SANDPOINT — The City Council will hold two public hearings on proposed changes to the city's short-term rental and lot coverage code at its next meeting on Wednesday.

The code changes were recommended to the council by the city’s Planning and Zoning Commission at its Dec. 16 meeting. The changes to the STR code would remove the citywide 35-unit cap on non-owner occupied STRs in residential zones in addition to increasing regulations around parking and occupancy.  

Planning and Community Development Director Jason Welker said the city is removing the cap to bring its ordinance in-line with state law and the Idaho Supreme Court’s ruling in the case of Idaho Association of Realtors v. City of Lava Hot Springs.   

In that case, the Supreme Court found that the Lava Hot Springs’ cap of zero STRs in residential zones was in violation of state law 67-6539 or Short-term Rental and Vacation Rental Act. Zachary Jones, the city’s legal counsel, said at the meeting the Supreme Court's decision allows cities to regulate, but not prohibit STRs in city limits.  

"My thought on that is that the 36th applicant is prohibited from having a short-term rental,” Jones said at the Dec. 16 meeting. “Whether you make that number 500, the 501st applicant is prohibited from having a short-term rental. So, the first 500 might not have a cause of action, but as soon as you cross that line, then someone could.”   

Jones added that a regulation could not amount to a prohibition by being unreasonable, using the example requiring all STRs to have 10 off-street parking spaces. Both Welker and Mayor Jeremy Grimm have said publicly that the city was becoming the focus of potential lawsuits because of the cap, however none were ever filed against the city. 

The STR changes were recommended unanimously by the five attending commissioners in a reluctant vote, where numerous said they felt like their hands were tied because of state law. Public comment on the STR code at P&Z meetings has been mixed but leaned toward asking the city to fight for the cap in court instead of making a preemptive move to avoid a lawsuit. 

In place of the cap, the city is proposing separating STRs into two groups, low and high occupancy. A high occupancy STR, which would house 11 or more people, in a residential zone would have to apply for a new STR permit, which is similar to a conditional use permit. 

That process would involve a hearing at the P&Z commission, which could approve or deny the permit. In the proposal, parking requirements for STRs would mirror residential requirements, with one off-street parking space required for STRs housing five or less and increasing with the number of people advertised to stay at the location. 

Before the STR change, the city council will hold a public hearing and discuss changes to lot coverage in residential zones, which was approved 4-1 at the P&Z Dec. 16 meeting.  

Under the amended code, single-story buildings in the residential single-family zone could exceed the current 35% building footprint limit. The code would eliminate the 40% building footprint cap in the residential multifamily zone but retain the 70% impervious surface maximum.  

The other proposed changes concern lot size and density in the residential multifamily zone. Staff is proposing shrinking the minimum lot size in from 5,000 square feet to 3,500 square feet and allowing more dwelling units as the lot sizes get larger.  

Welker and City Planner Bill Dean said the goal of these changes is to increase density in the city, which would hopefully lower housing costs as the supply rises.  

The changes to code align with several Idaho housing non-profits' recommendations such as the Gem State Housing Alliance and Panhandle Affordable Housing Alliance. In its policy agenda, the GSHA calls on cities to simplify subdivision standards and reduce minimum lot sizes.  

"While local policy cannot control inflation, we can remove barriers to local supply,” Welker said. “That’s what we are proposing with these amendments.” 

The city will hold public hearings before debating the changes on Wednesday, Jan. 21 at 5:30 p.m. at City Hall in City Council chambers.