Judi Murphy had lived in the north Phoenix neighborhood of Royal Crest Villa for 48 years when an Airbnb moved in earlier this year.

Neighbors say the new owner was renting the property out as an Airbnb, after a state law passed in 2016 expanded protections for short-term rentals. Airbnb and VRBO are two popular websites for people to rent homes for short-term stays that can be for a couple days or up to a week. People can rent out their homes on occasion, but some investors turn their properties into year-round vacation rentals.

The neighbors, on a quiet street with perfectly manicured green lawns and children playing in the street, were immediately skeptical.

Soon after came the renters, who brought an increase in noise, traffic and even recreational use of marijuana, according to the neighbors.

"We were all on edge," neighbor Holly Keeble said. "It was taking away our quiet enjoyment of living."

She and her neighbors joined together to change the neighborhood rules to ban short-term rentals. The home is now for sale.

Keeble wants residents around the Valley who are grappling with the consequences of the new law to know their options when an Airbnb moves in.

Neighbors push back

The four-bedroom home was being rented for $459 a night for up to 12 guests, according to an Airbnb listing for the property that Keeble forwarded to The Arizona Republic.

Keeble began reaching out to neighborhood advocates and lawyers to see what could be done to stop the short-term rentals on their street.

The neighbors were initially advised by a lawyer that their only recourse was to call the police if there was a disturbance, which they were reluctant to do.

Keeble said she is not inherently opposed to Airbnb, but that with children playing in the street and neighbors barbecuing in driveways, she didn't think Royal Crest Villa was a good fit for short-term rentals.

"I don’t think that every neighborhood is the right neighborhood for it," Keeble said.

The neighbors sent the homeowner a cease and desist letter, telling him he needed a business license to operate his Airbnb in the neighborhood.

The owner took down the Airbnb listing after the pushback from neighbors, according to a letter from his attorney forwarded over by Keeble.

The owner "wants no hard feelings to exist in the neighborhood," attorney David Knapper wrote. "It is, and will be, where he lives, too."

Knapper could not be reached for comment.

Changing deed restrictions

Royal Crest Villa was established in 1955 as part of a historic home-building challenge called the Parade of Homes.

The neighborhood is not governed by an incorporated homeowners association, but it does have a Declaration of Restrictions established in 1955 to outline rules for the neighborhood.

The restrictions reflected the issues relevant at the time, but the neighbors were advised by an attorney that they could revise the Declaration of Restrictions by voting through an official ballot.

The neighbors voted to change the restrictions so that no home could operate an Airbnb or VRBO short-term rental on their property.

With 30 homes on the street, the neighbors needed at least 51 percent of homeowners to approve the revisions. The vote passed, with 23 out of 30 neighbors voting "yes" and seven abstaining.

The neighborhood's attorney revised the Declaration of Restrictions and recorded it with Maricopa County. They also then sent the homeowner a letter with the new rules.

The home is now listed for sale.

"The change starts with you," Keeble said. "If you care about something then do something about it."

Homeowners associations have the power

The 2016 state law only prevents cities and towns from regulating short-term rentals, but says nothing about homeowners associations and individual neighbors taking action, according to real estate attorney Christopher Combs.

After the state law went into effect, Sedona began requiring all short-term rentals in the city to pay $50 for a city business license. The Arizona Attorney General's Office determined the move violated the state law.

However, with or without an HOA, homeowners can often access deed restrictions that come with the purchase of their home, Combs said.

Many homeowners associations already prohibit short-term rentals of less than six months in their neighborhoods.

"The reason a lot of (HOA rules) have prohibited short-term rentals is because they depreciate the value of the neighborhood," Combs said. "Renters don’t care about the neighborhood as much as the people who live there year-round."

Arizona courts have yet to make a ruling on the intersection between Airbnb and a communities’ restrictive covenants.

The future of the law

Republican state Sen. John Kavanagh, who represents Scottsdale and Fountain Hills, said he is drafting legislation to address some of the issues created by the original law.

"This was sold as a bill to allow individual homeowners to make some extra cash on the side," Kavanagh told The Republic in October. "Unfortunately that morphed into large investment groups pooling their cash, buying homes and creating party houses and catering to drunken golf outings."

In his new legislation, Kavanagh hopes to require a registry of all homes rented through Airbnb and VRBO, and prevent investors from buying homes to turn them into year-round, short-term hotels.

Reach the reporter at Lorraine.Longhi@gannett.com. Follow her on Twitter: @lolonghi.

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