Postponed indefinitely but still breathing. On January 4, 2023, at the regularly scheduled Commissioners meeting, the City’s attempt to negatively massage the monthly vacation rental market in Key West via a restricting ordinance, floundered as multiple lucid, constructive and cautioning arguments converted Key West's Mayor and Commissioners from voting for approval to voting for caution (1).  The postponement was not due to Administrative or technical errors but was due to and a victory for public comment.  No follow on course of action was determined; however, informal working group action among the City, the Key West Chamber of Commerce and the Key West Association of Realtors will very likely occur.

________________________________________________________________________________________

The “First reading” of a proposed Ordinance of the City of Key West, Florida, amending Chapter 122 of the Code of Ordinances titled “Zoning” ran into stiff resistance from a well informed and professional array of real estate and legal experts at the regularly scheduled Commissioners meeting on January 4th.  The upshot was the collapse of support from all members of the Board; the Mayor and the Commissioners.  After hearing the near unanimous opposition, Mayor Johnston verbally withdrew her previous support and Commissioner Weekley verbally offered a proposal to “Postpone Indefinitely” the entire matter.  Proposal approved.

Why did the Ordinance fail?

It was clear from the first public speaker that the City did not understand the issue which was supposed to be the focus of the proposed Ordinance.  The issue which the proposed Ordinance was supposed to positively impact was “affordable housing”.  The Ordinance was designed to extend the minimum period of monthly, or vacation, rental to 180 days from the present 30 days.  In crafting this Ordinance, the City theorized that this 30 day to 180 day extension would stop the multi-year practice, since at least 2013, whereby property owners, existing or new, legally and with the City's approval, convert annual rental property into much more lucrative monthly rental property.

Nearly every public speaker refuted this theory.  Speaker after speaker offered terms either economic or legal that easily revealed that the proposed Ordinance would make matters only worse and in particular would have zero positive impact on the stock or price point of affordable housing.  Particularly in legal terms, it was shown that the City was placing itself in serious jeopardy of suffering major legal action from those who believed their private property rights had been violated.

Now realizing their mistake, the Mayor and Commissioners withdrew the Ordinance indefinitely.

Follow the Data

The economic data brought forward by the public speakers repeatedly showed the proposed Ordinance would do more harm to the quest for “affordable housing” than good. Oddly, not once was any of this data refuted by the Mayor or any of the Commissioners. At no time did they use any economic or real estate oriented data to support their position. This begs the question, what affordable housing data did the City use in crafting the Ordinance? What economic and real estate advice did the City use or receive in crafting this Ordinance - and from whom - as none was in shown at the meeting.

The only questioning of the speakers was exactly that – one Commissioner repeatedly asked "who" from the Key West Association of Realtors or "who" from the Key West Chamber of Commerce would assist the City in creating policy that would address the issue of “affordable housing”.  Did the Mayor and the Commissioners not use licensed and experienced professionals from either of these two organizations to assist in crafting the proposed Ordinance?  For if they had, they would have stated that; i.e., Mr. Smith or Ms. Jones, members from one or both of these two organizations, had been instrumental in the foundation of the proposed Ordinance and so how is it that these two organizations have such differing opinions of the facts – the data.  But there was no such counter from the Mayor or Commissioners.

Legal evidence was brought forward by two widely respected attorneys who practice in Key West.  Both of these attorneys highlighted the briar patch of legal action the City was placing itself in by infringing so aggressively on the private property rights of property owners.  No one from the City, including the acting City Attorney, offered any reclama.

Incentives

Real estate professionals of Key West have long addressed a bevy of incentives that can assist in ameliorating the historic problem of affordable housing problem in Key West.  Among these ideas are:

• Annual rental properties receive Homestead status
• Owners of annual rental property pay zero license fees when they obtain or renew the license to rent their property annually (The license is called a Non-Transient Business Tax Receipt (BTR)).
• Owners of annually rented property pay zero permit fees when they improve and upgrade their annually rented property.
• When ownership of annually rented property transfers to a new owner from an existing owner, the new owner has the option of continuing property taxes at either the existing rate or at the transaction rate.
• The cost of the Non-Transient BTR is the same whether the owner of the property rents annually (i.e., $36,000 annually) or monthly (i.e., $10000 monthly). Users of Non-Transient BTR’s for monthly rentals should pay SIGNIFICANTLY more.
• The City must make better using of Zoning.  Among these Zoning issues are; height restrictions, shopping centers, propertis in residential areas that are used for non-residential purposes should be re-located outside of Key West and …. What else?
• Investigate affordable housing grants from the State, particularly as Key West is in an Area of Critical State Concern.
• Tax breaks to private entities who build, own and operate, or sell, large scale projects featuring residential properties.
• The City must increase its dialogue with the large employers in Key West so that these employers make a greater effort to provide housing for their employees, employees who overwhelmingly are renters.
• The US military has more open and vacant acreage than any other entity in Key West.  The City must increase its dialogue with senior military and political leaders about the military significantly increasing the number of single family and multi-family units on the multiple military bases in Key West.
• (These incentives are my own and not attributed to any organization)

What incentives would you recommend that would keep or increase the number of annual rental properties in Key West?

Conclusion

If the Ordinance was not crafted using facts about the economics of affordable housing and the legalities of private property then what was used in its creation and why? There were no incentives incorporated in the proposed Ordinance to encourage annual rentals.  Was punishment of owners of monthly rentals an objective and even if not, perhaps a review of how Key West's Code Compliance Department enforces monthly vacation rental policies is in order.

Two public workshops were conducted during the buildup to this January meeting. The intent of these workshops was to exchange information with the public on the proposed ordinance.  It appears that input from the public back to the Commissioners was not incorporated into the Ordinance.  I was disappointed to discover that the Mayor and Commissioners used neither facts, data nor public input to craft this proposed Ordinance.  Neither coming together, staying together nor working together succeeds when one side is doing all of the talking and the other side is expected to do all of the listening.

Thank you to Dr. Bll Hettinger, PhD, for writing and presenting an extremely well written White Paper.  The Paper detailed the state of the Key West property ownership and rental markets, the impact this Ordinance would have on those markets and a set of potential solutions to the affordable housing crisis.

If you have any comments or questions, please contact me here.

Good luck!

(1) Only one Commissioner, Lissette Carey, disapproved of the Ordinance from the onset and she maintained this position throughout discussion and voting.

Additional Resources: