Rules vary on short-term rentals in South Dakota

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SIOUX FALLS, SD (KELO) – How many city or county steps are there to rent a property through Airbnb and VRBO?

Few cities or counties, but others, have ordinances.

Short-term rentals through platforms such as Airbnb and VRBO are growing in the United States, including in South Dakota.

As of August 2021, South Dakota had 3,668 short-term rentals listed on Airbnb and VRBO, according to the South Dakota Department of Tourism. In 2017, there were 1,487.

The city of Sioux Falls has no regulations covering short-term rentals, said Jason Bieber of the city’s planning and zoning department.

A short-term rental would be classified as a rental, rather than owner-occupied, Bieber said. But a landlord who lives in the house can still rent the property short-term, he said.

The Town of Lead has a new ordinance that regulates short term rentals. City finance officer Billie Jo Inhofer said the ordinance is in effect this month.

Those renting their properties for short-term rentals must apply for a license from the city. Applicants must present proof of inspection from the South Dakota Department of Health and if they cannot obtain a DOH inspection, they must be inspected by the city.

While some cities may have ordinances on short-term rentals, the requirements are spotty at best.

Short-term rentals aren’t treated like motels in South Dakota, said Jasper Diegel, executive director of the South Dakota Hotel and Lodging Association.

“The most important thing is that we just want a level playing field,” Diegel said.

Rentals with Airbnb and VRBO may pay state sales tax, but are generally not required to pay room or occupancy taxes or fees often referred to as Business Improvement District (BID) fees , Diegel said.

Many cities in South Dakota have a BID and room/occupancy fees, Diegel said.

Sioux Falls has a 1% room/occupancy tax and a $2 BID fee per room, said Terri Schmidt, executive director of Experience Sioux Falls.

These taxes and fees often help fund tourism and marketing efforts in cities, Diegel said.

A landlord who rents a property through Airbnb or VRBO does not pay the 1% room feed or BID, said Shawn Pritchett, chief financial officer for the City of Sioux Falls.

Schmidt said if short-term rentals benefit from the commercialization of Sioux Falls, the question is, do they have to pay for the room and BID taxes?

It’s not just short-term rental properties that use Airbnb and VRBO would not pay, Schmidt said, she’s not sure it was presented to them.

“I haven’t spoken to any (owners) who object to it,” Schmidt said.

Ceca Cooper and her husband rent the ground floor of their home in Sioux Falls through Airbnb.

“We would be more than willing to support that,” Cooper said of paying room/occupancy tax and BID fees.

For her, it’s a way to support the growing city. Cooper also said Sioux Falls’ marketing efforts have been successful, with some of his guests saying they’ve heard of the city’s downtown, for example. The Coopers had guests who stayed because they were traveling from North Dakota and Omaha for the downtown burger battle.

Lindsay Chocoine and her husband own a house they rent through Airbnb in Sioux Falls.

She would like to consider the resort tax and BID fees before deciding she would support it. Their home is mostly rented to traveling nurses and similar healthcare workers. They don’t target travelers or tourists, Chocoine said.

The South Dakota Department of Revenue collects sales taxes from those who operate short-term rentals through Airbnb and VRBO, said Bobi Adams, deputy director of administration, strategy and communications for the DOR. .

These taxes are paid to the state through Airbnb and Vrbo. “That would include state, tourism, municipalities and municipal gross revenue tax,” Adams said.

Have the rules kept pace with the growth of short-term rentals?

Diegel said not only are short-term rentals exempt from many hotel and BID fees, but the state does not require them to be regularly inspected.

“Our hotels are inspected by the (state’s) Department of Health, those same rules don’t apply to Airbnb or VRBO rentals,” Diegel said.

It’s a health and safety issue because how does the public know if there are enough exits or fire extinguishers, Diegel said as an example of what inspections are finding.

Jake Hoffner owns Dakota Country Home about 15 miles west of Yankton with his wife.

Health and safety, cleanliness of the place are the main concerns, Hoffner said.

Customers of rentals through Airbnb and VRBO rate the stay. Negative reviews may eventually lead to removal from the platforms.

In some cases, it appears that city and county rules have not kept pace with the rental industry.

Minnehaha County has a Conditional Use Permit (CUP) requirement for bed and breakfasts. The planning department said those renting through Airbnb or VRBO would apply for a CUP in the same way as a bed and breakfast.

Yet a bed and breakfast description doesn’t really accurately describe an Airbnb or VRBO rental where no food is served, when the whole house is rented, or even if the owner lives and stays one level of the rented house at short term.

John Steever and his wife have operated a bed and breakfast for over 20 years in the Lennox countryside.

The Steevers live at the house and are there when the guests stay. They serve the breakfasts of the guests. There is no kitchenette and no access to the kitchen.

“We’re a different animal…” Steever said. “Our license allows us to serve breakfast but does not allow overnight meals.”

General monitoring

Airbnb and VRBO have an application process for those who rent through their platforms.

Cooper said Airbnb’s process worked well for their property. They have never had tenants that would be considered “a security concern”.

A Yankton city official said rentals through Airbnb and VRBO are happening in the city.

The city of Yankton has not yet determined that it is necessary to regulate short-term rentals such as those rented through Airbnb or VRBO, said Dave Mingo, the city’s community and economic developer.

The town of Spearfish has no regulations on short-term rentals, city planner Jayna Watson said.

City zoning allows up to five unrelated people to live in a single family home, Watson said.

But, it’s realistic to expect a city to enforce this zoning requirement, she asked. It could have the city knocking on every door and asking people to prove who they are, Watson said.

Lynette Gohsman is the General Manager of Holy Smoke Resort in rural Keystone. She is also a former member of the Keystone City Council.

A business license allows a person to rent property, but the city has no planning or zoning to cover use, Gohsman said.

Townspeople aren’t generally supportive of zoning regulations, but “they always complain when the house next to them is now a vacation rental,” Gohsman said.

Concerns about the loss of single-family homes to be used as short-term rental homes have been raised in Keystone, she said.

The loss of single-family homes has contributed to the city’s population decline, Gohsman said.

A zoning ordinance can be crafted to fit a city, she said. “It’s not just a cookie cutter (approach),” Gohsman said.

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