Duluth opens door to more vacation rentals

DULUTH – The city of Duluth is opening the door to more vacation rentals — as long as more housing is created first.

Last week, the Duluth City Council directed the planning commission to allow up to 10 more permits per year for full-time vacation rentals, which could eventually double the existing cap to 120.

A new short-term permit valid for 21 days a year would also be created.

"If folks want to get out of town for Grandma's Marathon weekend, they can rent out their home a few weekends a year without having to pay a higher fee and have all these other restrictions on there," said Council Member Zack Filipovich, who sponsored the initiative with council members Janet Kennedy, Roz Randorf and Terese Tomanek. "It will ultimately save staff time and be easier and faster for the applicants."

The expansion will be coupled with mandatory screens or fencing on vacation rentals and set the maximum number of bedrooms per unit at four.

The issue represents a growing tension in the city over amenities for visitors vs. quality of life for residents. Filipovich said the new rules should appeal to those on both sides of the issue.

"No one is getting everything they want, and everyone is getting something," he said.

Some areas of Duluth, such as downtown and other business districts, do not have a cap on vacation dwelling unit permits. Sixty are allowed across most of the city.

"It's a very hot topic, and I've had a lot of neighborhood complaints," said Randorf, whose district includes Park Point, where more than half of the city's vacation rentals are permitted.

A proposed expansion of a vacation rental in the Observation Hill neighborhood drew the ire of neighbors earlier this year. Randorf said a compromise was reached but it still highlighted the need to more permanently address residents' concerns.

"When you look at our 2035 plan, it's about making our neighborhoods livable," Randorf said. "We've added some common-sense things to hopefully add some protections. We're moving in the right direction."

Under the new rules, the vacation rental cap would be increased by 10% of the number of new housing units created, up to 10 per year.

Hundreds of apartment units are expected to open in the next few years as numerous projects are completed, which could see the number of permits rise as fast as they are allowed.

"Short-term rentals are a vital source of supplemental income for Duluth residents, help support local small businesses and generate tax revenue for the City," said Rachel DeLevie-Orey, a spokeswoman for Airbnb. "We appreciate the city's efforts to protect these benefits and look forward to continued collaboration with local leaders to ensure the proposed rules help bolster the region's post-pandemic recovery efforts."

Other proposed changes include putting the planning commission in charge of approving permits instead of the City Council, which would only handle appeals. Fees would also increase to offset the city's costs for overseeing vacation rentals. Now, less than a third of staff costs are covered by permit fees, according to Duluth's Deputy Director of Planning and Development Adam Fulton.

"As this industry has matured, we've learned a lot about how to get regulations right," Fulton said. "Duluth has been on the cutting edge of this and making sure there aren't negative impacts to housing stock and neighborhoods."

Some permit fees could also benefit the housing trust fund that was created this year to fuel money into affordable housing development.

The updated rules could come back in front of the council this fall after the planning commission takes a look at them in August and September.

"The last time the planning commission tried to make suggestions, council turned us down, so we asked them to give us suggestions," said Margie Nelson, chairwoman of the planning commission. "I think it's a good compromise. Something needed to change."

Brooks Johnson • 218-491-6496