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Minnetonka council leans away from outright ban on short-term rentals, asks staff for ordinance options
Summary
After an extended study-session discussion, the council rejected an immediate full ban on short-term rentals, asked for legal guidance on licensing versus zoning and directed staff to draft options (caps, homestead/owner-occupied limits and geographic approaches) for public engagement.
After a multi-hour study session on March 2, the Minnetonka City Council signaled that it would not pursue an outright prohibition of short-term rentals, instead asking staff and the city attorney for ordinance options that could include caps, homestead (owner-occupied) limits or geographic tailoring.
"We didn't do ban," the senior development director summarized the sense of the council during the discussion; later, the city attorney warned that court decisions in cases such as Wayzata could determine whether a city must recognize grandfathered uses or can use licensing-based controls.
Staff presented data showing about 24–25 registered short-term rentals in Minnetonka and AirDNA estimates of roughly 24 unique units with an average daily rate near $406 and occupancy around 58 percent. Police calls for service connected to registered units were limited and staff reported no registered-unit nuisance complaints during the registration period.
Councilmembers expressed contrasting concerns: some urged a strict owner-occupied or homestead requirement to protect neighborhood character and lakeshore properties, while others favored allowing homesteaded but nonresident owners (for example, seasonal residents) or preferred a modest cap and spacing controls to avoid concentration.
City attorney Eric Nilsen advised the council that litigation in other cities centers on whether rules are executed as zoning (which runs with the land and may require recognition of existing uses) or as business licensing (issued to a person and subject to annual renewal). He said a dispositive motion hearing in a relevant case was scheduled and a decision could come within about 90 days.
The council directed staff to obtain more detailed legal advice, draft ordinance options that reflect the council’s preferences (caps, potential homestead rules and geographic considerations), and prepare a public engagement plan. Staff estimated drafting and initial public outreach would take two to three months.
Next steps: staff will return with draft ordinance language and engagement options after consulting on the licensing-versus-zoning question and in light of any relevant court guidance.
