Orem Short‐Term Rental Ordinance Analysis: Legal, Economic, and Policy Considerations
Utah Case Law: Retroactive Enforcement and Regulatory Challenges
Enforcing Previously Unenforced Ordinances: Utah courts have held that a city does not lose the power to enforce its zoning laws even after a period of non-enforcement. In Town of Alta v. Ben Hame Corp. and related cases, property owners argued that a city’s long silence or lax enforcement should prevent it from suddenly cracking down on short-term rentals. However, Utah precedent is clear that “failure to enforce zoning for a time does not forfeit the power to enforce” later on. In other words, a municipality may begin enforcing an existing ban on transient rentals at any time, and mere inaction or tolerance in the past won’t alone create a legal defense for violators. Owners cannot acquire a “prescriptive right” to violate zoning just because the city didn’t previously object. This principle was affirmed in a 2022 Utah Court of Appeals case, South Weber City v. Cobblestone, where the city obtained an injunction shutting down an unlicensed short-term rental. The owner’s argument that the city’s past inaction barred enforcement was rejected under the rule that a city is “not precluded from enforcing its zoning regulations[] when its officers have remained inactive”.
Reliance on City-Issued Licenses and Vested Rights: Complications arise when owners have received some form of approval or license from the city and then the legal landscape changes. Generally, if a use was legally established under the ordinances at the time, it may become a legal nonconforming use (grandfathered) if later banned. But crucially, the use must have been legal to begin with. Utah courts draw a hard line between uses that were permitted versus those that were always prohibited. In the South Weber v. Cobblestone case, the owner began short-term renting a home in a zone where such rentals were never an allowed use. The court ruled this use was never “permitted” in the first place and thus could not be grandfathered when new STR regulations were adopted. The owner’s ongoing STR operation was deemed illegal and not a protected prior use. Similarly, in Town of Alta v. Ben Hame, a homeowner had rented out a ski chalet to short-term guests; the area was annexed into Alta and subject to an ordinance prohibiting rentals under 30 days. The owner claimed the rentals were a customary “accessory use” or that the county’s earlier tolerance gave him a vested right. The court disagreed, finding the intensive short-term “commercial lodging” use plainly violated the zoning and was not an incidental residential use. Even an affidavit from a county official stating they hadn’t enforced against short-term canyon rentals did not override the ordinance – administrators “may not forfeit the power of enforcement” by their failure to act.
When a city has affirmatively licensed an STR, only to later revoke or invalidate that license, owners may argue equitable estoppel (that they relied on the city’s approval). Utah law sets a high bar for estoppel against government. The owner must show the city made a definite representation and the owner substantially relied on it, such that it would be highly inequitable for the city to contradict that representation. In practice, Utah courts rarely uphold estoppel in zoning. In the Cobblestone case, the STR operators noted the city’s own website said no business license was needed for a “rental unit” – but the court found that referred only to long-term rentals (defined as 30+ days) and did not specifically authorize short-term use. Because the city never gave a clear approval for STR use, and merely failed to enforce initially, estoppel did not apply. The court explicitly concluded that the owner “had not proved that South Weber should be estopped from enforcing the Ordinance” and upheld the injunction against the STR.
There are instances, however, where ambiguity in the law can work in the owner’s favor. In Brown v. Sandy City Board of Adjustment (1998), homeowners challenged the city staff’s new interpretation that rentals under 30 days were forbidden in single-family zones. The Utah Court of Appeals found that Sandy’s zoning ordinance at that time did not clearly prohibit short-term leasing of a residence – the ban was an interpretation, not an actual codified rule. The court reversed the enforcement action, essentially telling the city that if it wanted to ban short-term rentals, it must do so explicitly by ordinance. Sandy City subsequently updated its code to explicitly ban transient lodging (a ban that, according to city officials, had existed in practice since the 1980s but wasn’t clearly written). This case illustrates that cities must have clear legal basis in the ordinance language; otherwise, an enforcement crackdown can fail for lack of “notice” in the law.
Estoppel, Takings, and Equal Protection Claims: Utah courts have generally sided with municipalities on regulatory authority over STRs, so long as proper process is followed. Equitable estoppel, as noted, is seldom a winning argument unless a property owner can show they were affirmatively misled by the city. A scenario might be if Orem had explicitly told an owner in writing that an STR was allowed or issued a license, and the owner then invested heavily, the owner could argue it’s unfair to pull the rug out. But even then, courts will weigh the public interest and typically require very clear evidence of a promise by the city. Simply obtaining a business license is often not enough if that license was issued in error contrary to zoning – the remedy is usually to revoke the erroneous license rather than to deem the use legal.
Regulatory takings claims have been threatened by STR owners in various jurisdictions, but they face an uphill battle under both Utah and federal law. A regulatory taking occurs when a regulation deprives property of all economically viable use or unduly interferes with investment-backed expectations. Banning short-term renting of a home does not deprive the owner of all use – the home can still be used for personal residence or long-term rental or sold. Courts have found this is a reasonable land-use regulation and not a taking requiring compensation, especially given that short-term rentals were often not an allowed use to begin with. For example, the Utah Property Rights Ombudsman, in an advisory opinion for a case in Spanish Valley (San Juan County), noted the county had broad discretion to prohibit STRs in residential areas. In that case, the Ombudsman concluded the ordinance must be interpreted to allow small-scale STR use (up to 4 guests) because it hadn’t been clearly outlawed – implicitly suggesting that had the ordinance been clearer, a ban on larger STRs would be within the county’s rights. This indicates that as long as the regulation is clearly legislated and the owner isn’t left with zero use of the property, a takings claim is unlikely to succeed.
Equal protection or fairness arguments similarly have not prevailed against STR regulations so long as the city has a rational basis for distinctions. A city can differentiate between, say, owner-occupied rentals and non-owner-occupied, or allow STRs in commercial/tourist zones but not in low-density residential zones, as a matter of legitimate policy. Such distinctions are typically reviewed under the “rational basis” standard – the regulation just needs to be reasonably related to a legitimate government interest (like preserving neighborhood character or housing supply). For instance, allowing short-term rentals only in certain overlay zones (as Park City does) or capping their numbers in a neighborhood (as Sandy City implemented after 2018) would likely be upheld as rational attempts to balance competing interests. The key for Orem is to ensure its new STR ordinance is applied uniformly and not arbitrarily. If some owners are grandfathered or exceptions are made, the city should articulate clear criteria to avoid claims of arbitrary enforcement or favoritism. Courts also look at procedural fairness – Orem should provide proper notice, a chance for public input (which it has been doing), and perhaps an appeal process for STR-related decisions. By crafting the ordinance carefully and basing it on documented impacts (noise, traffic, etc.), the city will be on solid legal footing against any equal protection challenges.
Historical Context of Orem’s 2002 Transient Lodging Ban
Orem’s prohibition on short-term “transient lodging” in residential zones dates back to an ordinance enacted in 2002. The early 2000s predate the Airbnb era, but even then Orem saw the need to explicitly disallow overnight rentals in neighborhoods. The Orem City Code was amended to state that in residential zones, certain lodging and rental uses are not permitted. According to city records, “All Transient Lodging and Hotels, Tourist Courts & Motels” were listed as prohibited uses in residential districts. In practical terms, this meant any rental of a dwelling for a short stay (traditionally defined as less than 30 days) was not allowed anywhere in Orem’s residential areas. The likely motivation in 2002 was to preserve the single-family character of neighborhoods by preventing them from effectively turning into commercial lodging areas. Orem is a city with many family-oriented neighborhoods, and at the time there may have been concerns about homes being used as short-term boarding houses or BYU/UVU game-day rentals disrupting the community. Banning transient lodging outright was a common approach for suburban cities during that period. It put Orem in alignment with many other Utah cities that treated short-term rentals as akin to a hotel use, only appropriate in commercial or high-density zones if at all.
The legal reasoning for the ban hinged on defining the primary use of a home in a residential zone. Orem’s zoning ordinance defines a dwelling as for residential occupancy by families (typically long-term). Short stays for paying guests were viewed as a fundamentally different, commercial use. By explicitly prohibiting transient lodging, the city avoided any ambiguity (unlike the Sandy City ordinance before it was clarified). This gave Orem a clear enforcement tool: any property being rented nightly or weekly could be deemed an illegal land use. Notably, Orem continued to allow long-term rentals (monthly leases) in residential zones as those are considered residential in nature. The line was drawn at transient use, which was grouped with hotels and motels, uses clearly out of place in low-density neighborhoods.
Contemporaneous accounts from 2002 indicate that Orem’s leaders were concerned about protecting residential quality of life. Transient guests could bring noise, parking congestion, and safety concerns, and unlike a long-term neighbor, they have no long-term stake in the community. Additionally, there was an element of fairness to traditional lodging businesses – hotels and bed-and-breakfasts had to operate in commercial zones and comply with fire codes, taxes, etc., so unregulated house rentals in neighborhoods were seen as an end-run around those rules. By banning them, Orem eliminated competition with hotels and kept the playing field even.
It’s worth noting that for many years after 2002, Orem’s ban was not vigorously enforced. The city did not create a licensing system or actively seek out violators. This is unsurprising since short-term rentals were not as ubiquitous in the 2000s. However, as online platforms popularized home rentals in the 2010s, Orem saw more homeowners (and investors) engaging in the practice despite the ban. The issue flew under the radar until complaints from neighbors began to surface. By 2023, high-profile cases like the “GOAT House” – a large Orem home frequently rented out for short stays and events – brought the dormant 2002 ordinance back into the spotlight. Neighbors of the GOAT House reported chronic nuisances, and the city pursued enforcement in administrative court, ultimately winning an order to cease the STR operation for violating the zoning code. This enforcement was directly grounded in the 2002 ban, showing the ordinance had real teeth when invoked.
In summary, Orem’s 2002 transient lodging ban was a proactive measure reflecting the attitudes of the time: keep residential zones for long-term residents. The city treated short-term rentals as equivalent to a motel use, incompatible with family neighborhoods. That policy went largely unchallenged for over a decade. Only recently, with the rise of STRs and the resulting community feedback, has the city been forced to reconsider whether a blanket ban or a more nuanced regulatory scheme is appropriate going forward. Understanding this history is important – it explains why Orem’s code is written the way it is, and it frames the debate now confronting city leaders: whether to maintain the strict stance of 2002 or adapt to the modern reality of short-term rental activity.
Case Studies of STR Regulations in Other Cities
Orem can draw lessons from the experiences of other Utah cities and peer communities around the country that have grappled with short-term rental regulation. Below are case studies of how Moab, Park City, and other cities have approached STRs, including successes, pitfalls, and the inclusion of host stakeholders.
Moab, Utah – Managing a Tourist Boom: Moab is a small city overwhelmed by tourism (over 3 million visitors annually) and correspondingly high demand for overnight accommodations. In the late 2010s, Moab’s housing stock increasingly shifted toward vacation rentals, exacerbating a local housing shortage for residents and workers. The city’s response was to get very restrictive: in 2018–2019 Moab enacted a moratorium on new short-term rental development. Specifically, in February 2019 Moab temporarily prohibited building any new structures for short-term rental use while it revised its ordinances. City officials acknowledged that “the business is so lucrative” that without limits, “no one would build anything else” but nightly rentals. During this pause, Moab undertook long-term planning and extensive public outreach (over 8 months of meetings for a Spanish Valley Area Plan, which included STR concerns). The resulting policy severely restricts STRs: Moab and surrounding Grand County now largely ban new STRs in residential zones, allowing them only in certain commercial or overlay zones designated for overnight accommodations. Existing legally licensed STRs were generally allowed to continue (grandfathered), but new entrants were shut out in most areas.
Moab’s approach included responsible host involvement primarily through the public hearing process. Many local residents (both those supportive of STR income and those concerned about neighborhood impacts) participated in meetings to shape the rules. Moab tracked metrics such as the number of business licenses for STRs, the impact on housing availability, and complaints about noise or parking. One metric of success Moab sought was stabilizing the long-term rental market – by curbing STR proliferation, they hoped to free up units for local housing. An unintended consequence of strict bans is the potential to drive rentals underground, but Moab’s small size and proactive stance seems to have kept a lot of it in check. There will always be some “underground” STRs, but Moab buttressed its ban with enforcement and by collaborating with Grand County (and even San Juan County in Spanish Valley) so there aren’t nearby loopholes. Indeed, when neighboring San Juan County initially issued business licenses for STRs in a residential subdivision just outside Moab, the error was caught and those licenses were revoked to uphold the ban in that area. The Moab case study shows a successful containment strategy: STRs were recognized as a threat to community balance, and through temporary moratoria and zoning changes, the city drastically limited their spread. This has been “successful” in protecting Moab’s housing for locals, though at the cost of some angry would-be STR operators and likely a cap on how much lodging tax the city might collect. It also illustrates that if rules are clear and strict, many people won’t even attempt to violate them – but as Moab’s city manager noted, they had to act decisively, because with profits so high in a tourist town, enforcement alone (without a ban) would have been a whack-a-mole game.
Park City, Utah – Integrating STRs in a Resort Economy: Park City is a ski resort town where short-term nightly rentals have long been part of the fabric. The city takes a more permissive but regulated approach. Park City’s zoning allows STRs (“nightly rentals”) in certain zones by right – mainly in resort and higher-density residential areas, especially those near the ski resorts or Main Street. In strictly single-family neighborhoods outside the resort core, STRs historically were not permitted, although enforcement was sporadic unless complaints arose. Rather than a ban, Park City uses a comprehensive licensing system to manage STRs. Anyone renting out property for less than 30 days must obtain a Nightly Rental business license from the city. The licensing process includes a safety inspection: owners are required to pass an inspection by the Building Department to ensure basic fire and life safety measures in the unit. Only after passing inspection and paying the fee will the city issue the license.
Park City’s regulations also impose operational rules on STRs to mitigate impacts. For example, the city code requires that trash be managed properly (bins not left out, property kept free of garbage) and that parking for nightly rentals does not obstruct streets. On-street parking by guests is limited to avoid clogging narrow mountain roads. Likewise, Park City enforces its noise ordinance on STRs – quiet hours are expected just as with any residence, and the city advises neighbors to call a non-emergency line if an STR is noisy after 10 PM. Importantly, Park City set up a dedicated complaint hotline and form for nightly rental issues. This allows the city to log and track complaints specifically tied to STR properties. Repeated verified complaints can lead to fines or even revocation of the license. By tracking metrics like complaint frequency, Park City can identify problem properties versus the many STRs that operate without incident.
A notable aspect of Park City’s model is that responsible owners have a voice – the city often engages with the local Board of Realtors and property managers when adjusting STR rules. For instance, when addressing parking or occupancy limits, the city received input from rental managers about what is practical. Park City has periodically revisited its rules (especially as the number of listings grows or issues arise), showing a willingness to adapt. The city also collects significant transient room tax and sales tax from STRs (either directly or via platforms that remit on hosts’ behalf), integrating these rentals into the local economy. While Park City’s approach has generally been successful in balancing tourism with neighborhood livability, it is not without hiccups. Compliance is an ongoing challenge – a recent analysis noted that many Park City Airbnb listings did not display a license number, suggesting some hosts might be operating without completing the license process. The city has had to invest in monitoring (even contracting STR tracking software) to ensure unlicensed rentals come into compliance. In summary, Park City demonstrates a managed inclusion strategy: embrace STRs as part of the tourism economy but subject them to licensing, taxes, and strict enforcement of nuisance regulations. This approach can work in a destination city, though it requires continual enforcement effort and cooperation with hosts. Responsible operators in Park City appreciate having clear rules (they know what occupancy is allowed, etc.) and a legal pathway to operate – something currently lacking in Orem’s outright ban.
Other Examples – Sandy, Millcreek, and Beyond: Several other cities offer instructive examples:
Sandy, Utah: As noted, Sandy long had a de facto ban on STRs in single-family zones dating back to fears from the 1980s about “strangers” in neighborhoods. However, by 2018, public sentiment had shifted somewhat – Airbnb-type rentals had become more common and some residents wanted to legally partake. Sandy City opted to relax its ban slightly by allowing a limited number of STR licenses per neighborhood. Essentially, they implemented a quota or distance requirement so that not every house on a street could become a rental – only a certain number within a radius. The deputy mayor explained that as people became accustomed to the idea of STRs, the city moved to regulate instead of prohibit. Sandy still responds to complaints about illegal rentals, typically giving a warning first. The success here is mixed: by allowing some STRs under a cap, Sandy brought a formerly black-market activity into a regulated space for a few owners, but it still must tackle enforcement against those who exceed the limits. The partial allowance at least gave responsible hosts a seat at the table – they can apply for a permit if available and demonstrate good behavior to keep it.
Millcreek, Utah: Millcreek is a newer city (incorporated 2016) that took a notably permissive approach. Rather than ban STRs, Millcreek legalized them across the city, subject to a simple licensing process. The mayor reported making it “easy to obtain a license” anywhere in the city, with the rationale that if it’s easy and legal, owners will come forward and the city can then hold them accountable. Applicants must certify they understand and will follow key rules like parking restrictions and noise ordinances. This educational component upfront turns hosts into partners in keeping neighborhoods orderly. Millcreek’s inclusive strategy appears to have avoided a lot of underground activity – since people can get a license, there’s less reason to hide. And by spreading STRs citywide (rather than concentrating them in one district), no single neighborhood becomes overloaded. The city can track how many licenses are active and where, and if problems cluster, adjust accordingly. Millcreek’s case is an example of working with responsible hosts: rather than vilifying them, the city invited them to legalize their rentals, which fosters cooperation and compliance.
Cities Outside Utah: Many cities nationally have experimented with STR regulations, providing additional lessons. San Francisco initially required all Airbnb hosts to register with the city, but the process was so cumbersome that most hosts ignored it. The result was poor compliance – at one point, hosts would start applications and abandon them due to complexity. The city ramped up enforcement later and simplified registration, which significantly increased compliance. The takeaway: make compliance straightforward, or else even well-intentioned owners won’t bother. Los Angeles and New Orleans both imposed strict caps (like limiting rentals to one’s primary residence and a certain number of days per year); these can reduce total STRs but are hard to enforce and can lead to creative workarounds (people rotating LLC ownerships, etc.). Santa Monica, CA took a hardline approach by banning non-owner-occupied STRs entirely and prosecuting violations with hefty fines. This virtually eliminated overt STR activity in Santa Monica’s residential zones, but it also spawned litigation and pushed some operators to neighboring cities. It also required resources – Santa Monica employed staff to comb listings and even subpoena Airbnb for data (an effort that survived legal challenge). The unintended consequence in such cases is that overly stringent rules can be resource-intensive to enforce and may simply displace the problem. As one STR compliance expert noted, if enforcement relies only on neighbors reporting, many illegal rentals will slip under the radar (for example, hosts can rent out covertly during ski season then lie low, never getting caught in the act). Cities that succeeded in enforcement, like Santa Monica, did so by investing in proactive monitoring and by instituting platform cooperation (requiring Airbnb/VRBO to only list licensed units).
Across these case studies, a few common threads emerge:
Including stakeholders (responsible hosts, neighbors, lodging industry) in the policymaking process tends to produce more balanced outcomes and better buy-in. Park City and Millcreek exemplify collaboration, whereas cities that legislated without host input often faced backlash or non-compliance.
Key metrics to watch are complaint rates (noise, parking, trash), housing availability (number of long-term rentals or homes converted to STR), and revenues (both tax revenue and local business patronage by STR guests). Successful programs, like Park City’s, actively track and publish these metrics to inform adjustments. For instance, if complaints spike in a certain area, enforcement can be targeted there; if too many homes are being lost to STRs, a cap might be considered.
Unintended consequences are real. An outright ban can create an “underground” market of secret STRs operating without oversight, as was seen in South Salt Lake where operators simply went covert rather than cease business. On the other hand, very lax policies can lead to an over-saturation of STRs and community pushback (as happened in Moab before the clampdown). The sweet spot usually involves allowing STRs under controls that mitigate the downsides.
Education and ease of compliance are critical. Cities that provided clear guidelines, checklists, and even training (as Utah’s proposed state legislation would have mandated) see better compliance. Those that make the rules overly complex risk hosts either ignoring the law or unknowingly violating it.
In sum, Orem’s situation is not unique – cities from resort towns to suburbs have struggled to get STR regulation right. Orem can learn from Moab’s strict zoning approach to protect housing, from Park City’s licensing and enforcement regime to handle tourism impacts, and from others like Millcreek that finding a path to yes can bring hosts into the regulatory fold. The best practices gleaned from these case studies will inform the policy recommendations later in this report.
Fire Code Classifications: When Does IBC R-1 Apply to Short-Term Rentals?
A critical technical issue underlying the STR debate is how homes used as short-term rentals fit (or don’t fit) into building and fire code occupancy classifications. The International Building Code (IBC) and International Fire Code classify buildings into use groups with differing safety requirements. For typical single-family homes and duplexes used as long-term residences, the applicable classification is Residential Group R-3 (or under the separate International Residential Code). R-3 covers one- and two-family dwellings and lodgings with very small occupant loads. It has relatively minimal fire protection mandates compared to commercial occupancies. Group R-1, by contrast, is the classification for transient lodging uses like hotels, motels, and boarding houses where occupants stay less than 30 days. R-1 buildings require higher safety standards (e.g. fire sprinklers, fire alarms, emergency exits, and other features similar to a hotel) because transient guests are less familiar with the property and there may be many unrelated occupants.
The question many jurisdictions face is: At what point does a big short-term rental house stop being treated as a house (R-3) and start being treated as a hotel (R-1)? The model code provides some guidance based on occupant count. Generally, if a dwelling is used for transient lodging for more than 10 occupants at a time, it is considered Group R-1. If it accommodates 10 or fewer transient occupants, it can often be considered a lodging or rooming house falling under Group R-3 (with some additional fire safety provisions). In other words, “10” is a key threshold in the codes. For example, the International Fire Code defines a transient boarding house and says that a transient facility with not more than 10 occupants can be R-3, while above 10 is R-1. An STR with 11, 12, 15 guests is, from the building official’s perspective, essentially operating as a small hotel and should meet the stricter safety standards accordingly.
This threshold has been recognized in various city ordinances. Some cities explicitly limit STR occupancy to avoid tripping into R-1 territory. For instance, Philadelphia’s STR regulations require a change of occupancy (and code compliance upgrade) if a short-term rental has more than 5 guest rooms or more than 10 guests – those would be classified as R-1 and need a new Certificate of Occupancy. Philadelphia allows smaller STR operations (≤10 occupants, in an owner-occupied home) to function without a commercial occupancy permit, but anything larger must go through a building permit process as a hotel or boarding house use. This kind of rule effectively forces large “party house” rentals either to scale down or install life-safety upgrades like sprinkler systems if they want to legally operate. Similarly, Utah’s proposed but not enacted 2024 legislation hinted at this issue by suggesting a base occupancy of 4, plus 2 per additional bedroom – a formula that would naturally cap most STRs in normal homes around 8–10 people, thus staying under the 10-occupant threshold in most cases.
In practice, many short-term rentals in Orem and elsewhere have likely been operating in a gray area with regard to fire code. A large home that sleeps 12-15 (common for family reunion rentals) technically should meet R-1 standards, but most were built as single-family dwellings under R-3/IRC standards (no sprinkler, perhaps only one exit, etc.). This raises liability and safety concerns. If Orem were to allow STRs, it must coordinate with the fire marshal and building officials to determine how to handle these cases. Some cities choose to grandfather existing homes from having to meet full R-1 code, but impose alternative safety requirements (for example, require interconnected smoke detectors, CO monitors, fire extinguishers, perhaps a second exit route, without mandating a full sprinkler retrofit). The goal is to achieve a reasonable level of safety without making it infeasible for owners. Others simply set the occupancy limit low enough that large group rentals are not allowed, period – thereby avoiding R-1 situations entirely.
When IBC R-1 strictly applies: If an owner of a residential dwelling actually wanted to use it truly like a boutique hotel – say a home that can host 5+ separate guest rooms or 12+ guests who are unrelated – the city’s building department would likely require a change of occupancy classification to R-1. That would trigger significant upgrades (e.g., adding a sprinkler system, hardwired alarm system, possibly ADA accessibility requirements for lodging). Most homeowners are unwilling or unable to make such upgrades, so effectively they either reduce the occupancy or cease doing short-term rentals. We saw an example in the Spanish Valley case (Advisory Opinion 275) where the ordinance only allowed up to 4 guests. By keeping the occupancy to 4, the owner’s use remained within the residential classification. If he tried to fill his 5-bedroom homes with 10-12 people, the county considered that a prohibited “lodging house” use requiring commercial zoning. Orem’s earlier discussions also indicate awareness of this issue – city staff have compared what neighboring cities allow, noting Provo allows up to 10 occupants per STR and Sandy imposes no specific cap. Orem’s initial proposal of an 8-person occupancy cap is likely influenced by safety concerns (8 is under the 10 threshold and also seen as more manageable for noise/parking). During the April 8, 2025 council meeting, some members felt 8 might be too low for large homes, while others stressed that a clear cap makes enforcement easier. The debate acknowledged that larger occupancies bring noise and parking issues but also that an arbitrary number like 8 might not fit all cases.
Municipal Variances and Precedents: Some municipalities have created special categories for STRs in building codes. For example, California amended its code to define a “hosted short-term rental” differently if the owner lives on-site, etc., sometimes relaxing certain requirements. Another precedent is the concept of an “Accessory Dwelling Unit (ADU) used as STR” – if an owner occupies the main house and rents an ADU, some places treat that ADU as still R-3 because it’s accessory to a primary residence, not a standalone lodging business. Orem could explore working with the Utah State Fire Marshal on guidance for STRs. Often the fire authorities will insist on basics: every bedroom must have proper egress (window or door), there should be smoke detectors in every bedroom and hall, and at least one carbon monoxide detector per level, as well as a fire extinguisher – essentially the same requirements in that failed 2024 bill. These are low-cost safety measures that any STR ordinance can and should mandate for all rentals, regardless of size. For very large homes, Orem might consider requiring a fire inspection and perhaps limiting use of certain areas (e.g., not allowing large gathering events in an STR unless the building meets assembly occupancy standards).
In summary, the fire code issue underscores why Orem cannot simply ignore occupancy in its STR ordinance. The difference between 8 guests and 16 guests is not just a neighbor nuisance matter – it’s a different risk profile in case of fire. If Orem sets a reasonable occupancy limit (or ties it to the number of bedrooms with a formula), it can keep STRs within the R-3 classification in most cases. For any that exceed, it could require a conditional use permit and code compliance as a quasi-inn. Very few owners will go that route, so it may effectively deter the high-capacity party houses. The city should consult current code (IBC 2021, which Utah uses) for the exact definitions: transient “congregate living” for more than 10 persons = R-1. Knowing this, crafting the ordinance to align with R-1 vs R-3 thresholds will make it far more enforceable and defensible. It also protects guests – no one wants a tragedy where an STR full of tourists catches fire and lacks basic safety features. So, any legal STR framework in Orem needs to integrate building/fire code compliance as a core component.
Economic and Equity Impacts of Orem’s Proposed STR Ordinance
The proposed short-term rental rules in Orem carry significant economic and equity implications for different groups: owners of large STR homes, local resident hosts vs. absentee investors, the broader housing market, and the local tourism economy. Understanding these impacts is crucial to crafting a fair ordinance.
Impact on Large STR Homes: Orem has a handful of very large homes that have been used as short-term rentals (like the so-called “GOAT House”). These properties often advertise sleeping capacities of 20 or more, catering to family reunions, wedding groups, or sports teams. A strict occupancy cap – say 8 guests as discussed – would severely curtail the viability of renting such homes. Owners of large STR houses could see a sharp decline in rental income or even an inability to rent at all if their typical groups far exceed the limit. Economically, this might force a change in use: some owners might convert the property to a long-term duplex (if possible) or simply sell the home. The property value for these homes may drop if they can no longer generate the high income from STR use. On the flip side, neighbors who have been living next to a 20-person weekend “party house” would experience a positive impact: reduced nuisance and perhaps a more stable environment.
There is also a question of fairness and investment-backed expectations. If someone bought or built a 8-bedroom home largely with the intent of short-term renting it (even though it was technically not legal under Orem’s code), they will feel singled out by a new ordinance that makes that use impossible. Some of these owners testified in the March 2025 council meeting, pleading for grandfathering of existing operators. For example, Chris Hammond, a real estate professional, argued STRs had positive economic impacts and urged the council to protect those who already invested in STR properties by grandfathering them in under the old rules (or lack of enforcement). The council will have to decide whether to include any grace period or grandfather clause for such properties. Completely shutting them down could invite legal challenges (though, as discussed, the law is on the city’s side since the use was technically unlawful to begin with). Alternatively, Orem might allow large homes to continue operating but under much stricter conditions (reduced occupancy, event restrictions, etc.) as a compromise.
Local vs. Absentee Operators: A common concern in STR debates is that out-of-town investors will buy up homes, removing them from the local housing supply and potentially being less responsive to neighborhood issues. Orem’s ordinance could implicitly favor local owner-operators in a few ways. For instance, if Orem requires that the STR property be the owner’s primary residence or that the owner (or a manager) live on-site or nearby, it gives an edge to local residents. Utah’s proposed HB180 would have required each STR to have a local contact within one hour’s drive and limited one person from being the local agent for more than 20 properties. This kind of rule, if adopted by Orem, doesn’t ban absentee ownership but ensures absentee owners hire local managers (creating local jobs and improving responsiveness). From an equity standpoint, local owner-occupants often rely on STR income to help pay their mortgage or make ends meet. Shutting down all STRs would cut off that supplemental income for families who might genuinely need it, while a big investor with a portfolio might be better able to absorb the loss (or move their capital elsewhere).
On the other hand, many residents feel it is unfair for a company or out-of-state investor to operate what is essentially a hotel business in a residential zone, profiting while the neighbors bear the noise and traffic. Equal protection legally may not require distinguishing between local and absentee, but the political optics certainly do – many communities are more sympathetic to an STR in someone’s basement or an inherited family home than to a mini-hotel empire. Orem’s ordinance could try to strike a balance: for example, allow STRs in an owner’s primary residence (including renting out a portion or the whole home when the owner is away), but disallow or cap STRs in purely investment properties. Some cities do this via a permit system that only issues one permit per person or per address. If Orem were to grandfather any existing licenses, it might prioritise those held by Orem residents versus those held by LLCs or out-of-towners.
From an economic perspective, absentee-operated STRs mean rental income leaves the community (the owner spends it elsewhere), whereas locally operated STRs are more likely to recirculate the earnings into the local economy. Additionally, a local owner is more likely to properly maintain the property (protecting property values in the neighborhood) than an absentee landlord focused on short-term profit. These considerations suggest that any incentives or leniency in the ordinance (such as higher occupancy for on-site hosts, or permission for an accessory unit) could be tied to owner-occupied situations, whereas absentee operations might face tighter restrictions.
Housing Values and Availability: STRs can have a dual effect on housing markets. On one hand, the ability to do short-term rentals often increases a property’s market value – investors will pay a premium for a house in a city that allows Airbnb income. Conversely, for neighbors not renting their homes, having transient rentals next door can decrease the appeal and value of their own property (due to perceived noise or instability). By formalizing an STR policy, Orem could see a modest correction in home values: properties that had been implicitly valued with an STR “option” might see that option curtailed, possibly easing prices slightly for local buyers. However, given the high overall demand in Utah County, any cooling effect might be minimal.
More importantly, restricting STRs can protect long-term rental housing stock. Homes that can no longer be used for lucrative short-term rentals may return to the long-term rental pool, increasing supply for local families and students. The Utah Apartment Association and affordable housing advocates often support strict STR controls for this reason. A Salt Lake Tribune report noted that short-term rentals are tempting to owners because “they can make more money renting nightly than monthly”, and this dynamic has pulled units away from long-term tenants statewide. By capping nights or enforcing the ban, Orem could push some homeowners to rent those basement apartments or ADUs to long-term tenants (like students at UVU) instead of Airbnb guests, which would be an equity win for those seeking affordable housing. There is a flip side: some argue that being able to STR a portion of a home makes homeownership affordable for first-time buyers (they count on that income). Removing that option might discourage some buyers or make it harder to carry the mortgage. It’s a complex equation, but Orem’s moderate housing needs (it’s not a pure resort town with extreme STR conversion rates) suggest the ordinance’s main housing effect will be to solidify the residential nature of neighborhoods rather than dramatically shift values.
Tourism Spending and City Revenues: Short-term rentals do contribute to the local economy by hosting visitors who spend at restaurants, shops, and local attractions. If Orem clamps down too hard, some of that spending might shift to neighboring Provo or elsewhere. For example, families coming for university events or Silicon Slopes conferences might prefer to stay in an Orem Airbnb; if none are available, they could book in Salt Lake or Lehi and perhaps not patronize Orem businesses. One local host, Rachel Kirkham, emphasized in public comment that STRs in Orem provide essential accommodations for families visiting for events and that overly strict rules (like too few allowed nights or too low occupancy) could be “harmful to responsible operators” and limit those visitor options. Her point underscores that STRs fulfill a niche not always met by hotels – large groups who want to stay together, or people seeking a kitchen and neighborhood setting. If Orem’s ordinance is reasonable (for instance, allowing STRs with up to 8 or 10 people), it can continue to capture that segment of visitors. If it’s a ban, Orem might lose them entirely.
Additionally, if Orem moves from a ban to a regulated system, it stands to gain fiscally. Licensed STRs would pay fees to the city and lodging taxes. Currently, any STRs operating illegally are likely not remitting the transient room tax (though technically they should, but unlicensed operators often don’t report). By bringing STRs into the light, Orem could collect its share of the 3% transient room tax that Utah County imposes, plus any additional local fees. These funds can support enforcement costs or be reinvested in city services. Of course, the volume of STRs in Orem will never rival Moab or Park City, but even a few dozen licensed rentals generating taxes could be a net positive.
Compliance Incentives and Behavior: The stringency of the ordinance will directly affect compliance rates. As noted earlier, overly burdensome regulations lead to non-compliance. If Orem sets up a system where responsible hosts can get a permit with reasonable requirements, most will likely do so. Especially if the city couples the ordinance with an amnesty period – for example, “Apply for your STR license in the next 60 days and no fines for prior operation” – many hosts would come forward. However, if the ordinance effectively amounts to a continued ban (just with new labels) or extremely strict conditions (like a very low occupancy cap and a primary-residence requirement and a night cap, all together), some owners may decide it’s not worth it and continue under the radar.
Enforcement capabilities matter here. Utah law currently (since 2017) prohibits cities from using web listings alone as evidence to issue citations. This means enforcement is largely reactive – the city must get a neighbor complaint or other evidence of actual rentals. If a significant number of owners choose to ignore the new ordinance and if neighbors don’t report them, the ordinance could be undermined. One property manager quoted about Utah STRs said, “When cities are unreasonable it drives people to do it unlicensed… They shouldn’t require such a ridiculous, onerous process that people just throw up their hands and give up.”. This is a warning Orem should heed: find the right balance so that well-meaning hosts don’t throw up their hands and revert to the black market.
On the other hand, with a clear ordinance in place, Orem can also increase penalties for non-compliance to create a deterrent. If someone operates without a license or violates the occupancy rules, the fines should outweigh the profit. Some Utah cities had low fines (South Salt Lake was noted as only ~$650 fine, which some hosts would risk since they make more than that in a couple nights). A revised ordinance can set escalating fines or even misdemeanor charges for repeated violations, which will incentivize compliance or exit from the market.
In sum, the economic and equity impacts of Orem’s STR policy are nuanced. Responsible local hosts stand to gain from a regulated legal framework (they can operate without fear of sudden shutdown, and earn income), while purely commercial operators might lose some profitability or exit if the rules are tight. Neighborhoods gain stability and perhaps slight housing affordability improvements by curtailing STRs, but at the cost of some tourism dollars. The key will be to design the ordinance so that it maximizes the positive impacts (controlled income for locals, tourism boost, tax revenue) and minimizes negatives (nuisances, housing loss, non-compliance). This balancing act leads directly into the final section of policy recommendations.
Policy Recommendations for Orem’s STR Regulations
Drawing from the legal analysis, community input, and case studies above, here are detailed policy recommendations for Orem’s short-term rental ordinance. These aim to create a fair, enforceable system that addresses both neighborhood concerns and the interests of responsible STR hosts:
Tiered Occupancy and Zoning: Implement a tiered approach to STR occupancy limits based on home size and/or zoning district. Orem should allow a reasonable number of occupants per rental by formula (for example, 2 occupants per bedroom up to a set maximum) rather than a one-size-fits-all cap. This approach was reflected in the draft state bill (HB 180) which effectively allowed 4 occupants for the first bedroom and 2 per additional bedroom. Such a formula scales with house size – a five-bedroom home might be allowed ~12 guests, whereas a condo might be limited to 4 or 6 – which is inherently fairer and more intuitive to owners. To maintain safety, an upper limit (perhaps 12 or 14 persons) can be imposed to avoid ever reaching the dangerous R-1 threshold. Larger groups than that should be prohibited in residential zones or required to obtain a special conditional use permit as a “lodging” use. This tiered system ensures large homes are not unduly penalized while still preventing extreme party-house scenarios. Additionally, Orem could designate specific zones or an overlay where higher-occupancy STRs are permitted (for instance, in more rural estate areas or commercial mixed-use areas) while keeping stricter limits in low-density neighborhoods. This is akin to Park City’s zoning strategy and would pass muster legally as long as it’s in the ordinance text. By aligning occupancy with house capacity and zone context, Orem addresses the core of many complaints (which stem from overcrowding of homes with too many guests). Importantly, such gradation gives owners an incentive to right-size their guest count to avoid triggering tougher rules or license denial.
Local Oversight and Complaint-Driven Enforcement: Encourage local responsibility by requiring each STR to have a designated local contact (who can respond within an hour) and by largely enforcing based on complaints rather than blanket proactive sweeps. This means Orem’s ordinance would not turn into a punitive witch-hunt for every STR; instead, resources focus on those generating complaints or operating flagrantly outside the rules. A complaint-driven model respects privacy and deploys enforcement where it’s needed – it was acknowledged even by state lawmakers that those not causing a nuisance should be left alone. To make this work, the city must set up an accessible mechanism for neighbors to lodge complaints (a hotline or online form, as Park City and others have done). The ordinance can specify that upon, say, two or three validated complaints, the city may revoke the STR’s license or impose fines. This creates a strong incentive for hosts to be proactive in preventing problems (quiet hours, informing guests of rules, etc.). Meanwhile, responsible operators who never generate complaints would continue without issue. Orem should also leverage the state’s recent easing of the “advertising ban” – a new 2024 law now allows cities to use an online listing in conjunction with other evidence to enforce against unlicensed STRs. This means if the city hears of an illegal rental and sees it listed on Airbnb, that can form part of a case. Still, primary reliance should be on neighbor reports, which is more efficient and community-driven. By adopting a complaint-trigger approach, Orem avoids over-policing and respects property rights, while still having the tools to shut down the truly bad actors.
STR Licensing and Registry: Establish a straightforward STR license or permit system with an annual renewal requirement. All operators should be required to obtain a city permit to operate, which entails providing owner or agent contact info, certifying compliance with safety and noise regulations, and agreeing to pay applicable taxes. The process must be user-friendly – available online, with clear checklists – so that hosts will comply. As Granicus found in its work with 350+ communities, clarity and simplicity in the rules are paramount: governments should ensure “hosts can easily find information about the codes and ordinances” and that the process isn’t so cumbersome that people abandon it. Orem could model its permit application after Millcreek’s, which is famously simple (essentially a form plus self-certification of understanding parking/noise rules). Permit fees should be set at a level that covers administrative costs and enforcement (perhaps a few hundred dollars annually), but not so high as to be punitive. The city should maintain a public registry of licensed STRs, which improves transparency – neighbors can see if a nearby home is officially licensed or not. This also aids enforcement; any listing found that’s not on the registry is clearly illegal. Requiring the license number to be posted in any online advertisement (a provision included in HB 180) will further help compliance. The license system transforms STRs from an unregulated activity into part of the city’s formal economic framework, enabling collection of transient room taxes and tracking of how many STRs exist and where. Data from the registry can inform future adjustments (for example, if one neighborhood has a disproportionate number of permits, the city could decide to cap new ones in that area for balance). In terms of equity, the license system is the mechanism to grandfather or phase-in existing operators: Orem could say any existing STR (as of a certain date) can get a permit if they apply within 60 days, whereas new applicants afterward might be subject to tighter rules or caps. This gives those who have been operating a chance to come into compliance (acknowledging their reliance interest) while preventing a sudden rush of new investors trying to game the system.
Operational Standards (Noise, Parking, Safety): Incorporate clear operational requirements into the ordinance to address the typical nuisances and hazards. These should include: quiet hours (for example, no outdoor noise or amplified sound past 10:00 PM, matching the city’s existing noise ordinance), parking rules (each STR must provide sufficient off-street parking – Orem is considering a requirement like one parking space per bedroom – and inform guests not to park on neighbors’ frontages or violate any permit parking zones), trash management (garbage bins must be promptly removed from curb after pickup, etc., to prevent overflowing trash on weekends), and occupancy limits per the license (the number of overnight guests and perhaps a separate limit on daytime visitors if large events are a concern). Additionally, fire and life safety provisions are critical: require working smoke detectors in every bedroom and hallway, carbon monoxide detectors on each level, and a fire extinguisher in the kitchen. These simple measures were mandated in the draft state legislation and are inexpensive to implement. Orem’s ordinance can also require that exits are not obstructed and that the home’s address is clearly visible from the street (for emergency responders). While not every home will be sprinklered or meet hotel-grade fire code, these baseline safety rules greatly reduce risks. The ordinance should state that violation of these standards is grounds for fines or permit revocation. By codifying such standards, responsible hosts will be empowered – many already impose quiet hours and provide parking instructions, but now they can point to city rules in their house manuals, which helps set guest expectations. For example, a responsible host can tell renters “City law limits us to 3 cars and no noise after 10pm,” which carries more weight than a mere request. This turns the ordinance into a tool for hosts to manage guest behavior. And for neighbors, it provides assurance that if an STR is licensed, it must follow the same rules that any considerate neighbor would (no loud parties, no street congestion, etc.), or the city will intervene. Essentially, these standards make explicit the social contract of STR operation: enjoy the property, but don’t impose on the surrounding community.
Graduated Enforcement and Penalties: The ordinance should outline a fair but firm enforcement scheme. For instance: first complaint – warning or notice to comply; second substantiated complaint – a fine (perhaps $500); third complaint – suspension or revocation of the license. Severe violations (such as operating over capacity or a significant safety violation) might merit immediate fines without a warning. The idea is to give operators a chance to correct issues (sometimes owners aren’t aware a renter threw a big party, etc.) but also to show that Orem means business if problems persist. For those operating without any license after the ordinance is in effect, penalties should be even stiffer (to incentivize coming into the fold). Maybe an unlicensed STR caught renting is fined $1,000 for the first offense and more thereafter. The fines must be “hefty enough to deter illegal operators—otherwise, STR hosts will see them simply as a cost of doing business.”. This was a lesson from many cities: set fines high so that compliance is the cheaper, easier path. Additionally, Orem could consider an amortization period for existing STRs that truly cannot conform (say a big one that can’t operate under new rules) – essentially giving them until a certain date to wind down operations. This isn’t legally required, but it can demonstrate good faith and mitigate any claim of unfair sudden taking. The ordinance could, for example, allow any STR that has a rental contract already booked in the next 3 months to honor those bookings (so as not to disrupt travel plans) but no new bookings without a permit. Little transitional allowances like that show the city is reasonable.
Grandfathering and Fairness Provisions: As a policy matter, Orem should decide whether to allow any non-conforming STRs to continue. One approach is a strict reset – everyone must comply with the new rules, no exceptions. Another is to grandfather only those who obtained a business license for an STR (though in Orem, few if any have such a license since it wasn’t offered), or those who have been paying transient taxes. The more likely scenario is not true grandfathering (which would let an STR operate forever even if it violates new rules), but perhaps a conditional use path or a variance path for unique cases. For example, if there is a single property that has historically hosted large groups without issue, the owner could apply to the Planning Commission for a special permit to continue doing so, subject to stricter conditions. This would shift the burden to the owner to prove they deserve an exception. From an equal protection standpoint, having a defined process like that is safer than blanket grandfathering a list of addresses (which could be seen as special treatment). The ordinance could also explicitly state that it is not waiving the city’s right to enforce past violations, but that it will forgive past infractions for any owner who registers promptly. This carrot-and-stick approach was implied by citizens at the meeting who favored bringing people into compliance rather than punishing retroactively.
Periodic Review and Adjustment: Build in a mechanism to review the STR ordinance after, say, one year and then every couple of years. A sunset or review clause means the city will look at data – number of permits issued, number of complaints logged, impact on housing availability (perhaps measured by vacancy or rents), revenue collected, etc. – and then adjust if necessary. For example, if the city finds that even licensed STRs are causing too many disturbances, it might tighten occupancy or increase fines. If it finds very few STRs came forward for licenses (meaning likely many went dark or underground), it could re-evaluate if the rules are too strict or if enforcement needs boosting. Essentially, treat the ordinance as a living document that can respond to outcomes. Several cities have taken this iterative approach, and it helps address concerns incrementally. Public hearings during these review points should solicit feedback from both the STR owners and the neighbors to see if the balance is working. This collaborative tweaking can improve the ordinance’s effectiveness and keep it legally resilient (it shows the city is continuously tailoring the regulation to legitimate issues, which is good if ever challenged in court).
In conclusion, these recommendations aim to create a comprehensive STR policy for Orem that is legally defensible, economically sensible, and socially equitable. By allowing short-term rentals under defined conditions – rather than an outright ban – Orem can harness the benefits (for homeowners and visitors) while mitigating the harms. Clear rules and active enforcement will be key. The council’s own discussions echo many of these ideas: they’ve considered occupancy limits, parking plans, and focusing on nuisance enforcement instead of arbitrary caps. Community voices have urged fairness (grandfathering, not punishing all for the sins of a few). If Orem implements a licensing system with sensible limits and holds operators accountable to high standards, it stands a good chance of turning a contentious issue into a win-win. Responsible hosts can continue to operate and contribute to Orem’s economy, and residents can enjoy peace and safety in their neighborhoods. The experience of other cities shows that such a balanced outcome is achievable with thoughtful policy and ongoing collaboration between the city and its citizens.
Sources:
Utah Court of Appeals – South Weber City v. Cobblestone (2022); Town of Alta v. Ben Hame Corp. (1992); Brown v. Sandy City Board of Adjustment (1998).
Orem City Council Meeting Minutes and Discussions (2023–2025).
Salt Lake Tribune and other Utah news reporting on STR trends and local regulations.
Utah Property Rights Ombudsman Advisory Opinion 275 (2023).
Park City and Philadelphia STR regulatory documents.
Granicus Host Compliance insights on STR ordinance best practices.
Well-researched, well-written, and well-balanced.