Tobyhanna Township Adopts a Cap on Vacation Rental Properties

On March 18, 2024 in a packed township meeting, the Tobyhanna Township Board of Supervisors voted 3 to 2 to Cap the number of STR licenses at a number that equals 12% of the number of homes. The Cap was originally proposed at 10% but in the discussion portion of the meeting the administrative staff of the township suggested that the township was very close, even over the 10% level, thus 12% emerged. Currently there are just under 7,500 homes in Tobyhanna Township which means less that 900 homeowners would be approved to rent their homes to vacationers.

The supervisors insist that they are being overrun by business activity, although no firm examples were given, and feel the Cap is needed to maintain a balance in their communities. Suggestions that better license review and code enforcement is the answer, were ignored. One supervisor even stated they cannot afford to enforce the rules that they themselves put in place. Another supervisor said the township needs more affordable housing and that a drop in the long-term rental rates and drop in real estate values would be good for the township.

Members of the Short-Term Rental Alliance of Tobyhanna Township (STRATT) stated that their “Tobyhanna for All” lawsuit is not settled and that the Cap violates the proposed settlement. The township solicitor neither confirmed or denied that case has been settled. One supervisor reminded everyone that the Cap is a resolution, not an ordinance, and that a resolution can be easily overturned in the future if this does not work out. The next Tobyhanna Township Board of Supervisors election is November 2025.

At the meeting, several real estate professionals brought up the chaos this will have on the real estate market.  There seemed to be confusion on “Cap” versus “Freeze.”  Lehman Township has Frozen the STR license process, and no new licenses are being issued.  Jackson Township recently put a Freeze on licenses in residential districts. When there is a Freeze, the exception is for properties with a license whose new owners can apply for a license under the grandfathering principle.

Caps on the other hand will have a waiting list for a limited number of licenses.  The Tobyhanna supervisors affirmed that their licenses are not transferrable and that the sale of a home with an existing license will terminate the license and the new owner will have to go the back of the line.  Without clear and fair policy rules around this Cap resolution, the impact on real estate values in Tobyhanna Township will be unclear.

Recently the Poconos Association of Vacation Rental Owners (Poconos VRO) put forth a resolution opposing caps. It reads:
Poconos VRO disagrees with regulations that cap the number of vacation rental properties in any community or municipality. Evidence has shown that caps fail and that the best form of control is reasonable regulation that focuses on successful good neighbor policies plus the overall health, safety/wellbeing of the residents, property owners and guests. Practical fees and consistent enforcement are part of a successful formula, artificial Caps are not.

As always there will be people who find workarounds, and we may see some unique solutions to the awkward situation in Tobyhanna Township. It has been suggested that the sale of an LLC that includes a single property may not require the license be transferred. In this scenario, the buyer buys all the assets of the LLC that includes the digital assets (rental listing, etc.) as well as the property and the licenses if those licenses are in the name of the LLC. It has also been implied that properties with a license will have much greater value than properties without a license and that the licensed owners can use the services of a co-host or use rental arbitrage where they maintain their license, then sign long-term leases with the operator who accepts the business risk of the vacation rental operations.

Based on the March 18 decision by Tobyhanna Township, nothing is clear. This arbitrary Cap is going to be viewed as unjust and is going to be challenged. Creative operators will find workarounds if they want to enter this market, struggling operators may find alternatives to selling their properties and thus the Tobyhanna Township STR saga continues.

Disclaimer/For the record:
The opinions expressed in this article are just that, opinions. I’m a professional realtor, not a lawyer and these are my personal thoughts.  If you want legal advice, I suggest you seek clarification from a lawyer familiar with property rights and short-term rental ordinances in the Poconos.

Update: As of September 2024 the number of licenses issued remains below the cap and the real estate market in Tobyhanna has become tepid. Home prices have dropped in Tobyhanna Township, demand is soft across the township while in neighboring Kidder, Coolbaugh and Tunkhannock Townships which do not have caps, the real estate market, especially for homes in communities that allow STR remains strong. Tobyhanna Township has not provided details on what happens when/if the cap is reached, how they will administer a waiting list, how they will manage expired licenses, how they will handle properties with a license that are sold, etc.

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