A plan to allow Urban Estates homeowners to rent guesthouses to reduce a critical workforce housing shortage was halted this week after two years of research and input.

After a motion failed, the Board of County Commissioners on March 11 opted to let a county prohibition stand and not move forward with a pilot program in the Urban Estates, an area of North Naples west of Collier Boulevard.

Renting guest houses for commercial gain is prohibited by the county’s land development code, which allows them to be used only for housing relatives or caregivers — without charging rent — and bars owners from living in the guest house while renting out their principal dwelling.

“Once we open this door up to legalize the renting of guesthouses, the next step is going to be that people are going to be renting those out as Airbnbs,” said Commission Chair Burt Saunders, noting most residents who attended public meetings supported rentals, but “the sentiment changed” when they heard state law doesn’t allow the county to prohibit short-term rentals.

“Doing this is a mistake,” added Saunders, an Urban Estates resident. “I think the next step is if we do this in the Urban Estates, we’re certainly going to do it in the Rural Estates and I just think that that’s creating more traffic on these very narrow roads and it’s also potentially destroying quality of life for people who live in those Urban Estate dwellings.”

Of 3,558 lots in the Urban Estates, 393 already have guesthouses, but 403 are eligible because those vacant lots are large enough. County officials say they know some are being rented out under the radar. If caught, the Tax Assessor’s Office removes the guesthouse portion of the property from the resident’s homestead exemption — cutting a percentage from the full discount, which can be up to $50,000.

The pilot program was suggested in February 2023 by Commissioner Bill McDaniel Jr. and was endorsed by the county Affordable Housing Advisory Committee, which asked staff to gather residents’ feedback. Urban Estates was chosen because it has infrastructure to support it.

After developing a program, staff sent 3,558 postcards to eligible Urban Estates residents last spring, asking them to attend meetings or complete online surveys, but received only 135 responses. At neighborhood meetings, residents were in favor of renting guesthouses but not limiting the rental price to restrict it to affordable, workforce housing.

State law prohibits the county from restricting Vrbos and Airbnbs, which often include party houses, unless the program is limited to income-restricted rentals for affordable housing — and residents didn’t support that due to the costs of building guesthouses and the loss of the homestead exemption percentage.

The county prohibition predates state statutes so it’s grandfathered in, County Attorney Jeff Klatzkow said.

Last year, commissioners supported limiting rentals to homesteaded Urban Estates properties, which then totaled 1,560, but Commissioner Rick LoCastro asked for a one-year review to make sure property owners didn’t “go wild” renting them out for $6,000 or $1 million. Commissioner Chris Hall asked for a review this week, saying they want to ensure it’s not “automatically going to be Airbnb city,” but benefits workforce housing.

The state estimates Collier has a shortfall of about 49,399 affordable housing units. Recently, the Planning Commission and county commissioners have approved numerous developments that contain affordable workforce units and are working toward increasing that. The 2023 market rate for rentals in the Urban Estates area ranged from $4,770 for a two-bedroom unit to $6,323 for five bedrooms.

“The assumption is that if we did this, it’s going to ruin the people’s lives in the neighborhood,” Hall said, adding that he gets calls about a million cars parked and trash in Naples Park. “It’s going to increase their traffic; it’s going to overwhelm them with trash. … Those are concerns that need to be considered.”

But Klatzkow said they couldn’t stop it if they started or make limitations.

“What you’re trying to do is make an end-run around the statute,” Klatzkow said. “… Once you open this up, it’s done.”

McDaniel noted that state statutes take away the county’s ability to control rentals, if they allow them.

“Once we open up Pandora’s box, it’s open,” McDaniel said of starting the pilot program. “There’s nothing stopping a corporation, Marriott — or any of these companies that are buying these homes — from buying homes in the Urban or Rural Estates and renting them [out]. They’re certainly allowed to do it under whatever pretense that they can and for whatever term that they can. We don’t have a say so in those things.”