Columbia Falls City Council Gets First Look at Short-term Rental Policy Framework

To restrict to owner-occupied or not restrict to owner-occupied? That is the question Columbia Falls City Council members will consider over the next few weeks before providing direction on the city’s proposed short-term rental policy. 

The city council on Monday night got its first look at a short-term rental policy framework that will be used to regulate the city’s current and future short-term rental inventory, ultimately culminating in a new ordinance the city expects to take effect in January 2027.

The policy framework proposed by city staff adjusts the city’s approach to regulating short-term rentals — which are defined as the rental of any portion of a dwelling unit for stays less than 30 days to transient guests or tourists — by shifting to a single process for all short-term rental permits, irrespective of zoning, and implementing stricter enforcement of permits, compliance standards and resort tax collection requirements. 

But city councilors also heard pleas from some planning commission members who voiced support for the staff’s framework proposal but urged the council to take the policy a step further by limiting future short-term rental permits to property owners with primary residences in Columbia Falls. 

The tweaked framework the commission put forward is modeled after the city of Bozeman’s, said Justin Ping, a Columbia Falls Planning Commission member who spoke on the group’s behalf at Monday’s meeting. Bozeman city commissioners in October 2023 banned new permits for “Type 3” short-term rentals — units where the owner doesn’t live on-site at the residence at all — and agreed to grandfather in currently permitted Type 3 short-term rental units.

“While the challenges related to real estate speculation and tourism pressures here in our smaller town have yet to be as acute as those that the city of Bozeman’s facing and has faced, we believe that Columbia Falls should do its best to be ahead of the curve and be as forward thinking as we possibly can, and be an example to other communities within the Flathead Valley,” Ping said. 

While short-term rentals have been a prominent topic of conversation in Columbia Falls for years, the city over the last few months began reviewing its policy as it simultaneously moves through its Montana Land Use Planning Act (MLUPA) requirements. The ultimate goal is to craft a short-term rental ordinance that aligns with the city’s new land use plan and zoning map that will be developed through MLUPA. 

The city’s analysis found that there are currently 121 short-term rental units registered or permitted with the city — of those units, 98 are licensed and 90 pay resort tax, City Manager Eric Hanks said. 

“It’s clear that we have some people that are not properly permitted or properly licensed or they’re not paying resort tax,” Hanks said. “We know that we’re missing some people, and by having a clearly defined and a better education campaign of what those requirements are, we’ll see a lot more compliance. There’ll be a small group of people that probably try to play the system, but generally people will be compliant with the right kind of regulations and the penalties associated.”

The policy framework proposed by city staff Monday night would be a modernization of the city’s current short-term rental program, with Hanks saying it establishes a clearer permitting system and enforceable penalties while maintaining opportunities for property owners to participate in the local tourism economy. 

The city’s current short-term rental program requires those managing a short-term rental to determine whether their unit is in a conditional or permitted zone. If the unit is zoned conditional, the owner must apply for a $325 administrative conditional use permit, which includes a 15-day comment period and notification of properties within 150 feet. 

All short-term rental units are required to obtain state registration ($40), a fire inspection ($75), county health license ($280), and a business license from the city ($40). 

The proposed framework would consolidate the program into a process not tied to zoning, replacing the need for an administrative conditional use permit or business license with a single short-term rental permit. There would be no maximum permit limit within the city or within specific zoning, and permits would terminate upon sale transfer of property ownership.

Obtaining the short-term rental permit would include an initial $350 fee, along with a $250 annual renewal fee, and a $150 fire fee, which includes up to two inspections, according to city documents. All fees would be due by the end of January each year, Hanks said.

To give the policy “more teeth” for enforcement, the proposed framework includes a tiered series of penalties for infractions, such as not paying permit fees or resort taxes. 

Following a written warning, non-compliant properties could receive civil penalties ranging from $300 per day for the first documented violation to $500 per day for the second documented occurrence. Serious violations could warrant permit suspension and removal from short-term rental hosting platforms, according to city documents. 

“When you threaten that they’re going to be removed from the hosting platform right before the summer season, and their reservations would be canceled because they’re not current, then it drives compliance,” Hanks said.

Despite the planning commission largely agreeing with the city’s proposed framework, members at Monday night’s meeting highlighted one key point of disagreement: limiting permits to owner-occupied units. 

When the planning commission began discussing the short-term rental policy last month, several commissioners made it clear they want short-term rentals to be a tool for residents, but not overrun by outside investors or corporations.

Ping had the same message for city councilors on Monday night, urging councilors to pursue a more “aggressive model of short-term rental regulation.”

“We believe that housing units in Columbia Falls should be available for those who live here or would like to live here, plain and simple,” Ping said. “As is the charge for the planning commission, we want to be as forward thinking and as proactive as possible.” 

The commission asserted “primary homeowners” could be easily defined using the state’s new tax code, which defines primary homeownership as living at the residence for at least seven months of the year, Ping said. 

Ping also noted that those who are currently managing short-term rentals but may not fit the primary homeowner definition wouldn’t lose their ability to continue operations, saying current permits would be grandfathered in until ownership of the property is transferred. 

“We believe that secondary homeowners that would potentially be affected by this new ordinance would have plenty of runway between now when the ordinance was adopted to either put their home within the short-term rental pool and apply for a permit, or also have the ability to then think about their home critically in terms of its value and their position within that home as either wanting to keep it up themselves or sell before this happens,” Ping said.

Councilor Marijke Stob voiced the most support for the planning commission’s pitch at Monday night’s meeting, saying it’s a necessary step to prioritize the community. Councilor John Piper also noted liking the idea of an owner-occupied focused policy, saying it would be good for the city’s housing supply if it could limit people buying homes for the sole use of being a short-term rental. 

“We keep using this word restrictive, but it’s restrictive on people who have two or three or four homes,” Stob said. “I think if we let this not go regulated, we’re going to be prioritizing tourists over our residents.”

In a caution to city councilors, Hanks explained that the city staff’s proposed framework is based on a viewpoint that the city should have “incremental change instead of going from one of the least restrictive short-term rental programs to one of the most restrictive,” he said. 

“We also think that with our proposal, it’s an increased data collection so we can do proper analysis to confirm the perceived impacts of non-owner-occupied properties and the volume of how many of those are really out there,” Hanks added.

The city’s attorney, Justin Breck, also laid out some legal risks that the city may take on if it restricts its future short-term rental permits to only owner-occupied units. 

“I think the risk of limiting to owner-occupied is discrimination suits for discriminating against interstate commerce,” Breck said. “That’s been a legal basis for lawsuits in California and some other big states that have cities where they’ve tried to do that. Differential treatment of in-state and out-of-state economic interests that benefit the former and burden the latter have been found to be unconstitutional. 

“So you can see and extrapolate how that might be the basis for a lawsuit by an investor backed owner of a STR versus a city or county that limited to only owner-occupied. There hasn’t been a lawsuit filed against Bozeman for that, but if I were an investor-backed owner of a STR, I’d certainly consider it.”

The city council is set to discuss and give direction to city staff regarding the short-term rental policy framework at its next meeting on April 6, Hanks said.

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