This is the third article dealing with the topic of short-term rentals. The first article, City Cracking Down on Illegal Short-Term Rentals, described efforts by the City of Coronado to encourage compliance with the City’s prohibitions on rentals of less than 26 nights. The second article, Cities Grapple With the Challenges of Regulating Short-Term Rentals, addressed how some major cities are responding to the explosive growth in short-term rentals that is being fueled by websites such as Airbnb, VRBO, and Flipkey. The beach communities of Southern California and how they are dealing with the challenges of short-term rentals are the subject of this article.
California Coastal Commission
In addition to the factors that other cities have had to contend with regarding short-term rentals, coastal communities in California also need to consider the views of the California Coastal Commission. Any amendment to a city’s zoning ordinance that expressly limits or prohibits short-term rentals in the coastal zone requires the approval of the Commission. The “coastal zone” is defined by the Commission as the area that generally extends 1,000 yards inland from the mean high tide line or, in some areas, inland to the first major ridge line. The Commission has historically and successfully opposed attempts by cities to prohibit or limit short-term rentals in the coastal zone. The Commission’s contention is that these rentals provide a low-cost alternative to lodging in the coastal zone and provide the general public with a greater opportunity for access to the beach, recreation, and coastal resources.
Every coastal city in California is required to have a Local Coastal Program (LCP). In its guidelines for updating LCP, the Commission states the following:
“Short-term (or Vacation Rentals)
In response to residents’ concerns, some communities have been motivated to consider ordinances to regulate or prohibit the rental of private homes on a short-term basis. Such rentals can help meet Coastal Action Section 30222 requirements to protect the priority for visitor-serving uses over residential uses and help to maximize public access as required by the Coastal Act. Thus, complete prohibitions on such rentals can be problematic. However, past Commission actions have recognized the potential effects of short-term rentals on residential communities and considered standards to regulate the length of time and conditions for them in a manner that protects residential communities while maximizing public access and priority visitor use. Proposals for policies or ordinance to address short term rentals will be based on the unique conditions in each jurisdiction. An update should include a revised assessment of existing overnight accommodations and other visitor-serving facilities in your jurisdiction and whether the supply is adequate to meet future demand. Depending on such assessment, any proposed restrictions on short term rentals must be consistent with the priority land use and public access policies of the Coastal Act.”
The Section 30222 referred to above in the guidelines states, “The use of private lands suitable for visitor-serving commercial recreational facilities designed to enhance public opportunities for coastal recreation shall have priority over private residential, general industrial, or general commercial development, but not over agriculture or coastal-dependent industry.”
In a nutshell, new prohibitions or severe limitations on short-term leases are difficult for beach communities to enact because they have a high probability of being vetoed by the Commission. In 2002 the Commission rejected a proposed ordinance in Imperial Beach that would have restricted short-term rentals to the city’s “commercial/tourist zone.” Even though the city had spent a year doing its due diligence studying the requirements of other cities and soliciting input from its residents, the Commission denied the ordinance on the grounds that it would restrict public access to the beach area. Based on the strong support of the community, the city sued the Commission and eventually won the case.
Coronado’s LCP was adopted by the city in 1980 and has been amended for various reasons several times through 2005. Regarding visitor accommodations the plan precludes any restriction on the number of available hotel and motel rooms in the city and permits new hotels and motel facilities to be developed within designated commercial use areas. There is no requirement for Coronado to update its LCP with respect to visitor accommodations or any other provision of the program.
Encinitas
Encinitas initially proposed an amendment to its LCP that would have prohibited all short-term rentals in residential zones. After lengthy opposition by the Coastal Commission, the city adopted an ordinance in 2006 that defines a short-term rental as being less than 30 consecutive days. Only single family residences and duplex units can be rented on a short-term basis. Condominiums are precluded. A permit is required, which needs to be displayed inside the entry door of the residence. A notice is required to be place in the exterior that provides contact information in the event there is a complaint about the renters. A transient occupancy tax (TOT) of 10 percent of the rent are due quarterly to the city. The TOT is also required in “swaps” of 30 days or less based on the fair market value of the unit.
Solano Beach
In Solano Beach short-term rentals in residential zones are regulated. They are defined as rentals of seven to 30 consecutive days in duration. Stays of less than seven days are prohibited. An annual short-term vacation rental permit is required. Short-term rentals are permitted in single-family residences, condominiums, duplexes, triplexes, townhouses and multi-family dwellings. As is also the case in Encinitas, the landlord is required to ensure that tenants do not create unreasonable noise or disturbances, engage in disorderly conduct, or violate any local ordinances or state laws. Failure to stop the unacceptable activity is a violation. Penalties for not responding to complaints or failing to end the unacceptable behavior results in fines of up to $1,000, if there are two violations in 12 months. Additional violations in a year can result in revocation of the short-term rental permit.
Santa Monica
Beginning on June 15 of this year, Santa Monica instituted the toughest regulations on short-term rentals in the US short of banning them outright. Specifically, for rentals of under 30 days the host has to live in the property during the renter’s stay but can continue with their normal business, personal, and social activities. A business license is required and the host has to collect and remit to the city its 14 percent occupancy tax. If the rental generates more than $40,000 in income in a year additional business taxes are also due. The ordinance also requires websites like Airbnb to disclose the name, address, length of stay, and price for each short-term rental in the city. The expectation is that these requirements will shut down 1,400 of the 1,700 short-term rentals in this city of 92,500.
The city enacted these requirements to combat the overall increase in the housing prices in the city, to respond to commercial enterprises acquiring multiple units and converting them into short-term rentals thereby decreasing the housing supply and putting more pressure on housing prices, and to avoid damaging the character of the city through the loss of owner and long-term renter occupied housing.
The city is hiring three new staff to enforce the ordinance: two enforcement officers who will patrol the city and an administrative analyst.
There has been pushback from Airbnb, its hosts, and others in the short-term rental industry. They say that most renters are good neighbors who boost the local economy. Robert St. Genis, Director of Operations for the Los Angeles Short Term Rental Alliance, a trade association that represents vacation rental property owners, managers and industry members said, “Santa Monica’s new law fails to see the reality of the marketplaceÂ…This is a great opportunity to be capitalizedÂ…The decision to drive it underground does not make sense.”
Carlsbad
Carlsbad passed a new ordinance that took effect on June 4, 2015. Recognizing the sentiments of the Coastal Commission, the ordinance allows short-term rentals in the portion of the city within the “coastal zone,” which is 37 percent of the city, but not elsewhere in the city because of “concerns about the possible negative effects of vacation rental properties in residential neighborhoods.”
In the coastal zone houses, apartments, and condominiums are eligible to be short-term rentals, which are defined as rentals for less than 30 days. The exception is where short-term rentals are precluded by a homeowners association or have been approved as affordable housing units.
An annual permit is required and a TOT of 10 percent plus a fee of $1 per room per night has to be paid to the city. The $1 per room per night is an assessment of the Carlsbad Tourism Business Improvement District. The taxes need to be paid to the city each month.
Penalties for a landlord failing to respond to complaints about tenants include fines similar to those imposed by other communities except that everyday a violation is committed, continued or permitted counts as a separate offense and on the third offense the punishment can include jail time. In addition an owner can be billed the cost of law enforcement services when a second or subsequent police response is required at a short-term rental to address a threat to peace, health, safety or the general welfare of the public.
Manhattan Beach
At its June 16, 2015 meeting Manhattan Beach city council voted to outlaw vacation rentals of less than 30 days. In the meeting Councilwoman Amy Howorth stated, “People are now buying homes to do this. It is a zoning issue and about who we are as a community.” The councilmember who cast the lone dissenting vote stated that he believes that licensing, monitoring and fines for violators would adequately address any concerns. The ban is estimated to cost the city about $70,000 in TOT in 2015-16 and over $120,000 annually thereafter. It will also reduce the number of tourists in town and the revenue to the city they generate.
Laguna Beach
Laguna Beach adopted its short-term rental ordinance in 1999 before the advent of Airbnb and other similar sites. A short-term rental is defined as shorter than 30 days and requires a permit, which costs $275.
A unique aspect of Laguna Beach’s ordinance is that it requires notification of property owners within 300 feet of the residence for which the permit is being sought and tenants and residents within 100 feet. The notified parties can request a public hearing before the Director of the Community Development Department. At the public hearing objections to the permit can be raised. The decision to grant or reject the permit application can be appealed to the city council.
Short-term rentals also require a business license and are subject to the city’s 10 percent TOT. Short-term rentals of buildings that contain three or more units are also subject to a two percent Business Improvement Assessment.
On May 15 of this year the city council determined that the existing ordinance was inadequate and there was a current and immediate threat to public health, safety and welfare. The recent proliferation of online host sites advertising homes for short-term lodging purposes has resulted in a substantial increase in the number of unpermitted short-term lodging units throughout the city. The increase has been accompanied by a substantial increase in the number of complaints relating to short-term rentals and difficulties in effectively enforcing the existing regulations regarding short-term rentals.
Based on this determination the council suspended the approval of all incomplete and new applications for short-term rentals because they may conflict with whatever revisions are required in the requirements for short-term rentals.
Dana Point
In April 2013 Dana Point revised its ordinance to allow short-term rentals of 30 days or less but not fewer than two nights. Prior to the revision short-term rentals were not allowed. Under the revised ordinance a permit costing $150 is required for a short-term rental and a 10 percent TOT has to be collected and remitted to the city quarterly. If short-term rentals are not allowed by a homeowners association then they continue to be disallowed.
Properties offered as short-term rentals require safety inspections. They also need to provide two off-street, covered parking places for each property or what off-street parking originally existed for the property. Renters are only allowed one vehicle per bedroom. Special events including weddings, graduation parties, and raves are prohibited. All advertisements must include the city’s permit number.
Proposed California State Legislation
The following quote from publicceo.com captures the essence of the problem: “Municipalities from New York to San Francisco are cracking down on the vacation rental industry. Each city has approached the situation in a wildly different manner, but one factor remains the same: Restrictions on these hard-to-track rentals present serous enforcement challenges. It is a principal obstacle facing local government as ordinance are implemented to rein in home-sharing websites like Airbnb, VRBO and HomeAway that connect vacation renters to homeowners and dodge the local taxes hotels are subject to paying.”
But help may be on the way, at least in California. Senate Bill 593 will be reintroduced when the legislature reconvenes in January. The bill would authorize a city and/or county to adopt an ordinance that would require a transient residential hosting website, such as Airbnb, to report specified information quarterly to the city and/or county and to establish a fine or penalty on the website for failure to provide the report. The bill would make the information in the report confidential and require that it not be disclosed. The bill would authorize the city and/or county receiving the report to use the report solely for transient occupancy tax and zoning administration. The bill would also authorize a city and/or county to require a website to collect and remit any applicable transient occupancy tax.
The bill would prohibit a website from facilitating occupancy of a residential unit offered for tourist or transient use in violation of any ordinance, regulation, or law of the city and/or county would authorize a city and/or county to establish a civil fine or penalty on an operator of a website for a known violation of this provision.
This bill would also require the operator of a website to disclose specified information regarding insurance coverage in its agreement with an offeror of a residence for rent.
John Tato
Staff Writer
eCoronado.com
