Jana Johnson is a local homeowner -- and she rents out vacation homes she owns -- so she knows there are complaints about short-term renters who may act less than neighborly.
The Pequot Lakes resident is an Exit Lakes Realty Premier real estate broker and investor who rents out two of her homes -- on Upper Whitefish and Daggett lakes -- and is acquiring a third.
“The Daggett one I’ve owned since 2001 -- bought it as a vacation home for ourselves, just a summer, weekend place to go while we lived in the Twin Cities,” said Johnson, who relocated about six years ago to the Brainerd lakes area to live year-round.
In Crow Wing County, there are about 575 vacation rentals according to Host Compliance, an online compliance monitoring company that checks rental advertising sites and grabs data to get distinct counts in a designated area.
“We wanted to be able to keep the cabin … so it just made sense to rent them out,” Johnson said. “Then I have the best of both worlds because we can still have a cabin on the lake within close proximity.”
Vacation rentals by owner
Vacation rentals by owner, or VRBOs, are not specifically regulated in the county’s land use ordinance, which defines bed-and-breakfast residences, resorts and commercial use.
“A short-term rental is something that is basically rented for less than 30 days at a time,” said Gary Griffin, Crow Wing County land services director.
Problematic tenants of short-term rentals have been a long-standing issue with some of their neighbors, and the contentious issues have come up before the county board of commissioners more than once, including at the Tuesday, Sept. 17, committee of the whole.
“This is a way for some property owners to generate some extra income. At the same time, should you generate that income at the expense of your neighbors?” Griffin asked the board.
Concerns associated with VRBOs include public safety, traffic, parking, safe drinking water supplies, adequate sewage treatment systems and disturbances such as noise and trespassing.
“Should there be some kind of regulation or mechanism that if you have a problem-child renter that there’s a way to deal with them? Currently, there just isn’t, and some folks are just frustrated with that,” Griffin said before discussing a proposed ordinance regulating VRBOs.
Renters choose VRBOs “because they seek a more economical way to travel as a group or are seeking a different experience than your typical hotel or resort,” according to Griffin.
“When you’re commanding $650 a night, it’s really nothing for me to get the popcorn popper that they want or whatever. It’s worth it to make them happy and come back,” said Johnson, who was not at the committee of the whole meeting. “In fact, they’ll fondly call it ‘their cabin’ or ‘their place on the lake.’ We’re starting to find that as well, that people will book next year already in advance, so they can ensure their family vacation the same week every year.”
Johnson said tenants who rent via Airbnb and VRBO.com are rated, not just the property owners, so renters are likely to be on their best behavior.
“And that’s important to them because when they try to rent from other places, they don’t want a bad rating,” Johnson said of her customers. “It will affect them in the future.”
There has been an increase in the number of VRBOs in the county on VRBO.com, one of the most popular websites for short-term rentals, from 325 last year to 477 this year, according to the county land services department.
“I think the location and the dollar amount that you’re expecting and easily getting per night can self-regulate that a little bit because we really only have families,” Johnson said of the clientele and complaints the sheriff’s office may receive. “And for $650 a night, and we do a five-night minimum, so we’re trying to avoid those parties, and they have insurance that’s required through Airbnb and VRBO. We want to be very discerning as well, mostly to protect our property.”
Only a small number of VRBOs in the county are licensed by the Minnesota Department of Health under the hotel/motel classification, but enforcing regulations on VRBOs would require time and county staff resources to enforce any regulation the county puts in place.
“Much of the short-term rental market today is unregulated. Those who rent typically do not have their premises inspected to determine compliance with health, building, housing and safety codes,” according to the American Planning Association. “Many short-term rental hosts do not have homeowners and liability insurance to cover losses that may result from commercial occupancy ... and in the event of death, injury or property damage, there may not be insurance coverage or sufficient assets available to cover the liability.”
Johnson said she advertises her rental homes on VRBO.com, Airbnb and Craigslist, and has a Facebook page for both her properties where people can leave reviews and see photos. She rents them by the week in the summer and is finishing her second season of renting.
“Obviously, we can’t use it as frequently,” Johnson said of her using her own lake homes. “Our weekend is basically on a Tuesday and a Wednesday because the weekends are almost always booked.”
The county board of commissioners discussed Tuesday what to do about short-term rentals, and one of the options is to continue doing nothing at all, which Commissioner Paul Koering had advocated before commissioners Bill Brekken and Steve Barrows joined the board.
“All I have to say is elections have consequences, and the board has changed. The board was not interested in this last year or before that, but apparently it looks like there’s a majority. I’m not supporting it,” Koering said.
The ordinance would define a short-term rental to include “any home, cabin, condominium or similar building that is advertised as, or held out to be, a place where sleeping quarters are furnished to the public (that is not a bed-and-breakfast, resort, hotel or motel).”
“I just feel like it’s more and more government. This is a private property issue, and I’m for private property rights. You buy the land, it’s your property, do what you want with it,” Koering said.
Griffin said, “If you’re on the lake and this would happen to you, I would think you would expect that you could go to your government, and they would help in some way.”
The Minnesota Department of Health has licensing jurisdiction over food, pools and lodging services. In the state, a lodging license is required for short-term rentals from the department under the “hotel/motel” classification if rented a week or less at a time, to be renewed annually.
The state does not have a specific definition for “vacation home rental,” but many of the legal and regulatory issues related to these rentals are covered in statutes and regulations that apply to hotels, motels and lodging establishments.
The board of commissioners previously discussed VRBO in 2014, when a group of property owners on Lake Hubert in Nisswa brought forth nuisance concerns, and last summer at another committee of the whole meeting. That board did not move forward with regulations at the time.
“I think it’s unnecessary, and I don’t think it will be cost-effective because then if you have this ordinance, you’re going to have to govern it, you’re going to have to staff it somehow and perhaps do inspections,” Johnson said.
Griffin told the commissioners the revenue generated by the proposed ordinance, however, would be more than enough to cover the associated costs of enforcing it.
“If we can get to better regulation … and not have to have the citizens of Crow Wing County pay for it, it’s the people generating the money pay for it, that seems like to me, commissioner, kind of a win-win for everybody,” Griffin told Koering.
The Minnesota Department of Revenue states if a home’s primary use is a short-term rental, then it shall be classified as 3a Commercial for the 2020 assessment, payable 2021.
“If somebody’s house was seasonal recreational, meaning that it’s not homesteaded -- it’s their cabin and let’s say their renting it out -- their property taxes would literally more than double,” Koering said of the commercial classification.
No state legislation has been passed specifically defining vacation home rentals, but the Minnesota Department of Revenue states lodging and related services, including vacation home rentals, are subject to Minnesota sales tax, and local sales and use taxes where they exist.
“Multiple counties and cities regulate these differently based on their local elected officials, but there is some opportunity to bring some economic benefit … potential generation of income to the county here if there was a fee for licensure,” Griffin said.
State building code does not require inspection of short-term rentals, which means it would not require that all permitted work be performed by a licensed contractor, so there is no guarantee the structure is compliant with the Minnesota State Building Code, according to land services.
“If this is a business, then it should be operated like a business that requires the permitting and the fees and what not,” Commissioner Doug Houge said. “It’s just, to me, an unfair advantage for VRBOs to profit at the resorts’ expense.”
The state health department has jurisdiction to license and inspect these properties, but given the rapid growth in the number of short-term rentals, many operate without a license or inspection by the health department or a delegated authority.
“Not everybody can afford to stay at some of these expensive resorts, and that’s all that’s left, the little small mom-and-pop where you maybe could afford to go there for a week, are going away,” said Koering, who lives on South Long Lake.
State officials seem to realize they don’t have the capability to effectively regulate these short-term rentals, and allow and encourage local regulations, according to the county land services department.
“I think the more we put the squeeze on these people, the more of them go away, the less people have access to a lake,” Koering said
Chris Ashmore is the owner of PMI MInnesota and said he brought the franchise to the Brainerd lakes area for these exact issues. PMI Minnesota is a full-service real estate asset management company that provides professional property management and real estate brokerage service.
“As I stated before, the answer is not more government mandates on how a property owner can use their property but rather better management,” said Ashmore, who was not at the committee of the whole session.
Ashmore, having been the broker/owner of Coldwell Banker 1st Minnesota with offices from Brainerd to Bemidji, said he saw the changes coming in how the short-term rental has been changing property usage.
“We find having hands-on management or boots on the ground takes care of the majority of the issues. We are there at check-in, check-out and everything in between,” Ashmore said.
“We even have the ability to monitor noise decibels from a distance to help ensure the peace and quiet for all concerned neighbors.”
Future options the board can consider is to do nothing, establish a permitting process such as Aitkin, Douglas, Mille Lacs, Stearns and Lake counties or establish a licensing process like Otter Tail and Cook counties -- and with the latter processes, determine how in depth the regulations should be.
“It’s about, let’s just focus on the problem child renter ones, and when those arise ensure that we have a way to deal with that and help out the neighboring property owners,” Griffin said.
“I don’t think anybody has come to me and say, ‘We should get rid of VRBOs.’ … If somebody wants to rent out their property, go for it -- just do it in a responsible way, please, and be courteous to your neighbors -- that’s what people have said to me.”