelan County outlawed them from all residential zones.

Bauer said the regulations were created with community concerns in mind.

Under the new regulations, if a property owner wanted to offer a short-term vacation rental, they would need to get a permit from the city of Olympia that they would have to renew biannually. Permits would allow the city to keep track of the short-term rental economy in Olympia, Bauer said.

While homestay rentals would be exempt from permitting, people offering both types of rentals would need to get a business license, liability insurance and remit state and local taxes.

The city of Olympia has been in the process of adopting rules for short-term renting for four years, and after multiple public hearings and revisions from the city’s Land Use and Environment Committee, the City Council voted Tuesday to approve the new ordinance.

The regulations limit the number of short-term rentals a property owner can have to two — unless the owner was already operating more than two, in which case they need to make sure they follow all other requirements with the properties. That does not extend to homestay rentals.

Mayor Pro tem Clark Gilman said there had been debate around the two-unit rules — other drafts of the rules limited ownership to four short-term rental units. Gilman said he sees short-term rentals as part of the gig-economy “and I think that scale of two units is still appropriate in that world. Someone owning more units than that starts to become a bigger hospitality business and I don’t think it fits within these guidelines.”

City Council members had questions about who to call if someone is in violation of the city’s short-term rental regulations. Council member Yen Huynh asked if people should call 911 to report a short-term rental noise complaint, for example. Bauer said the city will put an emergency contact number on the city’s website “so they can react and respond if there’s an issue with guests at a short-term rental that’s affecting neighborhoods.”

The regulations will allow property owners to offer ADUs as vacation rentals, and requires them to build additional parking spaces if they rent out more than two bedrooms.