"It's more of a brief hiatus for them," Sedona Community Development Director Tony Allender told the Sedona Red Rock News in September. He was describing the homes that joined the city's Rent Local program and then went back to the short-term rental market.
The program had been open since August 2022. It paid short-term rental owners to sign a one-year lease with a local worker. By this fall, $141,000 of its $240,000 budget had been paid out and 14 properties had used it. Staff now recommend ending it. The city's program page currently says the program is "ON HOLD."
The low turnout comes down to price. New long-term rental supply in Sedona will not come from short-term rentals switching over. It will come from new buildings, and the city has started spending accordingly.
The math owners were doing
Rent Local paid by home size, topping out at $10,000 a year for a three-bedroom with its own entry, bath, kitchen and outdoor space. Owners had to submit a lease of at least one year with a local worker and stop short-term renting for that year. The rent was capped too. In April 2025 the City Council raised the cap from $2,200 to $2,500 a month, the Red Rock News reported.
Put a three-bedroom owner's three options side by side:
| Path for a three-bedroom | Annual gross | Basis |
|---|---|---|
| Rent Local lease at the cap, plus the incentive | $40,000 | $2,500 × 12 + $10,000 |
| Unrestricted long-term lease at the city's 2025 average rent | about $42,600 | $3,553 × 12 |
| Average Sedona short-term rental listing | $63,300 | AirDNA, trailing 12 months through September 2026 |
The middle row is the one that matters. The $3,553 average comes from an informal city staff study that the Red Rock News reported in April 2025. At that average, a plain market lease with no city paperwork brought in slightly more than the capped lease plus the full incentive. For the many owners already earning more than market long-term rent, the program asked them to give up income in return for a payment that never made up the gap. That year, the city's housing manager said the rent caps were "kind of misaligned with our market rates" and that "most potential participants have been discouraged because the rental cap is below what they can bear."
The comparison has limits. AirDNA's $63,300 is gross revenue before host expenses, and it averages the whole market, not just three-bedroom homes. Cleaning, platform fees and furnishing narrow the real gap. Even so, a $10,000 incentive was competing against a cap that sat below market rent.
The commitment was also short. The lease ran one year, and after that the owner could go back to short-term renting. That is the "brief hiatus" Allender described. Paying for a one-year pause buys one year of affordability, and city staff now recommend spending the housing budget elsewhere once the remaining Rent Local funds are used up.
Why Sedona had to pay instead of rule
A city with this many short-term rentals might be expected to simply limit them. Arizona law does not allow that. Under A.R.S. § 9-500.39, cities and towns cannot prohibit short-term rentals and cannot regulate them based on how they are classified, used or occupied, except as the statute allows. Cities can require a permit, with the fee capped at the lower of actual cost or $250. They can also require emergency contacts, neighbor notification and liability coverage. The permit framework came from SB 1168, which was signed July 6, 2022.
Sedona uses that framework. Its short-term rental page requires a separate permit for each advertised unit and bans hosting events that need a special event permit. Since January 1, 2026, late renewals carry a $50 or $100 fee. Permits, fees and nuisance rules are all the city can use. None of them changes what a home earns as a rental. So when Sedona wanted homes back in the long-term pool, its main option was to pay for them. Rent Local was that payment, and the voluntary deed restriction program was the other half of the same idea.
The market thinned anyway
The short-term rental market has been changing without the city's incentives. AirDNA counted 3,729 active listings in the Sedona market as of September 2026, down 21.3% from a year earlier. Over the same period, average revenue per listing rose 30.2% to $63,300. Occupancy rose 3.1% to 57%, while the average daily rate fell 6.9% to $337 and RevPAR fell 4.4% to $193.
Those numbers fit a market where fewer listings share the same visitors. Each remaining listing earns more over a year even though the nightly rate has slipped. AirDNA's market area is not the same as city limits, and its counts do not show where the departing listings went. What the numbers do show is that the units still operating earn more per listing than they did a year ago. That makes the gap in the table above wider, not narrower.
Operators are also changing the product. Allender told the Red Rock News in April that single-family homes used as short-term rentals grew from 454 in 2020 to 1,041. He said owners now seek permits to expand homes, in some cases from three bedrooms to seven, to sell more of an "experience." According to the city's 2026 housing analysis, short-term rentals rose from 9.8% of Sedona's housing stock in 2020 to 18.1% in 2025, more than the 17.6% that was renter-occupied.
Where the $19 million goes instead
Since it could not regulate or pay its way to more long-term rentals, the city moved its effort to new construction. Its draft Balanced Housing Strategy sets a 10-year target of 775 new units, backed by about $19 million in the city housing fund. About 29% of that target is already underway:
| Project | Address | Units | Status, September 2026 |
|---|---|---|---|
| Navajo Lofts | 10 Navajo Drive | 60 | Under construction |
| Goodrow Housing | 60 Goodrow Lane | 51 | In design |
| Village at Saddlerock Crossing | 82 Saddlerock Circle | 46 | In design |
| Villas on Shelby | 2250 Shelby Drive | 30 | Completed |
| Jordan Townhomes | Jordan Road | 19 | Under construction |
| Alkemista | 2144 W. SR 89A | 15 | Under construction |
Of those 221 units, 73% are planned as rentals and 27% for sale. Fifty-four percent will be market-rate, and the rest will be restricted at 60%, 120% or 150% of area median income. Community Development is also in early talks on a land trust partnership, possibly with Housing Solutions of Northern Arizona or the Verde Valley Community Land Trust. Allender called a land trust "a critical partner" if the city wants permanent affordable housing.
The October 13 council meeting moved this forward without adopting the strategy outright. The city's action item list records that council directed staff to "move forward within the framework given tonight." Staff were also told to proceed with requests for proposals on two sites, 2911 SR 89A and Sunset Lofts at 220 Sunset Drive. The revised strategy presented that night proposes ending both Rent Local and the deed restriction program. That is still a proposal, and the action list does not record a final decision on either program.
What this means if you're weighing Sedona
For a short-term rental buyer, city incentives do not belong in your numbers. The one program designed to change an owner's choice is on hold and proposed for elimination. What drives value is the operating trend: fewer listings, higher revenue per listing and a softer nightly rate. As AirDNA notes, its revenue figures are gross before expenses, so test any property against its own costs.
For a long-term rental buyer, the competition will be new buildings. Navajo Lofts, Jordan Townhomes and Alkemista are under construction, and most of the pipeline is rentals. More than half of it is market-rate, so a single-family long-term rental will increasingly be compared with newer apartments and townhomes.
For any buyer looking at a home with a rental history, there is one title detail to check. According to the city's 2026 housing analysis, the voluntary deed restriction, used on 14 properties since 2023, limits short-term rental use for 49 years and is formally filed with the county. A buyer planning to run a short-term rental should know whether a home carries one before writing an offer. A title review is where a recorded restriction like this would turn up.
This post is general information, not legal, tax or financial advice. Confirm how any statute, permit rule or recorded restriction applies to a specific property with an attorney, title professional or tax advisor.
FAQ
Can I still apply for Rent Local? As of this writing, the city's program page lists it as "ON HOLD" and directs questions to Housing Coordinator Laura Stewart.
Was the incentive paid every year or once? Sources differ. The city's page lists amounts "per year," while the Red Rock News described it in 2025 as a one-time incentive. The city's housing analysis caps total payments at $25,000 per owner.
Can Sedona ban short-term rentals in a neighborhood? State law bars cities from prohibiting short-term rentals. The text is in A.R.S. § 9-500.39.
If you're deciding between running a Sedona home as a short-term rental and leasing it long-term, Arizona Adobe Group Realty manages more than 200 rental doors across the Verde Valley. We can run the comparison on your specific property, using real operating costs instead of market averages. Get Your Free Market Report and start there.
