STAFF REPORT SAUSALITO CITY COUNCIL. AGENDA TITLE: Update on Short Term Vacation Rentals - Code Enforcement Program

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1 STAFF REPORT SAUSALITO CITY COUNCIL AGENDA TITLE: Update on Short Term Vacation Rentals - Code Enforcement Program RECOMMENDED MOTION: Receive Report and Provide Direction to Staff re Next Steps SUMMARY The City Council in June 2015 directed staff to implement a Short Term Rental Code Enforcement Program, and to report to the City Council with an update and options/recommendations at the end of the year. The City hired Code Enforcement Officer Lamonte Mack for part-time code enforcement services. Lamonte comes from CSG, the same company that currently provides contract plan check and building services to the Community Development Department. This report provides an update on the code enforcement program, provides a summary of what other cities are doing to address short term rentals, and provides options and recommendations for the City Council to consider. DISCUSSION Background - City Council Direction The City Council has had two prior discussions regarding short term rentals - in March and in June Short term rentals are sharing economy businesses such as Airbnb, VRBO, and HomeAway. Through these on-line companies, people rent out their homes, apartments or rooms, in exchange for a nightly rate, and the companies take a cut of the price for their role in the transaction. Sausalito's regulations do not allow rental of residential property for less than 30 days. At the March 17, 2015 meeting, California Senator Mike McGuire introduced a proposed bill (Senate Bill 593) that would require housing platforms (Airbnb, VRBO, etc.) to disclose a listing of short term rentals that are operating in the City, the address and number of days rented and require that these housing platforms remit TOT to the City. This legislation would also assist staff in code enforcement efforts to regulate the prohibition of short term rentals. However, it is important to note that this legislation is pending and tabled until year The City Council directed staff to continue to enforce the existing regulations that prohibit short term rentals, and to devise a code enforcement program that identifies properties that are violating the regulations, collects the transient occupancy tax (TOT) for the period of time rented, and recovers the costs for a code enforcement officer. 1 Page 1 of 5

2 At the June 30, 2015 meeting, the City Council directed staff to implement a short term code enforcement program and contract for a part-time Code Enforcement Officer at a $50,000 cost, per approved FY , with an attempt to recover cost by collecting back transient occupancy tax (TOT) from violators. The code enforcement was established as a trial period to test the enforcement capability, test the cost recovery via remittance of TOT, and to test the success rate of ceasing the operation of short term rental uses. The primary focus of the code enforcement was on residences used as short term rentals that have received complaints from neighbors and are disruptive to the neighborhood. Short Term Rental Code Enforcement The Code Enforcement Officer began enforcement on short term rentals in the Fall 2015 (October). Code enforcement included the following activities and report of responses: Investigated 15 cases - residences advertised as short term rentals verified by on-line photos, descriptions, and subsequent field inspections. Internet search found 50+ short term rentals in Sausalito. These properties were found on popular websites including Airbnb, VRBO, FlipKey, HomeAway, Craigslist. The Code Enforcement Officer routinely drove by the 15 properties to document fluctuating vehicle and foot-traffic conditions. Courtesy notices were mailed that included a compliance deadline date of December 22, 2015 Courtesy notices were posted on front doors of the same properties that were mailed a courtesy notice. «Electronically notified online hosts, on multiple sites, using website options for notifying hosts and 'flagging' listings. These hosts were notified that their listings showed availability for short term (less than 30 days) and that this is in violation of the City's Municipal Code. «Two responses received from legal representatives, denying violations and ensuring compliance. responses from about twelve (12) hosts; most agreeing to adjust their account settings to clearly discourage short-term bookings; Many 'Availability' settings have been changed to require '30-Day Minimum' accommodations. The next steps is to re-examine those website listings for language adjustments regarding availability, actual booking dates, reviewer comments, pertaining to length of stays etc; along with site observations which might contradict owner's agreements to comply. Next steps - If further evidence of non-permitted advertisement or use is observed, notices demanding retroactive TOT; and Administrative Citations (when warranted) will be issued. Focus on code enforcement has been paid to three particular cases where the City received repeated verbal and/or written complaints from neighbors within the last two' years. Notifications as described above were given. For Case #1, an attorney representative responded via November 2015 letter denying short term rental activity and presence of website listing, and subsequently in December 2015 a letter received stating rental use has ceased. There have been no further complaints and no further evidence of activity. 2 Page 2 of 5

3 For Case #2, neighbors confirmed continued short term rental activity. The Code Enforcement Officer directly observed website listings, observed tourists and rental cars on several occasions. Compliance order letter was sent to the property owner, inspection notice was posted on the property, and a notice of violation was ed via the website listing. There has been no response from the property owner. Administrative citation is recommended. For Case #3, complaints date back to 2013, and new complaints have emerged on continued activity reported by neighbors. Previous code enforcement action included numerous letters and notices, resulting in one $100 Administrative Citation that was upheld after it was contested at a cost-, staff- and time-intensive Administrative hearing held in September Despite code enforcement action in 2014, continued activity is reported and verified by Code Enforcement Officer via observation of rental cars and continued on-line listing. Property owner verbally stated that he has renters sign a lease for more than a 30-day stay, but if they leave earlier than that, he has no control over that. There have been no outward signs of vacation-rental activity and no recent complaints. The Code Enforcement Officer continues to monitor activity. The City Council appropriated $50,000 for code enforcement in the FY budget. To date, $15,385 has been expended; the remaining amount is $34,616. Back TOT has not been collected. Challenges of Code Enforcement Since the news broke that the City is enforcing-the prohibition on short term rentals, and articles were published in the Sausalito Currents and the local papers (Marin IJ), it appears that some "hosts" ceased their operations or modified the language on their website listings that they rent for a period of 30 days or more. Staff is concerned about hosts modifying language on the listings for stays 30 days or more, but in reality allowing renters to stay for shorter periods. The Community Development Director has kept in contact with members of a "Sausalito Host Group" and they have reported that the number of hosts in Sausalito has lessened since code enforcement became active. A big challenge is that while the City is receiving responses from hosts that they will cease and comply with the City's Code, code enforcement falls short of being effective because we cannot prove that rentals are being conducted on a short term basis - i.e., documentation of receipts or rental documentation. This proves difficult if the City also intends to collect back TOT to help recover costs for code enforcement. Many cities have experienced these same challenges and find that code enforcement is time intensive, staff intensive, costly, and falls short of proving the violations. Another concern raised by many cities is that a ban on short term rentals pushes the rental economy underground, making it difficult to enforce. Update on what other cities are doing. Tiburon - initially allowed "seasonal rentals" but the prevalence of Airbnb-type rentals have been problematic and residents have complained about transient residency, noise, and parking impacts. The Town Council moved forward to ban it last summer 2015, but community supporters of short term rentals opposed Council's direction and the Council formed a special committee to consider provisions to allow short term rentals. At that time, it was reported that Airbnb approached Tiburon to come to an agreement that hosts be required to pay TOT, which would also help to regulate short term rentals. Then in November 2015, Town Council in a 3-2 vote banned seasonal rentals. 3 Page 3 of 5

4 Mill Valley - requires short term rentals to register with the City, complete a TOT form and to remit TOT to the City, and agree to a list of terms and conditions that include good neighbor policies that must be adhered to or the short term rental shall cease for a one year period. Mill Valley planning staff says that the registration process seems to be heading in the right direction in regulating short term rentals, however, only 14 hosts have registered and there are likely short term rental uses that are unregulated and fly under the radar. Here is a link to the registration form (also attached as Attachment 1): Larkspur - decided to hold off on any regulations or formal ban until the effects of SB 593, a state bill that will reinforce local laws on short-term rentals at the state level, requiring disclosure. San Rafael - no regulations in place. San Francisco - a ballot initiative in November 2015 to limit short term rentals was defeated. The City has a registration process to regulate short term rental uses and to collect TOT. Sacramento - recently passed ordinances to allow short term rentals. A permit must be obtained, neighbors are notified of the permit, TOT is required to be paid at 12%, and rentals are limited to no more than 90 days annually if the space is not a primary residence. Here is a link to a news article (also attached as Attachment 2): Sausalito Host Group Since City Council discussions began in March 2015, a Sausalito Host Group has formed to address short term rentals in Sausalito. The Community Development Director has met with Group members to update them on code enforcement activity, and to discuss their recommendations to allow/regulate short term rentals in Sausalito. The Group has submitted a number of materials to support their recommendation that short term rentals be allowed with regulations (attached as Attachment 3). The Group will be presenting their findings to the City Council:» Short Term Rentals & Home-Sharing Policy Recommendations Survey of Sausalito Home Sharers ( taqhpmucrczqlkjnxibnjvnt3ryvc6r3mmsstdxtdq/viewanalytics) Proposed Code for Sausalito FISCAL IMPACT The costs to contract for a part-time code enforcement officer was approved in the FY budget for $50,000. To date, $15,385 has been expended; the remaining amount is $34,616. Back TOT to help recover costs has not been collected. RECOMMENDATION The City Council has the following options: 1. Direct staff to continue Code Enforcement Program; 2. Appoint a task force/working group to develop policies (draft ordinance) to allow and regulate short term rentals. 3. Discontinue Code Enforcement Program. 4. Any other direction the Council wishes to provide. 4 Page 4 of 5

5 PREPARED BY: REVIEWED BY: Danny Castro, Community Mary Wagner, City Attorney Development Director REVIEWED BY: Melanie Purcell, Administrative Services Director SUBMITTED BY: Adam W. Politzer City Manager ATTACHMENTS Attachment 1 - Mill Valley Short Term Rental Registration Form Attachment 2 - News Article - Sacramento Approves Regulations on Short Term Rentals Attachment 3 - Sausalito Host Group Information and Policy/Code Recommendations Page 5 of 5