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Minnesota's Lake Country Facing New Battle with Private Cabin Rentals;
State's New Plan Would Require Private Owners to Comply with
Same Rules Set for Hotels, Motels & Resorts

By Jim Buchta, Star Tribune, MinneapolisMcClatchy-Tribune Regional News

Aug. 08, 2010--A new battle is erupting across Minnesota's lake country.

In the first widespread action of its kind, the state has sent more than 600 letters to property owners across Minnesota who rent their cabins for a week or less. In an attempt to enforce an existing law more vigorously, the letters warn that the owners might need to buy a license and undergo inspections -- the same rules that apply to hotels, motels and resorts.

Resort owners whose complaints helped prompt the letters argue that everyone needs to play by the same rules to ensure the health and safety of travelers. But for the cabin owners, the state action smacks of bureaucratic over-reach.

Julie Lien and her sister got their notice after they made their cabin near Fergus Falls available for the occasional short-term rental.

"They don't have a right to come in and tell us what we can and cannot do with our private property," said Lien, who decided to rent her place because of rising property taxes and other costs. "I think it's Big Brother stepping in and intruding into our lives."

The conflict comes amid an explosion in private home rentals on the state's lakes. For cabin owners out of work or struggling to pay bills, their second homes have become a way to supplement their incomes. For others, the rentals are a means to hang on to a family cabin they can't otherwise afford.

Three years ago, those cash-strapped cabin owners could sell. Not anymore.

"It's a reflection of the economy," said John Edman, director of Explore Minnesota Tourism, which has tried to remain neutral but posted an interpretation of the rules on its website.

Backlash to trend

It's impossible to say how many private rentals there are -- most are unlicensed. But the number of websites, including vrbo.com, craigslist.org and lakeplace.com, that cater to private rentals has soared.

Dave Gooden and Cameron Henkel of lakeplace.com say the number of rental listings on the site has increased 20 to 25 percent every year.

It's happening around the world. In Paris, where vacation rentals owned by foreigners pose stiff competition for hotels, the mayor says that he'll prosecute property owners who violate a 2005 law that restricts short-term rentals. And in recent weeks, legislation in New York City proposed limits on apartment rentals of less than a month.

In Minnesota, the issue is concentrated in popular vacation areas such as Lake County, where a moratorium on new vacation rentals was recently enacted.

A man who owns a house on Lake Superior, but asked not to be identified to avoid being targeted by the Health Department, said he rents out his house during the summer when sports events keep the family tied to the Twin Cities. He's spent tens of thousands of dollars maintaining the property every year, much of it paid for by rental income.

If the rentals stop, he worries that he might have to sell.

Efforts to clarify

Explore Minnesota Tourism recently gathered stakeholders to try to clarify the issue. The resulting report aims to interpret existing laws, which provide a loophole for vacation rentals of a week or more.

Jeff Forester, executive director of the Minnesota Seasonal Recreational Property Owners Coalition, was on the task force. He contends vacation rentals aren't causing the kinds of problems some say. He described efforts to label private cabins as commercial ventures as a way to appease the interests of the resort industry.

"These [rental cabins] are heirlooms, not assets; they're not bought as an investment or as a business," Forester said. "I think that somehow we [private cabin owners] were put forward as a convenient scapegoat."

The state wants cabin owners to pay an annual licensing fee and have a regular inspection to ensure that the building complies with state and local health, safety and zoning rules.

William Griffith, the attorney representing the Minnesota Vacation Rental Association, said such rules shouldn't apply to privately owned cabins, even if the owner rents them out occasionally. "This is private use, not public lodging," he said.

He also said that rather than enforcing state laws that were never intended for this type of lodging, licensing should be done locally. He worries that calling vacation rentals commercial ventures will make it impossible to comply because getting lakeshore rezoned is next to impossible.

Protecting travelers

The Health Department's environmental health manager, Colleen Paulus, said the law is meant to ensure that private rental cabins meet the same requirements as hotels and resorts. She noted that if a violation is found, the department works with the owners to correct the problem before shutting them down unless there's an immediate health threat.

"We're saying that you have to have a place that's safe, has safe water and is not polluting the environment," she said. "And we're making sure that the property is compliant with rules that apply to lodging."

Paulus said the department has received "consistent" complaints about lack of compliance, mostly from the lodging industry, and that the department only sends a letter if it gets a complaint.

Gary Edwards, the business and finance operations supervisor for Environmental Health Services, said the letter isn't an enforcement action itself. "We're not assuming that everyone out there is skirting the law," he said. "We're trying to inform them that they might need to be licensed."

In an attempt to clarify the rules, legislation was introduced in 2009 and 2010 that would have created a separate category for vacation home rentals, but both efforts failed.

Ed Fussy, a resort owner in northern Minnesota and president of the Congress of Minnesota Resorts, said the number of private rentals is "spiraling out of control," and there's no doubt that the competition has cut into the resort business. Still, he's primarily concerned that not holding private cabin owners to the same standards he's held to could damage the tourist industry.

"If they come and have a bad experience, they won't come back to Minnesota," he said.

John Swenson of Ely can see the issue from both sides. A resort owner, Swenson also owns a company that manages about 70 private vacation rentals. He's a proponent of licensing but is concerned that calling private rentals commercial ventures could "wipe out" the cottage industry because of zoning restrictions.

That has big implications for a town like Ely, where about 20 percent of the rental units are private cabins.

"If we take 15 to 20 percent our tourism dollars away that's going to have a chilling effect on the local economy," he said. "A lot of these people who have these lakeshore homes are not rich folks. If they could sell, they would."

Jim Buchta --612-673-7376

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Copyright (c) 2010, Star Tribune, Minneapolis

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