The fee for licensing vacation rentals with the city is increasing by $250 for the first unit and $350 for each additional unit.

City Council last week approved changes in licensing fees for all businesses in the city. Most fees went up between $5 and $10, but the licensing for short-term rentals saw more significant increases.

The new fees go into effect immediately. Previously, the licensing for a short-term rental for the first unit was $150, now it’s $400. Each additional unit also has a fee of $400, compared to the previous fee of $50.

Councilor Steve Qunell spoke in favor of the increase in fees.

“We know that short-term rentals are one of the things that impacts our housing,” he said. “We know it’s not the only thing, but we need the funds to crack down on those who are doing this illegally.”

During public comment, one owner of vacation rentals said it’s unfair to charge more to those rentals that are operating illegally.

“The people running these legally are being impacted,” he said.

Council recently directed city staff to come up with new business licenses and permit application fees after evaluating the impacts of short-term rentals in the community. Staff also looked at other businesses’ licenses.

Finance Director Ben Dahlman pointed out that the increases for short-term rentals are designed to pay for increased efforts to monitor license, registration and compliance monitoring of such rentals.

“The fees are designed to help cover the costs of increased staff time, software and supplies to administer that process,” Dahlman said. “We hope that the fees will eventually help pay for a dedicated staff person that would significantly help the city meet its responsibility in monitoring for illegal short-term rentals.”

The city is reducing the initial short-term rental application fee from $100 to $50. That change reflects the amount of staff time on that initial application, Dahlman noted.

Beyond vacation rentals, other business licenses also increased. The fee for a home occupation went up $5, while the fee for contractors went up $10.

All other businesses are charged by square footage. Those rates went up by $10 also.

The city received $157,266 in business license fees in fiscal year 2021 from approximately 1,800 licenses.

Regarding short-term rentals, City Council on Dec. 6 is set to hold a public hearing on several zoning text amendments related to regulations for vacation rentals.

One change creates a definition that recognizes month-to-month standard long-term rentals as being different from any type of vacation rental.

The amendments include creating a designation of medium-term rentals, which are rentals of 30 to 90 days. The medium-term rentals along with short-term rentals are permitted uses in the resort residential zones and the WB-3, but planning staff says the added definition creates more tools to enforce illegal short and medium-term rentals in the long-term residential zones.

Another change will require a short-term rental registration number, hosting site property ID and property address to be listed on any advertising for the short-term rental.

The changes were initiated by City Council, planning staff notes, to further improve regulation and enforcement.

“They will help staff track legal short-term rentals and will help differentiate legal rentals from illegal ones that take needed long-term housing stock from our traditional residential neighborhoods,” planning staff notes.

Changes to the fines regarding short- and medium-term rentals are also proposed. Those found in violation would face a fine of $300 for the first violation and then $500 for each subsequent violation, per day that it occurs.