Business Community Government

Short-term rentals grew slowly in first year under new regulations, Gig Harbor officials say

Could it be that after an 18-month moratorium on new short-term rentals (STRs) in Gig Harbor, a sometimes acrimonious public debate on the topic, and a full year of these lodgings operating under new rules that seemed to satisfy neither critics nor proponents, the city’s STR businesses are growing at a slow to moderate pace and settling quietly into the fabric of the city?

That was the takeaway, at least tentatively, from a briefing delivered by city staff to Gig Harbor City Council members at a study session last Thursday.

The council passed Ordinance 1507 a little over a year ago to ward off potential STR woes. Critics warned that growth in these lodgings, fueled by pervasive Internet-based marketing, could turn residential neighborhoods into transient zones with too much noise and partying and too little parking. Another fear was the burgeoning short-term rentals sector would siphon off affordable housing as landlords converted units to serve vacationers and other travelers.

Monitoring and regulation

Gig Harbor was hardly alone in its concern over proliferating short-term lodgings. In response to AirBNB, VRBO and similar technology platforms’ transformation the travel industry, cities around the country have scrambled to rein in STRs’ real or perceived effects.

Ordinance 1507 gave the city a system to monitor and regulate short-term rentals, which it defines as lodgings whose guests stay fewer than 30 days. It required applicants to obtain a city business license and established a permitting system, with an application fee (currently $650), a requirement that applicants post notice of their intended STR use on subject properties, and a path to appeal permit decisions.

The law required off-street parking and mandated that STRs — most of which are in residential areas — “give no outward appearance nor manifest any characteristics of a business in the ordinary meaning of the term,” lest they infringe on neighbors’ peaceful enjoyment of their homes.

Before the law went into effect, the city didn’t know precisely how many STRs operated in Gig Harbor. Estimates ran as high as 60 units. But last week’s presentation set the currently permitted number at 28, illustrated at the council study session on a map showing STRs marked in red.

Only two new applications this year

That number is smaller than some expected. The bulk of permit applications occurred within a few months of the law taking effect, as existing operators sought to become legal, city staff explained. Permitting then slowed down, only to spike again in August after the city sent 13 letters to what it believed were STRs operating without permits.

The letters “resulted in a slight uptick in applications, and the removal of several listings of those who chose not to go through the permitting process,” according to a briefing document prepared by Jeremy Hammar, a senior planner.

So far in 2024 there have been only two new STR applications, according to the city’s Short-Term Rental Program web page.

Predictably, the map shows the bulk of permitted short-term rentals in parts of Gig Harbor boasting historic charm and/or mountain and water views. They cluster in downtown’s Historic Millville Residential District and along Soundview Drive. All but three STRs are east of Highway 16.

A map prepared by a city planner for a city council briefing shows properties where short-term rental permits were requested predictably clustered in the downtown waterfront area.

Planners also presented reassuring numbers on complaints and violations related to STR permits. Since the law went into effect, the city has received just one complaint from the public, concerning an STR operating without a permit. The owner subsequently got a permit and the case was closed, Hammar explained at the study session.

No neighbors have appealed

In several instances, neighbors have sent letters urging the city to not approve a proposed short-term rental in their neighborhood. But never has a neighbor — or anyone else — appealed an STR permit after it was issued. (Nor does the city appear to have ever turned down an STR permit application due to neighbors’ concerns.)

Planners reported that regulating the city’s STRs has become familiar and manageable enough that the city no longer needs the assistance of Granicus, a consulting firm hired during the first year of the program to monitor and report on the rentals. At the briefing last week, city staff and council members reached a consensus to not renew the contract with Granicus.

Councilmember Jeni Woock, who cast the sole vote against Ordinance 1507 a year ago after pushing for stricter regulations, acknowledged that there haven’t been many issues with noise and partying at STRs reported so far. “It’ll be interesting to see what happens this summer,” she said.

Woock said that as short-term rentals have come into residential areas of Gig Harbor, she has heard from constituents that they’ve “noticed a lot of strangers walking around their neighborhoods.” However, she said she doubted there is momentum for pushing for stronger STR restrictions, either on the part of the city council or among residents who would like tougher laws but don’t believe the council will move in that direction.

‘Very fair’

But while the city is unlikely to further restrict short-term rentals, “it would not surprise me to see (restrictions on STRs) come down from the county or state from the viewpoint of affordable housing,” Woock said.

Short-term rental operators also criticized Ordinance 1507 during the time leading up to its passage. They objected to the $650 permitting fee, didn’t like the requirement that STR applicants post signs on their properties announcing their plans, and worried about waiting too long to get permits.

Carolyn Allen, an STR operator and co-founder of the Gig Harbor Short-Term Rental Alliance, which represents owners, noted that with the city issuing just 28 short-term rental permits in the past year, STR opponents’ fears that the community would be inundated with such operations have proved unfounded.

Allen said that STR owners at first thought “$650 was kind of steep” but “once everyone realized it’s a one-time fee” that helps cover city services related to the rentals such as monitoring and compliance, there has been more acceptance.

“I think the regulations are very fair,” she said.

“The city has made it fairly straightforward to apply for permits,” said Paul Kadzik, who with his wife owns and operates the Harbor House on the Bay short-term rental on Harborview Drive. One positive of the changes under Ordinance 1507 is that “it removed the uncertainty of being in a grey area” in terms of STRs’ legality in Gig Harbor, he said.

Market factors

The couple’s rental is an accessory dwelling unit (ADU) over their garage, Paul Kadzik said. He described their typical guests as a couple in their 50s, who live in Portland or Seattle or Bellevue and are enjoying a “staycation” in Gig Harbor.

Allen said that market factors, rather than regulation, are likely to keep this type of lodging from proliferating wildly in Gig Harbor. “We’re not a year-round resort community” and hence not profitable enough to draw in large-scale investment to fund new STRs, she said. Allen’s bookings have tended to start in June each year but then “cut off pretty sharply” in the fall. This seasonality makes Gig Harbor a less attractive market for investors, she said.

In addition, short-term rentals in Gig Harbor are facing more competition, both from other newly permitted rental units in the city, and from STRs in unincorporated areas near Gig Harbor, Allen said. This makes short-term rentals in the city less lucrative, which deters new entrants, she said.