Missoula City Council takes up vacation rentals, again

Martin Kidston

(Missoula Current) Whether it’s private property rights or the need for housing, members of the Missoula City Council on Wednesday again took up the issue of tourist homes as one council member looks to ban them in areas zoned as residential.

But city staff said it’s currently a non-issue, as vacation rentals comprise only a small segment of Missoula’s overall housing stock.

In his proposal, council member Daniel Carlino looks to change several portions of city code, particularly in residential areas. Certain businesses, such as some commercial, civic, storage and vacation rentals are currently permitted in such areas, though he wants the later removed as a permitted use.

Existing vacation rentals would be grandfathered in, he said.

“I’m proposing we eliminate tourist homes from a permitted use in residential districts,” Carlino said. “I’m asking us to no longer allow them to be permitted in residential zones. We’re seeing a housing shortage in supply.”

According to city staff, the number of vacation rentals in Missoula hasn’t changed much over the past three years and remains at around 550 unique rentals. It represents roughly 1% of the city’s housing stock.

That’s less than other cities, such as Whitefish and Bozeman, where tourist homes represent around 3% of the housing stock, city staff suggested. As a result, the two cities regulate tourist homes to some extent while other cities, including Kalispell and Billings, don’t regulate them at all.

“It’s pretty split across the state. More seem to not regulate the use than to regulate the use,” said Eran Pehan, director of planning and development. “We’re not seeing any huge changes in our data.”

Data hasn’t changed

With speculation rampant on the number of tourist homes in Missoula, the city purchased software several years ago to track and evaluate the trends and drive down to real numbers.

The city also has separated the function of short-term rentals from those primarily occupied by the resident versus those that operate fully as rentals. However, the software doesn’t track that level of detail, said housing specialist Emily Harris-Shears.

“The data currently shows everything on the short-term rental platform but doesn’t do that level of nuanced reporting,” she said. “That’s something we’re currently doing ourself.”

Regulating vacation rentals has come up before and the City Council has balked at banning such business, saying they don’t represent a large enough piece of the city’s housing stock and that the right of the property owner must be considered.

Some also rely upon the income they make off vacation rentals to make ends meet. And in Missoula, being a college town, many short-term rentals are used by students during class.

While vacation homes comprise only a small piece of Missoula’s housing stock, those who operate such businesses are required to register them with the city. However, of the 550 short-term rentals operating in Missoula, only 113 are currently registered, the city said. Enforcement is a function of staffing and staff is focused on other issues.

“We aren’t monitoring or tracking any other uses,” said Pehan. “We don’t go out looking for folks violating code. We respond to residential complaints about code violations.”

The Legislature during the last session moved to prevent cities from regulating tourist homes but backed off, though it could revisit the issue in 2025. Some data also suggests that when vacation homes are returned to the housing market, it results in a roughly $35 annual increase in the cost of housing, staff said.

Pehan added that the vacancy rate in Missoula’s rental market is trending in the right direction. It has risen to around 3% and could hit 4%.

“In regards to the broader market, vacancy rates in Missoula for rentals are on the rise. It’s a good thing for our market and one of the success stories of rapid development and permitting of multi-family units over the last two years,” she said.

While the city doesn’t believe short-term rentals have a significant impact on the availability of housing in Missoula, one class of renter may be the exception, Pehan said.

“We see short-term rentals disproportionately affect one specific segment of the rental market, and that’s individuals who either singularly or through a group of people are renting single-family homes,” she said.

The Land Use and Planning Committee held Carlino’s measure in committee for further discussion.