Mill Creek reviews short-term rental options and lodging tax after limited local data on units

The Mill Creek City Council held a study session Feb. 11 on short-term rentals (STRs), often marketed through platforms such as Airbnb and VRBO, and on the lodging (transient occupancy) tax the city could impose under state law.

Planning staff briefed the council that the city has no current registration or reliable count of short-term rentals operating within the city limits; a quick public listing check returned only a handful of active listings. Staff noted that state law (RCW 67.28.1180) governs lodging taxes and that revenues from such a tax must be spent on tourism promotion and tourism-related facilities; imposing the tax would also require council-appointed advisory review of grant awards and annual reporting.

Councilmembers raised three related lines of concern: - Housing supply and neighborhood character: Members asked whether short-term rentals could reduce the stock of attainable long-term housing (for example, accessory dwelling units or townhouses) and whether investor-driven conversions to STRs could displace potential residents. - Legal and administrative scope: Several councilmembers asked staff to inventory homeowners associations (HOAs) and CC&Rs in Mill Creek to assess how many properties already prohibit short-term rentals, and to identify what portions of the city are subject to those private restrictions. - Revenue and regulatory thresholds: Staff explained that some nearby cities generate meaningful lodging-tax revenue, especially where hotels or visitor accommodations already exist; others derive little revenue if there are few STRs. Councilmembers asked staff to return with an estimate of how many STR units might be operating inside Mill Creek, information on HOA/CC&R restrictions, and the county or neighboring-jurisdiction approaches to taxing STRs before the Council considers an ordinance or a lodging-tax proposal.

Planning staff presented four regulatory approaches the council could take if it chooses to act: (1) ban STRs citywide, (2) allow STRs only in specific zoning districts (for example, mixed-use areas), (3) allow STRs but impose unit caps (for example, one permitted short-term rental per parcel), or (4) take no zoning limit and only adopt a lodging tax to capture revenue. Staff suggested that a unit-cap approach could balance owner income opportunities with protections against wholesale conversion of long-term housing to visitor accommodation.

Several councilmembers suggested a conservative next step: have staff gather data (number of active listings inside city limits, HOA rules, and county/jurisdiction tax approaches) and return with findings before drafting code changes or a tax ordinance. Council agreed with that approach and directed staff to report back with a short research summary and proposed next steps.

The council did not adopt any ordinance or tax at this meeting; staff will return with a factual inventory and recommended options.