Cities Want Control of Short-Term Rentals, but This State Won’t Allow It

A unanimous Arizona Court of Appeals ruling this fall sent a blunt message to city halls: When it comes to short-term rentals, local control has hard limits in this state. 

The decision arrives as cities across Arizona, grappling with rising housing costs and shrinking inventory, have pushed to regulate where, when, and how many homes can be turned into Airbnbs, VRBOs, and the like. But a 2017 state law sharply limits their authority, barring cities from restricting or banning short-term rentals altogether.

That law, though, is a relic of a different era for the state. Since the 2020 Census, Arizona’s population has grown by 6%, ranking fifth in the nation for numeric growth, according to the Arizona Office of Economic Opportunity. And like many places that saw a pandemic-era influx of new residents, State 48 now faces a deepening housing crunch.

Critics and some city officials argue that short-term rentals may be compounding the problem. While they generate tourism dollars and tax revenue, they also pull homes off the long-term market, tightening supply at a time when demand is surging.

Now, as pressure mounts in fast-growing cities and resort towns alike, local leaders are calling for the power to rein in short-term rentals. But so far, they’re hitting the same legal wall.

The housing crunch

Arizona’s housing supply has lagged behind its population growth. The state earned a lackluster “C” in a recent nationwide report card on housing affordability, state Department of Housing estimates estimate the housing shortage at roughly 270,000 units.

That imbalance is most visible across Arizona’s most sought-after areas. Since 2019, the college and ski town of Flagstaff has seen median home prices jump nearly 62%, according to data from Realtor.com®. Sedona, a resort town and top tourism destination, has seen a 49.5% increase. The major metros of Tucson and Phoenix aren’t far behind, with gains of 45.3% and 42.2%, respectively.

That’s why, in November, the Pima County Board of Supervisors—which oversees the Tucson metro—formally requested the power to regulate short-term rentals within its jurisdiction.

Supervisor Jennifer Allen, who represents Tucson’s District 3, noted that the city has at least 6,000 short-term rentals, 90% of which are single-family homes.

Allen was not immediately available for comment, but she told KOLD in November, “That’s why the county and the local governments being able to take back some of the regulatory freedom to be able to determine where and when short-term rentals may or may not make sense is so incredibly important.”

Yet, just weeks later, the state Court of Appeals delivered their unanimous ruling rejecting Sedona’s attempt to prevent a mobile home park from converting some of its units into short-term rentals. The city had argued that local zoning rules should block such conversions. The court disagreed.

Their ruling reinforced the grip of SB 1350, the 2017 law that bars jurisdictions from banning or broadly limiting short-term rentals. And for residents of that Sedona mobile home park, it raised the specter of being displaced in favor of nightly guests.

"Nothing in the legislative history of SB 1350 indicated that the Legislature intended to allow the wholesale eviction of residents through conversion of mobile home parks into de facto hotels,'' Lauren Brown, Sedona’s communications director, told The Arizona Daily Star. "Such conversions bypass local zoning processes and are disastrous for the availability of affordable long-term housing for Arizona's most vulnerable residents.''

It’s not just a Sedona issue, either. Across the country, mobile home park residents face rising risks of eviction when parks are purchased by investors. In Florida, eviction filings jump by 40% in the months following a park sale, according to data from Princeton’s Eviction Lab.

Why protect short-term rentals?

The steep cost that locals are paying raises an obvious question: Why protect short-term rentals at all?

Anyone who grew up in Arizona (like me) will be able to tell you that Arizona’s economy has long revolved around the “Five C's”: copper, cattle, citrus, cotton, and climate. It’s that last one, climate, that drives the state’s most powerful economic engine: tourism.

In 2023 alone, nearly 46 million people visited Arizona, lured by the state’s year-round temperate weather and near-constant sunny skies. (Phoenix, known as “The Valley of the Sun,” sees about 300 sunny days per year.) That surge in tourism generated $4.2 billion in tax revenue across the state and supported more than 187,000 jobs, according to the Arizona Office of Tourism.

Short-term rentals are seen as an important piece of the tourism industry puzzle. 

They offer visitors flexibility and volume that hotels can’t always match, especially in smaller towns or during peak travel seasons. And they help spread tourism dollars beyond traditional hotel corridors directly into the pockets of local resident homeowners.

At least that’s what the bill’s sponsor intended when she brought it to the state senate floor in 2016.

“When this legislation was passed, it was billed as a way for homeowners to make extra income by renting out a room in their house or a ‘Casita’ that they had on their property,” Debbie Lesko, former Arizona state senator, U.S. congresswoman, and current Maricopa County supervisor tells Realtor.com. 

“The Arizona League of Cities and Towns, comprising 91 different Arizona cities, really liked the portion of the legislation that centralized collection of rental taxes for them and, if I remember correctly, they either supported the legislation or they were neutral,” she adds.

To her point, hotel taxes generated $953 million in state tax revenue in 2024 alone, according to data from the Arizona Hotel and Lodging Association. That’s to say nothing of the $2.8 billion in wages and more than 51,000 jobs for Grand Canyon State residents.

But even Lesko sees that times have changed. 

“On the one hand, short-term rentals have indeed given homeowners a way to make extra income on their private property and given travelers a nice alternative to staying in hotels or motels, but I am concerned that investors are turning homes into money-makers and changing neighborhoods,” she says.

What Arizona wanted to avoid

So what would it look like for Arizona cities and towns to be able to regulate these housing units? New York City offers an example of what it might look like, and the reasons why some have resisted the push.

In 2023, New York enacted one of the country’s most aggressive crackdowns on short-term rentals, requiring hosts to register with the city and banning unhosted stays under 30 days. The aim was to reclaim housing for full-time residents, but the early results have been mixed.

Despite stricter enforcement, rents in New York continued to rise, climbing 8%, while hotel prices surged more than 12%, according to data from Airbnb. Critics argue the crackdown has done little to ease affordability, while reducing lodging options for travelers and pushing more demand into an already strained hotel market.

At the same time, New York’s tourism recovery has remained sluggish. While domestic visitation improved modestly in 2023, it still trailed pre-pandemic levels, according to a report from the Office of the New York State Comptroller. And International visitor numbers, which are typically a cornerstone of the city’s tourism economy, remained down more than 14% from 2019. 

All of that was expected to change in 2025, but industry leaders now warn of a potential backslide, citing softening sentiment and external economic factors, according to New York City Tourism and Conventions.

While the short-term rental ban isn’t widely viewed as causing the downturn in tourism for the city, its lackluster effect on housing costs provides little motivation for other cities and states hoping to adopt similar legislation. 

And for places like Arizona, where tourism is not just an industry but a pillar of the state economy, New York’s path serves as a cautionary tale. Through the lens of New York, the ban looks a lot less like a conflict about property rights or zoning authority, and much more about choosing which crisis to prioritize: the housing shortage or the tourism economy.

What’s next?

As Arizona’s housing shortage intensifies, momentum is building among local officials, residents, and even some state leaders to revisit the state’s strict limits on short-term rental regulation.

Even as “Homes Not Hotels” signs have popped up across the affluent city of Scottsdale, there is a deeply entrenched opposition and a political environment that’s only getting more complex.

On one side are local governments demanding tools to manage housing availability. On the other are short-term rental owners, industry investors, and a powerful lobbying presence that’s growing more sophisticated. 

In October, Airbnb launched a tax-exempt political organization in the state, according to an IRS document originally obtained and reported by Skift. The purpose of the Airbnb Responsible Tourism Coalition,” as the document details, is to “support/oppose state and local candidates” in “AZ.”

That move underscores the high stakes. Arizona is one of the most permissive states in the country when it comes to short-term rentals. Preserving that status quo is a priority not just for property owners but for a multibillion-dollar industry that sees Arizona’s year-round appeal as critical to its long-term revenue stream.

Still, the political ground is shifting. Gov. Katie Hobbs has signaled support for returning some regulatory power to local jurisdictions. Even Lesko signals she’s open to change.

“I know there is an effort to reform short-term rental policies and I am not opposed to reform,” she says.

To her point, investors accounted for 12.3% of homebuyers in Arizona in Q2 of 2025, according to the latest Investor Report from Realtor.com—almost two points above the national average of 10.8%. And in the highly sought-after metro of Phoenix, the share was as high as 13.8%. 

But legal precedent remains firmly on the side of the current statute, and any change would likely require a legislative overhaul or a political tipping point strong enough to challenge the industry’s influence.

Until then, Arizona cities are stuck in a holding pattern: watching housing costs rise, fielding resident frustration, and waiting for the state to loosen its grip.