CITY OF DANA POINT AGENDA REPORT

Transcription

1 01/30/07 Page 1 ITEM NO. 2 CITY OF DANA POINT AGENDA REPORT Reviewed By: DH CM CA DATE: JANUARY 30, 2007 TO: FROM: SUBJECT: HONORABLE MAYOR AND CITY COUNCIL CITY MANAGER SHORT TERM RENTAL PROPERTY RECOMMENDED ACTION: That the City Council receive and file the agenda report relative to short term rental properties in the City of Dana Point; and, following discussion, provide direction to staff. ISSUE: The current zoning code prohibits short term rentals in residential zones, however over one hundred properties have been identified as being utilized as short term rental properties throughout the City. Because the zoning code prohibits short term rentals, the City cannot collect a Transient Occupancy Tax from the property owner resulting in a loss of potential revenue for essential services. Should the City focus its resources to ensure that short term rentals are prohibited? Should the current zoning code be amended to allow short term rentals as a permitted use in residential zones, on a regulated basis, which would also result in the imposition of a Transient Occupancy Tax and increased revenues to fund essential City services? BACKGROUND: As the City Council is aware, several complaints have been received from residents claiming that properties being used as short term vacation rentals are imposing negative impacts upon residential neighborhoods.

2 01/30/07 Page 2 ITEM NO. 2 Staff has gathered the following information on the City of Dana Point s short term rental issue. In order to develop options for the City Council s discussion and consideration, several factors were examined including the City s current zoning code, potential Transient Occupancy Tax revenue and codes and ordinances of other southern California cities. DISCUSSION: CURRENT CITY OF DANA POINT REGULATIONS As per the City of Dana Point s municipal code, use of a residential home to house transients for a period of thirty (30) days or less is classified as hotel use. Section (b) "Hotel" means any structure, or any portion of any structure, which is occupied or intended or designed for occupancy by transients for dwelling, lodging, or sleeping purposes, and includes, but is not limited to, any hotel, inn, tourist home or house, motel, studio hotel, bachelor hotel, lodging house, rooming house, apartment house, dormitory, public or private club, mobile home or house trailer at a fixed location, or other similar structure or portion thereof, duplex, triplex, single-family dwelling units except any private dwelling house or other individually-owned single-family dwelling rented only infrequently and incidental to normal occupancy or any timeshare as set out in California Revenue and Taxation Code Section 7280; provided that the burden of establishing that the facility is not a hotel shall be on the owner or operator thereof. d) "Transient" means any person who occupies or is entitled to occupy by reason of concession, permit, right of access, license or other agreement for a period of thirty (30) consecutive calendar days or less, counting portions of calendar days as full days. Any such person so occupying space in a hotel is a transient until the period of thirty (30) days has expired unless there is an agreement in writing between the operator and the occupant providing for a longer period of occupancy. In determining whether a person is a transient, an uninterrupted period of time extending both prior and subsequent to the effective date of this Chapter may be considered. The City s current zoning code does not permit hotel use in residential districts. As a result of staff s investigation, a listing of 134 properties in the City s residential districts were identified as short term rentals despite their prohibition by the zoning code. The majority of the rentals were located in the Capistrano Beach neighborhood along Beach Road and the Niguel Beach Terrace condominium complex. Information on the existence of these types of rentals came from advertisements found on the internet and through real estate agencies. There are many websites dedicated to these types of rentals including and

3 01/30/07 Page 3 ITEM NO. 2 Please note that this is not a complete inventory of short term rentals in the City. Obtaining actual street addresses is difficult since most rentals are advertised as being located in a particular area of the City such as Capistrano Beach or Monarch Beach rather than at an exact address. Several street addresses were found by using the information that was provided in the advertisements such as pictures, owner name, and phone numbers and cross referencing with MLS search engines, reverse phone number searches, and the CityGIS program. Many of the complaints regarding short term rentals have been generated by residents of Niguel Beach Terrace. Addresses in the Niguel Beach Terrace condominium development utilized as vacation rentals were identified by the City s Code Enforcement staff when responding to complaints filed by residents. As you are already aware, the City has received complaints from residents regarding the increased noise and activity level from transient renters. In September 2006 the City sent correspondence to the Niguel Beach Terrace HOA and their community management company, PCM, of the zoning code s prohibition of short term rentals in residential districts (Supporting Document B). The HOA responded in writing that they were in receipt of the City s correspondence and that complaints are from a relatively small number of residents, and that the matter was under review (Supporting Document C). Subsequently, the City was advised by a resident of Niguel Beach Terrace, who opposes short term rentals, that the HOA adopted revisions to its rules and regulations last November to authorize short term vacation rentals (Supporting Document D). ESTIMATED TRANSIENT OCCUPANCY TAX (T.O.T.) POTENTIAL FROM SHORT TERM RENTALS IN DANA POINT According to the website listings, the weekly rate for short term rental properties in Dana Point indicates an average low of $2095 and an average high of $3367 per week. The peak rental period is in the summer months from June through August. Based on 134 properties a conservative estimate on the potential annual T.O.T. from these properties would be $321,600. This would be more than what was collected last fiscal year from the Blue Lantern Inn ($178,971) or the Dana Point Marina Inn ($260,761). Estimate Based on Following Conservative Assumptions: 134 properties currently rented week-to-week Rented 12 average weeks per year $2,000 average weekly rental rate 134 properties X 12 weeks X $2,000 rate X 10% TOT = $321,600 Annual TOT* *More than the Blue Lantern Inn *More than the Dana Point Marina Inn

4 01/30/07 Page 4 ITEM NO. 2 Since properties are often rented out beyond the summer months including many holidays, it would be fair to assume that a more realistic number of weeks a property may be rented would be a little less than half a year or 20 weeks. By using the median rental rate and the average of 20 weeks per year, the potential annual T.O.T. would increase to $723,600. This would be comparable to what was collected last fiscal year from the Doubletree Doheny Beach ($602,073). It should be noted that 134 properties is a conservative number of rentals. Estimate Based on Following More Realistic Assumptions: 134 properties currently rented week-to-week Rented 20 average weeks per year $2,700 median weekly rental rate 134 properties X 20 weeks X $2,700 rate X 10% TOT = $723,600 Annual TOT** **Comparable to the Doubletree Because short term rental of properties in residential districts is not permitted by the zoning code and consequently should not exist, the City does not collect T.O.T. A Zoning Code Amendment would need to be adopted in order to change the permitted uses currently listed in the zoning code before T.O.T. could be collected. A Zoning Code Amendment must be approved by both the Planning Commission and City Council at public hearings. Our Community Development Director has indicated that the procedure is rather common and the Community Development staff is quite experienced in handling these types of requests. OTHER SOUTHERN CALIFORNIA CITY REGULATIONS Information was collected from fourteen southern California cities on their handling of short term transient rentals (Supporting Document A). Of the group, ten cities allow these types of rentals in residential districts as long as the owner obtained an administrative use permit, a short term rental permit and/or a business license from the city. Nine out of the ten, including Newport Beach and Laguna Beach, also collected a T.O.T. Of all the cities surveyed, only one city, San Clemente, had no language either permitting or prohibiting short term rentals in residential districts in their zoning code and did not collect T.O.T. In the cities that did not permit short term rentals in residential districts, there was little enforcement except in the cases where a complaint was filed by a resident. The owner in violation would receive notice from the city and in some cases a citation would be issued. According to the survey, allowing short term rental properties in residential districts often becomes controversial and is resisted by property owners who reside in the area where the

5 01/30/07 Page 5 ITEM NO. 2 use is being proposed. By permitting this type of use, there is cause to believe that there will be a loss of neighborhood integrity due to the mix of transient and residential use. Increased noise, limited parking, and increased trash are often cited as the main negative factors in allowing this type of use. Short Term Rental Permits: Cities who allow short term rentals in residential districts as long as the owner obtains a short term rental permit, such as Newport Beach and Encinitas, often specify certain guidelines that must be met. Penalties for not complying with guidelines are often hefty and increase with each occurrence. Ultimately the city can either revoke the permit or refuse to renew a permit if a property becomes a constant source of problems for the neighborhood. Some common guidelines include: Specifying a limit to the number of occupants allowed per unit based on the size of the dwelling. Limiting the number of vehicles that overnight occupants may park on-site. Regulating the storage and disposal of trash. Requiring an interior display of the Short Term Rental permit and the number of occupants and vehicles allowed as well as a 24/7 number of the private party responsible for the facility. Notifying adjacent property owners and providing a 24/7 number of the private party responsible for the facility. Making the owner responsible for the prevention and response to disturbances pertaining to noise, disorderly conduct, overcrowding and penalizing the owner if they do not act on complaints. Administrative Use Permits: In cases where cities require an administrative use permit, the process is much more cumbersome. In addition to meeting the required guidelines and conditions specified in the code, an owner must give public notice to neighboring property owners. In Laguna Beach where an administrative use permit is required, a public notice must be mailed to property owners within 300 feet of the subject property informing them of the proposed Short-Term Lodging Unit and asking if a public hearing would like to be held on the matter. If there is no request for a public hearing, an administrative use permit is issued subject to the standard conditions specified in the ordinance. If a public hearing is requested, a second notice is sent with information on the hearing. Based on the information received at the public hearing the Director of Community Development makes a decision on whether the permit will be issued. The Director s decision may be appealed to the City Council by the applicant or property owners.

6 01/30/07 Page 6 ITEM NO. 2 CONCLUSION As you can see, the issue is very complex and there are many factors to consider when deciding on how the City should proceed. Current City of Dana Point zoning does not permit short term rentals in residential districts, therefore the City cannot collect T.O.T. In addition to the City experiencing a loss of potential revenue, short term rentals are illegally permitting transient visitors to occupy private residences instead of patronizing legal lodging establishments. In legal hotel and motel accommodations, in addition to making T.O.T. payments, operations have been approved for those activities at those specific locations and have the benefit of on-duty management. In a non-regulated short term rental in a residential area, neighboring residents are directly impacted by nuisances associated with the rental. If the City of Dana Point zoning code is amended to permit short term rentals in residential districts, impacts to neighborhoods can be considered through regulations such as those found in other cities as noted in Supporting Document A. The City of Dana Point has been quite lenient when it comes to enforcing the current zoning code in regards to prohibited short term rentals. If the City wished to pursue the matter further, either by increasing enforcement of current zoning or by regulating amended zoning, the Community Development department would need to take the lead due to the zoning, permit issuance and code enforcement issues. According to our Community Development Director Kyle Butterwick, if the City Council wished to amend the current zoning and allow hotel use in residential districts, the recommended approach would be to require short term rental permits as opposed to administrative use permits. By requiring short term rental permits, any negative impact to neighboring property owners could be addressed through regulations. He also recommended that if zoning was to be amended, that specific residential districts where these types of rentals are concentrated should only be included as opposed to all residential districts. Staff recommends the City Council discuss this matter and provide direction to staff. STRATEGIC PLAN INITIATIVE: Protect the health, safety and welfare of our residents, businesses and visitors. Evaluate land use issues to ensure that the goals, policies, and programs of the General Plan reflect the community s vision and mission. FISCAL IMPACT: The Transient Occupancy Tax revenue that could be derived from the identified short term rental properties in the City is estimated at $723,600 annually.

7 01/30/07 Page 7 ITEM NO. 2 ALTERNATIVE ACTIONS: As deemed appropriate by the City Council. SUPPORTING DOCUMENTS: PAGE NO. A. Short Term Rental Survey Other Cities.. 7 B. City s letter to PCM/Niguel Beach Terrace HOA..11 C. Niguel Beach Terrace Letter to City 12 D. Niguel Beach Terrace correspondence to HOA...13

8 01/30/07 Page 8 ITEM NO. 2 SUPPORTING DOCUMENT A SOUTHERN CALIFORNIA CITY SURVEY ON SHORT TERM RENTALS CITY HUNTINGTON BEACH Not Permitted CARLSBAD Not Permitted CORONADO Not Permitted SANTA MONICA Not Permitted REGULATION The City of Huntington Beach Zoning and Sub-Division ordinance prohibits short -term vacation rentals from single family dwellings The enforcement aspect is handled by our Code Enforcement Division. We contact the property owner with a violation notice sent certified mail advising them that the city prohibits rentals of less than 30 days in areas zoned residential. If the property fails to respond and continues the rental activity code enforcement will issue civil citations or prepare a prosecution request to our City Attorney's office. The City defines "transient" as any person who exercises occupancy for a period of thirty or less consecutive days. The City also defines a "hotel" as any structure which is occupied by transients. Hotels are not allowed within residentially zoned properties. Therefore, the rental of residential homes for short term purposes is not permitted by the Carlsbad Municipal Code. See Sections 3.12 on the City's website for more info if needed. There is no enforcement unless there is a blatant violation which is usually the posting of a sign in the front yard announcing the availability of the unit as a vacation rental Transient rental regulations. A. No dwelling or habitable unit in any Residential Zone (except as specified in subsection B of this section) shall be used as a transient rental. B. Dwelling or habitable units within R-4 Zone motels, or that constitute lodging houses within the P Overlay Zone may be utilized as transient rentals. (Ord. 1788; Ord. 1495) The City of Santa Monica defines this land use in the zoning code and then prohibits it in all districts. Here s the definition used: Short-term rental housing. Rental housing which has the following attributes: (a) The housing is designed for use by individuals who will reside on the property for a minimum stay of at least 30 consecutive days, but who otherwise intend their occupancy to be temporary.

9 01/30/07 Page 9 ITEM NO. 2 CITY ENCINITAS ***Does not collect T.O.T. LAGUNA BEACH Collects T.O.T. 10% Admin. Use Permit - $260 filing fee REGULATION (b) The housing is intended for use by persons who will maintain or obtain a permanent place of residence elsewhere. (c) The housing includes some or all of the following amenities: (1) Maid and linen service (2) Health club, spa, pool, tennis courts, or memberships to area facilities (3) Business service centers (4) Meeting rooms (5) Fully furnished units including a combination of some but not necessarily all of the following: furniture, appliances, housewares, bed linens, towels, artwork, television sets, stereos, VCRs, CD players, fax machines, and Internet access. (6) Valet parking. (Added by Ord. No. 2120CCS 1, adopted 3/23/04) Passed Ordinance Regulating Short Term Rentals: Any Short-Term Rental shall obtain a Short-Term Rental Permit. Any person operating a Short-Term Rental without a permit shall be guilty of a misdemeanor. Applicants shall submit an application for a Short-Term Rental Permit to the City of Encinitas each year for each unit. The application for a permit shall be accompanied by a nonrefundable application fee as established by the City Manager, Although the applicant may be the property owner or the property owner s agent, the property owner shall be the party responsible for compliance with all provisions and all of the laws regulating Short-Term Rentals. Short Term Lodging Ordinance: Short-Term Lodging Units are allowed in the R-I, R-2, R-3, LBIP, C-N, C-I, CH-M and VC Zoning Districts, subject to the following: 1. the density of the short-term lodging units shall be no greater than the density otherwise allowed in the underlying zone; 2. the on-site parking shall comply with current parking standards; and 3. the approval of an Administrative Use Permit. SOLANA BEACH Collects T.O.T.: 10% Solana Beach Municipal Code - Chapter 4.47 All short-term vacation rentals shall apply for a short-term vacation rental permit. Applicants shall submit an application for a short-term vacation

10 01/30/07 Page 10 ITEM NO. 2 CITY 11% % % Permit Fee - $40 application fee REGULATION rental permit to the city of Solana Beach each year. The fee associated with the permit application shall be identical to the amount required for a business certificate. The applicant may be the owner or the owner s agent, and shall be the party responsible for compliance with all provisions of this chapter and all of the laws regulating short-term vacation rentals. Rental for less than seven consecutive calendar days in duration within all residential zoning districts is prohibited. NEWPORT BEACH Collects T.O.T. 9% Business License Fee - $132 No Permit Fee IMPERIAL BEACH Collects T.O.T. 10% Business License Fee - $130 Newport Beach Municipal Code- Chapter 5.95 All persons renting a residential unit for a term of 30 days or less are required to apply for and obtain a Short Term Lodging Permit. While there is no fee associated with this permit, a City Business License is required for the business of renting a short-term dwelling. Short-term rental of residential property is defined as the commercial use by any person of residential property for transient lodging uses where the term of occupancy, possession or tenancy of the property by the person entitled to such occupancy, possession or tenancy is less than thirty (30) consecutive calendar days. Such use is allowed in the C-1, C-2 and MU-2 Zones subject to approval of a Short-Term Permit application and the submittal of a $100 nonrefundable processing fee and other required documents. BIG BEAR LAKE Collects T.O.T. 6% AVALON Collects T.O.T. 12% TRANSIENT PRIVATE HOME RENTALS 1. Any managing agency, agent, owner or property manager who rents one or more transient home rentals shall be required to obtain a City business license. 2. Rental of transient private home rentals shall be subject to collection of transient occupancy tax as required by the City. 3. The managing agency, agent, owner or property manager of each unit to be used as a transient private home rental shall register each such unit with the City prior to commencing the use. A fee established by resolution of the City Council may be collected to cover the reasonable cost of processing the registration. Municipal Code section (d). Any managing agency, agent, owner or property manager who rents one or more transient private home rental units shall be required to obtain a City business license. Failure to obtain a business license or continuing to operate a transient rental after revocation of a business license constitutes an infraction pursuant to Section (b) of the Municipal Code, and may result in imposition of a fine upon conviction among other penalties.

11 01/30/07 Page 11 ITEM NO. 2 CITY LONG BEACH OCEANSIDE SAN CLEMENTE REGULATION All transient rentals shall be subject to collection of transient occupancy tax as required by the Municipal Code, and each managing agency, agent, owner and property manager of a transient rental shall collect and make payment to the City of the transient occupancy tax for their transient rental Tax on rental of residential property. A. Every person engaged in the business of the rental of residential property consisting of any residential unit that is one of four (4) or more such units, inclusive of owner occupied units or rooms, under one roof or on one parcel, shall pay an annual business tax to the city consisting of fifty two dollars eighty five cents ($52.85) for each parcel containing such units and an additional twenty three dollars twenty cents ($23.20) for each unit thereon. This section shall not apply to the rental of any residential unit or room that is one of three (3) or less such units or rooms, inclusive of owner occupied units under one roof or on one parcel (based upon CPI base year 2000). B. In residential property of seven (7) or less units subject to taxation under subsection A of this section, the per unit charge of twenty three dollars twenty cents ($23.20) for one owner occupied unit may be excluded from calculating the total tax due under this section. (Ord. C , 2002: Ord. C , 1993; Ord. C , 1992: Ord. C , 1991: Ord. C , 1990: Ord. C , 1986: Ord. C (part), 1986). RT Residential Tourist District. To provide opportunities for tourist and year-round visitor-serving facilities, including permanent and transient residential and related uses, within the City's Coastal Zone. In the Residential Tourist (RT) District the base density for residential uses is 29.0 dwelling units per gross acre and the maxim Hotels, Motels, and Time-Share Facilities. Establishments offering commercial lodging on a less than monthly basis. This classification includes incidental eating, drinking, and banquet services intended for the convenience of guests. Nothing in the zoning that would prohibit short-term rentals in residential zones.

12 01/30/07 Page 12 ITEM NO. 2 Supporting Document B

13 01/30/07 Page 13 ITEM NO. 2 Supporting Document C

14 01/30/07 Page 14 ITEM NO. 2 Supporting Document D

15 01/30/07 Page 15 ITEM NO. 2