Hobbs proposes $3.50 nightly short-term rental fee to fund Arizona affordability

How a $3.50 short-term rental fee could help affordability in AZ

Gov. Katie Hobbs outlined a plan Monday to establish the Arizona Affordability Fund, a relief program designed to help residents struggling with the rising cost of living. FOX 10's Taylor Wirtz reports.

PHOENIX - Gov. Katie Hobbs outlined a plan Monday to establish the Arizona Affordability Fund, a relief program designed to help residents struggling with the rising cost of living.

What we know:

Under the proposal, funding for the initiative would come from out-of-town visitors through a new $3.50 nightly fee on short-term rentals, such as Airbnb and Vrbo.

Hobbs introduced the plan during her State of the State address at the opening of the Arizona Legislature on Jan. 12. She characterized the fee as a modest ask for tourists to support the state's workforce.

"I am proposing a nightly fee on short-term rental stays to fuel the Arizona Affordability Fund. By asking vacationers to kick in $3.50, less than a cup of coffee," Hobbs said, "We can deliver major change for the working people in our state who are struggling to get by."

The governor is launching the initiative with an initial $20 million investment but is seeking a long-term funding source. She said the fund would help working-class families pay utility bills, weatherize homes to lower energy costs and build more affordable housing.

Big picture view:

The proposal comes as Arizona enters its peak tourism season, with major events like the Barrett-Jackson auction and the WM Phoenix Open on the horizon.

"We thrive this time of the year," said Rick Kenworthy, co-owner and CEO of Scottsdale-based Travli Hospitality. "Everybody looks forward to it."

Kenworthy, who manages more than 100 properties, called the proposed $3.50 fee a "drop in the bucket" compared to other costs. He said he would support the measure if the money is used as intended.

However, some hosts expressed concern about the long-term impact on visitor spending. Rental host Ryan Gerdes said while the fee is small, "that's just going to impact the amount of money that they spend here when they're traveling."

‘Simply living has gotten harder’

Affordability proposal sparks debate over AZ short-term rental fees

Gov. Katie Hobbs proposed a $3.50 nightly fee on short-term rentals to bankroll a new Arizona Affordability Fund, aiming to help residents with living costs, though rental hosts and Airbnb warn the fee may hurt tourism. FOX 10's Taylor Wirtz reports.

"We must not lose sight that, for many, simply living has gotten harder as expenses have increased," Hobbs said.

Christopher Groesbeck, with the Tempe Coalition for Affordable Housing, said the group celebrates the initiative.

"Really putting funding to an effort is just, like she said, a promise to Arizonans that we’re not just here for a year, but we’re here for the long term," Groesbeck said.

Affordability a main theme in Gov. Hobbs' address

Lawmakers in Arizona have returned to the State Capitol for a new legislative session, and Governor Katie Hobbs encouraged lawmakers to pass a tax cut for Arizona families during her annual State of the State Address.

The other side:

The proposal has ignited a debate between housing advocates and rental hosts since the announcement.

Some rental hosts question why the fee singles out their industry. John Hildebrand, a rental host and board member of Arizonans for Responsible Tourism, noted that short-term rentals already pay state and local taxes, including bed and transient occupancy taxes.

"To go ahead and tax short-term rentals another $3.50 on top of already being very taxed ... it just seems like we’re getting attacked," Hildebrand said. "It is weird that they would only single out short-term rentals for a tax like this when they’re not going after the hotels."

Groesbeck argued that making the state more affordable requires a collective effort.

"I would say that Arizona is worth investing in," Groesbeck said. "When we work together as a community, when we work together as a state, we can achieve a future that we all benefit and thrive from."

In a statement, Airbnb said the fee would make travel more expensive and harm residents who rely on hosting to support their families. While many hosts said they understand the governor’s goals, they are asking for a "seat at the table" to discuss the proposal's impact.

'It would hurt Arizona families’ pocketbooks'

Airbnb Policy Lead, Lauren Bouton, released a statement on the proposal, saying, "This proposal is a new tax on over 1.2 million Arizonans who stayed in a short-term rental in Arizona last year. It will make travel more expensive and hurt the everyday Arizonans who use hosting as a way to support their families - all at a time when Arizonans demand real solutions to the affordability crisis they face. The proposal also grants an unfair advantage to corporate hotel execs on the backs of everyday Arizona hosts. At best, this proposal is misguided and at its worst, it would hurt Arizona families’ pocketbooks. We stand ready to work with any legislator who believes in protecting property rights and providing economic opportunity for everyday Arizonans."

What's next:

While the fee remains a proposal, the start of the regular legislative session on Monday marks the beginning of formal discussions on the measure.

Economy Arizona Katie Hobbs News Arizona Politics