ELY – Vacation and short-term rentals within the city of Ely will now be regulated and licensed following city council approval on Tuesday of a long-debated ordinance.
The ordinance will allow property owners to rent their properties for a period of less than 30 days.
The ordinance has been in the works for more than two years and has gone through multiple revisions with the city’s Planning and Zoning Committee and consultations with St. Louis County and the Minnesota Department of Health to incorporate their rules and regulations, according to Ely City Attorney Kelly Klun.
A split council approved a first reading of the ordinance in October with Paul Kess and Angela Campbell voting against the measure. Kess and Campbell remained unsatisfied with the revision and amendments, but the council passed the ordinance on a 5-2 vote.
A public hearing held prior to the council meeting on Tuesday included a couple of clarification questions from the Ely Chamber of Commerce and two commercial lodging establishments. Two letters received from out-of-town property owners with investment rental properties in the city indicated objections to the ordinance.
Council member Al Forsman sought to amend a limit on the number of permits allowed in various city zoning districts, derived by the Planning and Zoning Committee from the percentage of households in the city.
He made a motion to allow the city council to set the number of short-term permits by resolution at the beginning of each year.
“At the beginning of the year, we set our fees, like for building inspections and other permits,” he said, “and this would be no different. The number of permits could be determined by how much the population increases and decreases. We can address those changes without going through the whole ordinance (amendment process) at that time.” That amendment was approved unanimously.
Forsman also suggested an amendment to exclude such dwellings as rooming houses or bunkhouses maintained by a couple of wilderness outfitting businesses in the city as part of their business facilities. These establishments are already taxed, licensed, inspected and regulated as a commercial business. That amendment was approved unanimously.
Kess repeated his objection to allowing short-term rentals in the city’s residential or R-1 Zoning areas and made a motion to amend the ordinance to remove the R-1 Zoning District.
“If we allow rentals in these (residential) areas, it changes the character of the neighborhood,” he said. “There is the potential for constant changeover for people who live right next door.” He also mentioned public safety, traffic, noise and disturbance as other factors in his amendment, and that the short-term rental ordinance is unfair to the commercial lodging establishments in the city.
“It is difficult now in Ely to find an apartment,” he said. “If we allow this to happen everywhere in the city’s R-1 districts, it will be more and more difficult to live in Ely.”
Council member Ryan Callen asked what will become of the short-term rental units already established in the city’s residential areas.
“Are we going to tell them they can’t have them anymore?” he asked.
“So the question is: those 15 or 16 (short-term rentals) that already exist would have to shut down their operation?” Mayor Chuck Novak asked.
“Yeah. In my mind, they were never allowed to be in an R-1 district,” Kess said.
Forsman objected. “(Short-term rentals) were not prohibited before.”
Novak added, “If I put myself in the shoes of someone already operating one of these, I would sue the living crap out of the city if I was told I have to shut down. We would be opening ourselves up to a lot of litigation over this.”
Council member Heidi Omerza said the new ordinance “legitimizes” short-term rentals in the city. “We’ve talked about this for two years now. We can control the number of units in a neighborhood. We are balancing the playing field in a responsible and respectful way and taking a very balanced approach to this,” she said.
Kess’ amendment to exclude short-term rentals in R-1 zoning districts was rejected on a 5-2 vote. Just Kess and Campbell voted in favor of the amendment.
Following approval of a couple of clerical modifications suggested by Klun, council members approved the amended ordinance on a 5-2 vote with Kess and Campbell voting against the ordinance.

The ordinance stipulates:
• Property owners are required to obtain a permit from the city for all short-term rentals.
• A license from the Minnesota Department of Health is required for each short-term rental unit.
• Short-term rentals are required to pay lodging taxes.
• Short-term rental licenses are required in Zones R-1, R-2, RT, and SMU (Shoreland Multiple Use). Short-term licenses are not required in C-1 and C-2, and for previously licensed lodging establishments.
• Occupancy by use of recreational vehicles, tents, garages, sheds, and other structures is not allowed.
• Limits on occupancy are restricted to the number of bedrooms and bathrooms in a dwelling.