The Columbia Falls City Council took its first look at a comprehensive short-term rental policy framework during a Monday meeting, setting the stage for what could become a significant overhaul of how the Montana city regulates vacation rentals. The proposed ordinance would consolidate the current multi-permit system into a single streamlined process, with city officials targeting January 2027 for implementation. The framework represents part of the city’s broader effort to align regulations with its new land use plan and zoning map being developed through the Montana Land Use Planning Act.
Under the current system, short-term rental operators face a fragmented permitting process that varies by zone. Owners must first determine whether their property falls within a conditional or permitted zone, with conditional zones requiring a $325 administrative conditional use permit that includes a 15-day comment period and notification of properties within 150 feet. Beyond that initial step, all operators must obtain a $40 state registration, a $75 fire inspection, a $280 county health license, and a $40 city business license. Short-term rentals are defined as the rental of any portion of a dwelling unit for stays under 30 days to transient guests or tourists.
Compliance gaps exist under the current framework. Data presented during the council meeting showed that 121 short-term rental units are currently registered or permitted with the city, but only 98 of those units are properly licensed, and just 90 pay the required resort tax. City Manager Eric Hanks addressed these shortcomings directly during the presentation of the short-term rental policy framework, stating, “It’s clear that we have some people that are not properly permitted or properly licensed or they’re not paying resort tax. 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 proposed framework would replace the administrative conditional use permit and business license with a single short-term rental permit carrying an initial fee of $350, an annual renewal fee of $250, and a $150 fire fee covering up to two inspections. All fees would be due by the end of January each year. Notably, the framework proposes no maximum limit on permits within the city or specific zones, though permits would automatically terminate upon the sale or transfer of property ownership.
To address the compliance issues that have plagued the current system, the framework introduces a tiered penalty structure. Operators who fail to pay permit fees or resort taxes would first receive a written warning. A first documented violation would trigger a $300 per day civil penalty, with second documented occurrences escalating to $500 per day. Serious violations could result in permit suspension and removal from short-term rental hosting platforms. Hanks emphasized the leverage this provides, saying, “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.”
The most contentious aspect of the council’s deliberations centered on whether to restrict future permits exclusively to primary homeowners. Justin Ping, a Columbia Falls Planning Commission member speaking on behalf of the commission, urged the council to adopt such restrictions, modeling them after a policy implemented in Bozeman. In October 2023, Bozeman city commissioners banned new permits for Type 3 short-term rentals, defined as units where the owner does not live on-site, while grandfathering currently permitted units. The Columbia Falls commission proposed defining primary homeownership using the state’s tax code, which requires living at the residence for at least 7 months annually. “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 told the council. He added, “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. As is the charge for the planning commission, we want to be as forward thinking and as proactive as possible.”
Council reactions to the owner-occupancy proposal varied. Councilor Marijke Stob voiced the strongest support for the planning commission’s pitch, stating, “We keep using this word restrictive, but it’s restrictive on people who have two or three or four homes. I think if we let this not go regulated, we’re going to be prioritizing tourists over our residents.” Councilor John Piper expressed interest in the owner-occupied policy, saying it could benefit the city’s housing supply by limiting purchases made solely for short-term rental use. However, Hanks explained the staff’s proposed framework is based on “incremental change instead of going from one of the least restrictive short-term rental programs to one of the most restrictive.” He noted, “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.”
City Attorney Justin Breck outlined potential legal exposure associated with owner-occupancy restrictions. “I think the risk of limiting to owner-occupied is discrimination suits for discriminating against interstate commerce. 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,” Breck advised the council. He continued, “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.”
Ping addressed concerns about secondary homeowners who might be affected by an owner-occupancy restriction, noting, “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.”
The city council is set to discuss and provide direction to staff at its next meeting on April 6, with the final ordinance expected to take effect in January 2027.