The Duluth City Council unanimously approved an ordinance to adjust the rules for vacation rental properties within city limits at its regular meeting on Monday night.

The council also unanimously approved an ordinance to establish a new Housing Trust Fund to help out landlords looking to renovate their older properties and increase the city’s inventory of affordable housing. The housing fund will be fed partially by the city's home-share and short-term vacation rental permits.

New vacation rental rules

The new ordinance, which passed its second reading at the council meeting, will limit the amount of guests a single rental property can host to nine. Vacation rental properties that are already licensed to host more than nine guests will be grandfathered into the system, albeit provided they have four or more bedrooms at the property. Councilor Zack Filipovich pointed out the new ordinance should also clarify screenings and change the procedures for approval. Now applications for new rentals will go through the planning commission for approval and go to the City Council for any appeals.

The ordinance also creates a third tier of short-term vacation rentals/home-share rental permits. These are for homeowners who want to rent out their homes for fewer than 21 days a year without having to apply to become a full-fledged vacation rental.

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"We talked about having this third tier back in 2016, where you could rent your home for a few weekends a year, such as for Grandma's Marathon, and it was rejected then, which I thought was too bad," said councilor Joel Sipress. "I think there's a huge difference between people who want to rent your home for a few weekends to raise money for renovations versus people coming in to buy up properties and removing them from our affordable housing market permanently."

The license fees will also increase from $621 to $1,600 annually, with the funds raised from the fees going into the Housing Trust Fund.

Councilor Janet Kennedy raised concerns about the amount of cars that vacation rentals still bring into residential communities and asked that the council continue to watch that issue in the future. Councilor Sipress also warned that the raised cap on vacation rentals, which will increase from 60 gradually, as more housing units are added to the Duluth housing market, to 120 at the highest, "will never be seen as enough."

"We've voted against proposals to raise the cap in the past and I don't apologize for maintaining that cap," Sipress said. "I hope future councilors hold the line on this and don't reopen it again. I hope they see this compromise as the new way to set the cap and when people come back to us asking to raise it more, I hope they don't back down. The cap will never be high enough for some."

Housing Trust Fund creation

The council approved the second reading of an ordinance to create a Housing Trust Fund to help support affordable housing within the city. Earlier in the same meeting, the council approved a resolution to transfer $4 million from Duluth's Community Investment Trust to the Housing Trust Fund. This is in addition to another $2 million in funds dedicated to the trust from LISC, Local Initiatives Support Corp.

The fund will provide low-interest and forgivable loans to small-rental property owners in need of renovations. In exchange, the property owners will agree to maintain affordable housing for a set number of years.

"I'm excited for the rehabilitation program because here in Duluth we have a lot of aged housing stock that needs repairs," Filipovich said. "And I've always said that the greenest building is the one already built."

The fund has a revolving loan that will allow it to make back about 75% of the funds that it loans out. With that in mind, Filipovich asked that future councils continue to devote money to the fund to ensure it remains sustainable.

"We need this to continue in the future," Filipovich said. "We've all known someone looking for an affordable place to live and their frustration of not being able to find anything in their price range. This ensures that properties will have the funds they need to maintain their properties while staying affordable."