Ten years ago, then-Arizona Gov. Doug Ducey signed Senate Bill 1350 into law, preventing local governments from banning short-term rentals in their respective jurisdictions.
“For thousands of hardworking citizens, opening up their home to out-of-state guests provides the financial breathing room they need to provide for their family or enjoy an extra expense that they otherwise couldn’t afford,” Ducey said at the time.
Over the following years, Ducey signed concessions to cities, allowing them to require owners to obtain licenses to operate short-term rental properties and the power to revoke those licenses if three violations take place within a 12-month period. Another law signed by Ducey prohibited short-term rental owners from offering their properties for special events that would otherwise require a specific license.
“Local governments may enforce rules related to building codes, traffic control, noise, zoning and other areas that ensure that neighborhoods are safe and pleasant places to live,” Ducey reminded cities in a signing statement for the latter law. “Most short-term rental homeowners are good neighbors. H.B. 2672 provides a straight-forward enforcement mechanism to penalize ‘party house’ operators for not upholding existing laws on their properties.”
Unsatisfied with these practical rules, the League of Arizona Cities and Towns is now running state legislation to restore the ability of city governments to further restrict property owners from renting out their properties on a short-term basis.
According to the Arizona Capitol Times, “the league is proposing legislation that would allow cities to cap the number of short-term rental licenses issued in oversaturated areas, limit the number of total licenses issued and impose minimum distance requirements for short-term rental units.”
It’s part of a common trend seen across the country. As short-term rentals have grown in popularity, politicians have sought to scapegoat them for myriad issues.
Most commonly, they complain that short-term rentals are driving the housing crisis. In 2024, however, there were about 50,000 Airbnb and VRBO listings in Arizona, just 1.5% of the state’s 3.3-million housing units reported to the Census that same year. That includes listings in which the property owner actually lives on the property and rents out a room in their home.
But at the end of the day, many cities simply want the power to dictate how property owners use their properties.
Tom Savage, legislative director for the League of Arizona Cities and Towns, complained to the local media that Arizona has gone through a “a 10-year-long experiment” of letting property owners rent out their properties and that “investors have come in and purchased properties … that would otherwise be available to a permanent resident.”
Supporters of restrictions point to the relatively high concentration of short-term rentals in places like Sedona, which has a population of less than 10,000 people, or certain neighborhoods in bigger cities like Scottsdale.
That’s one side of the ledger.
On the other side are people who have benefited from being able to sell their properties to such investors or who themselves became entrepreneurial about their own properties to make them available to others. There are the billions of dollars in annual economic activity and tens of thousands of jobs supported by short-term rental visitors who are spending money in places they otherwise might not.
Most importantly, none of this precludes Arizona as a state or Arizona cities from continuing to adopt and implement pro-housing policies which bring more housing to the market for people to live in.
Of course, the League Arizona Cities and Towns has either fought outright or fought to narrow a number of pro-housing bills in recent years. Most notably, the league lobbied to water down “missing middle” housing legislation requiring cities to legalize duplexes, triplexes and townhomes to only apply within one mile of a downtown district.
Cities have often dragged their feet. That includes the previously mentioned Sedona. A 2025 report from the Common Sense Institute described Sedona’s pace of homebuilding as “sclerotic,” with lengthy permitting processes and mandates. “In general, it appears that Sedona strongly advocates for local control over housing supply issues, with the explicit goal of limiting density, and increasing the average quality of new homes, which necessarily implies a higher per-unit cost,” the report noted.
All of which circles back to a fundamental question in the short-term rental fight: What powers should city governments have? More to the point: Beyond the power to enforce criminal laws and local nuisance ordinances, should city hall have the power to tell a homeowner they can’t offer their home or a room in their home to someone wanting to pay to stay there?
It’s not clear why the answer should be “yes,” unless one views city hall as one big HOA, which would be a category error. City governments are not HOAs. They do not have agreed-upon contracts with city residents and property owners laying out the terms and conditions of residing or doing business. They issue rules and regulations that either are justified or not.
In weighing out whether rules and regulations are justified or not, economic freedom, that is, the freedom of people to peacefully and voluntarily engage in economic activity on mutually agreed upon terms, should be a central consideration. With nuisance and criminal laws already in place to check externalities that directly harm other people, it seems Arizona has roughly struck the right balance with respect to short-term rentals.
The real focus shouldn’t be on short-term rentals, but on expanding the state’s housing supply. And doing that will often mean overriding the complaints of city governments that want to control the economic freedom of property owners, builders and buyers as much as possible.
Sal Rodriguez is opinion editor for the Southern California News Group and a senior fellow with the Pacific Research Institute. He is the author of Dynamism or Decay? Getting City Hall Out of the Way, published by the Pacific Research Institute.
