Law and Legislation Committee Report 915 I Street, 1 st Floor Sacramento, CA

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1 Law and Legislation Committee Report 915 I Street, 1 st Floor Sacramento, CA File ID: April 24, 2018 Discussion Item 05 Title: Ordinance Amending Various Sections of Chapter of the City Code Relating to Short-Term Rentals Location: Citywide Recommendation: 1) Review an ordinance amending various sections of Chapter relating to Short-Term Rentals including: a) placing limits on the permitting of secondary dwelling units; b) limiting permits to one per parcel; c) expressly subjecting permittees to the applicable rules and regulations of neighborhood Covenants, Conditions, and Restrictions (CC&Rs); c) prohibiting advertising for more than six guests on hosting platforms; and 2) pass a Motion forwarding the ordinance to City Council for consideration. Contact: Brad Wasson, Revenue Manager, (916) , Department of Finance; Carl Simpson, Code & Housing Enforcement Chief, (916) , Community Development Department Presenter: Brad Wasson, Revenue Manager, (916) , Department of Finance; Carl Simpson, Code & Housing Enforcement Chief, (916) , Community Development Department Attachments: 1-Description/Analysis 2-Background 3-Concerns Raised by Neighbors of Permitted Short-Term Rentals 4-Ordinance (Redline) 5-Ordinance (Clean) Susana Alcala Wood, City Attorney Mindy Cuppy, City Clerk John Colville, City Treasurer Howard Chan, City Manager Page 1 of 13

2 File ID: Discussion Item 05 Description/Analysis Issue Detail: Councilmember Harris has asked the City Manager to address the following concerns related to short-term rentals (STRs): 1. Permittees that provide lodging to more than the authorized number of lodgers in violation of the city code, specifically, permittees that operate STRs in both the main and secondary dwellings on one parcel. (Sacramento City Code (Code) section ) 2. Permittees that advertise lodging in excess of the authorized number of lodgers in violation of the Code. On December 12, 2017, this Committee directed staff to amend the Code to address these concerns. The attached Ordinance includes revisions to the Code to address the Committees concerns. Staff recommends that this Committee forward the Ordinance to Council for consideration. The proposed Ordinance: 1. Prohibits operation of a STR in a secondary dwelling unit wherein the main dwelling unit is not the permittee s primary residence, 2. Limits one STR permit per parcel, 3. Expressly subjects STR permits to the rules and regulations of neighborhood CC&Rs, and 4. Prohibits any advertisement in violation of the Code. Lastly, to assist with the above concerns and those expressed by neighbors of STR operators, the City will obtain a consulting company to assist with the City s enforcement of the STR permit program. For the Committee s review, staff has attached an outline of the concerns expressed by neighbors of individuals who operate STRs within the neighborhood. (See Attachment 3.) Policy Considerations: The recommended amendments will increase the City s effectiveness to enforce violations of the STR permit program, which is consistent with Council s policy and their support of compliant permittees. Chapter of the Code defines dwelling types, including a secondary dwelling unit. Economic Impacts: None City of Sacramento April 24, 2018 powered by Legistar Page 2 of 13

3 File ID: Discussion Item 05 Environmental Considerations: This action is not a project subject to CEQA because it involves administrative matters and will not result in new physical development, direct changes to the physical environment, and any reasonably foreseeable indirect physical change in the environment. (CEQA Guidelines 15378(b)(5).) Sustainability: Not Applicable. Commission/Committee Action: On December 12, 2017, this Committee discussed and directed staff to return with a proposed ordinance and additional statistical information on the city s STR permit program. Rationale for Recommendation: Limitation on secondary dwelling units operating as STRs. Secondary dwelling units are used as STRs because they provide additional privacy for the property owner and the guest. They also increase the opportunity for property owners to host over the six-guest limit, especially if the main dwelling on the parcel is also used as an STR, and may be illegally converted spaces. Allowing secondary dwelling units to be used as STRs only when the main dwelling is the primary residence of the permittee will reduce these concerns. Limiting permits to one per parcel clarifies City Council intent to encourage homeowners in their financial endeavors while maintaining the residential neighborhood zoning requirements. Expressly subjecting STRs to CC&Rs. Currently, the Code does not address neighborhood CC&Rs as it relates to STRs. STR operators and neighborhood associations have questioned CC&Rs applicability to STRs given the Code s regulation. Clarification will provide permittees, property owners, and neighborhood associations with the understanding that the City s STR regulation does not supersede CC&Rs. Requiring STRs to comply with neighborhood association rules and regulations will provide such associations with the ability to keep the agreed upon residential quality and standards for STR operators within its jurisdiction. Advertising in violation of the Code. Lastly, the recommended amendment regarding advertising will increase staff s ability to gather the necessary proof required and take enforcement action regarding number of guests allowed. Financial Considerations: Civil penalties for non-compliant STR operators is provided for in the Code at no less than $250 or more than $25,000 for each day the violation continues (Code section (C)). City of Sacramento April 24, 2018 powered by Legistar Page 3 of 13

4 File ID: Discussion Item 05 The City collected $46,295 in transient occupancy tax (TOT) for FY2016/17 from STRs. In September of 2017, Airbnb initiated collection of TOT on behalf of their hosts. September 2017 through January 2018, Airbnb has remitted $244,198 to the City. Of this 1/6 th ($40,700) is transferred to the General Fund on a monthly basis. The remaining TOT funds remain in the Convention Center Fund pursuant to the TOT Ordinance. It is estimated that there are 360 STRs, whether or not permitted, operating in the City. To date, the City has issued 134 STR permits. Local Business Enterprise (LBE): None. City of Sacramento April 24, 2018 powered by Legistar Page 4 of 13

5 Background: Since the passage of the STR ordinance in January of 2016, issues with enforcement have continued to rise and staff has continued to research best practice regulation. The Department of Finance has been working closely with Code Enforcement, Planning, the Police Department, and the Rental Housing Inspection Program (RHIP) to: Address complaints that come to 311 regarding unpermitted STRs, including providing the related departments with a list of permitted STRs. Increase compliance of short-term rentals by considering all received complaints regarding noise, guest occupancy, and secondary dwellings, during the renewal process to determine if a specific STR is a public nuisance. Evaluate RHIP self-reporting properties to determine if a purported rental properties should comply with either the STR program or RHIP. Address structural issues related to secondary dwelling units operating as STRs by verifying if the proper permits have been obtained with Planning. Staff has researched neighboring cities such as San Francisco, San Diego, Napa, South Lake Tahoe, and Las Vegas to establish best regulation practices related to STRs. Many cities are facing the same challenges to enforce regulations on STR properties. San Francisco resolved unpermitted hosts by enacting legislation that requires the hosting platforms (e.g., Airbnb) to ensure the STR operators or hosts follow local permitting requirements. San Diego currently has no STR ordinance and only collects transient occupancy tax from property owners. Napa restricts the overall number of permits to 60 owner occupied and 41 nonowner occupied properties. South Lake Tahoe has moved away from violation warnings and issues monetary citations starting at $1000 charged to the property, the property owner, and/or the guest. City staff will notify neighbors within 300 feet of the proposed Vacation Housing Rental (VHR) property and schedule a hearing with the Zoning Administrator. If members of the community provide written objection to the VHR application, a public hearing will be held to provide opportunity to discuss concerns before proceeding. If no objections are filed, the Zoning Administrator will review the application. The Zoning Administrator will review the application, information from the onsite inspection, and compliance with City s VHR Code. The Zoning Administrator may approve or deny the application; or require special conditions before issuing a VHR permit. Page 5 of 13

6 Las Vegas requires all STRs to undergo an inspection through the planning department prior to issuing permits. Page 6 of 13

7 CONCERNS FROM NEIGHBORS OF PERMITTED SHORT-TERM RENTALS Neighbors have found the short-term rental listing on hosting platforms advertising for more than the six allowable guests. These concerned neighbors want to know how the City plans to enforce the disregard for the guest maximum listed in the ordinance. Neighbors have called wanting to know how the City plans to enforce the 90-day limit on secondary residences and are concerned about the property owner not being onsite while so many strangers are in the neighborhood. One short-term rental permittee has challenged how the City can prove that he does not occupy his secondary residence the required 184 days in the calendar year. Neighbors are concerned that secondary dwelling units, like pool houses and converted garages, are being used as short-term rentals but are not designed for habitation. A neighbor was concerned with the issuance of a short-term rental permit when his neighborhood CC&R s prevented this type of usage. The neighbor was unsure if the city code would override the neighborhood CC&R s. 1 Page 7 of 13

8 ORDINANCE NO. Adopted by the Sacramento City Council [Date Adopted] AN ORDINANCE ADDING AND AMENDING VARIOUS SECTIONS OF CHAPTER OF THE SACRAMENTO CITY CODE RELATING TO SHORT-TERM RENTALS BE IT ENACTED BY THE COUNCIL OF THE CITY OF SACRAMENTO: SECTION 1. Section of the Sacramento City Code is amended to read as follows: Definitions. For purposes of this chapter, the following definitions apply: Advertisement means any method used to solicit interest in the rental, including internet-based listing or hosting services. City manager means the city manager or designee. CC&Rs (also known as covenants, conditions, and restrictions ) means limitations and rules placed on a group of homes by a builder, developer, neighborhood association, or homeowner association. Dwelling has the same meaning as in Ssection Dwelling unit has the same meaning as in Ssection Dwelling, single-unit has the same meaning as in section Dwelling unit, secondary has the same meaning as in section Lodger means a person to whom a permittee is providing lodging for compensation. Lot has the same meaning as in section Permittee means the person to whom a short-term rental permit is issued. Primary residence of the permittee means the dwelling unit in which the permittee resides for at least one hundred eighty-four (184) days during the calendar year. 1 Page 8 of 13

9 SECTION 2. Property owner means the owner of the property on which the short-term rental dwelling unit exists, or their agent authorized to lease the short-term rental dwelling unit. Short-term rental has the same meaning as in Ssection (D). Short-term rental dwelling unit means the dwelling unit that is subject to a short-term rental permit. Section of the Sacramento City Code is amended to read as follows: SECTION Short-term rental permit required Consent required. A. No person shall operate a short-term rental unless there is a short-term rental permit is in effect for the that dwelling unit. B. Upon demand of a peace officer or city employee authorized to enforce this chapter, every person operating a short-term rental shall present the short-term rental permit that is in effect for that dwelling unit. C. No person shall operate a short-term rental without the consent of the property owner. D. No person shall operate a short-term rental in a secondary dwelling unit, unless the single-unit dwelling is the primary residence of the permittee and the secondary dwelling unit complies with title 17 and other applicable law. E. The city may issue only one short-term rental permit per lot; that permit may be for either a single-unit dwelling or a secondary dwelling, but not both. Section is added to the Sacramento City Code to read as follows: Compliance with CC&Rs. No person shall operate a short-term rental in violation of applicable CC&Rs or similar regulations. 2 Page 9 of 13

10 SECTION 4. A. Subsection B of section of the Sacramento City Code is amended to read as follows: B. All persons operating a short-term rental shall identify the city short-term rental permit number in any advertisement for that rental. For purposes of this subsection, advertisement means any method used to solicit interest in the rental, including but not limited to internet-based listing or hosting services. B. Except as amended by subsection A above, all provisions of section shall remain unchanged and in full effect. SECTION 5. Section is added to the Sacramento City Code to read as follows: Advertising in violation of this chapter. No person shall make, print, publish, or disseminate an advertisement for any activity that violates this chapter. 3 Page 10 of 13

11 ORDINANCE NO. Adopted by the Sacramento City Council [Date Adopted] AN ORDINANCE ADDING AND AMENDING VARIOUS SECTIONS OF CHAPTER OF THE SACRAMENTO CITY CODE RELATING TO SHORT-TERM RENTALS BE IT ENACTED BY THE COUNCIL OF THE CITY OF SACRAMENTO: SECTION 1. Section of the Sacramento City Code is amended to read as follows: Definitions. For purposes of this chapter, the following definitions apply: Advertisement means any method used to solicit interest in the rental, including internet-based listing or hosting services. City manager means the city manager or designee. CC&Rs (also known as covenants, conditions, and restrictions ) means limitations and rules placed on a group of homes by a builder, developer, neighborhood association, or homeowner association. Dwelling has the same meaning as in section Dwelling unit has the same meaning as in section Dwelling, single-unit has the same meaning as in section Dwelling unit, secondary has the same meaning as in section Lodger means a person to whom a permittee is providing lodging for compensation. Lot has the same meaning as in section Permittee means the person to whom a short-term rental permit is issued. Primary residence of the permittee means the dwelling unit in which the permittee resides for at least 184 days during the calendar year. 1 Page 11 of 13

12 SECTION 2. Property owner means the owner of the property on which the short-term rental dwelling unit exists, or their agent authorized to lease the short-term rental dwelling unit. Short-term rental has the same meaning as in section D. Short-term rental dwelling unit means the dwelling unit that is subject to a short-term rental permit. Section of the Sacramento City Code is amended to read as follows: SECTION Short-term rental permit required Consent required. A. No person shall operate a short-term rental unless there is a short-term rental permit in effect for that dwelling unit. B. Upon demand of a peace officer or city employee authorized to enforce this chapter, every person operating a short-term rental shall present the short-term rental permit that is in effect for that dwelling unit. C. No person shall operate a short-term rental without the consent of the property owner. D. No person shall operate a short-term rental in a secondary dwelling unit, unless the single-unit dwelling is the primary residence of the permittee and the secondary dwelling unit complies with title 17 and other applicable law. E. The city may issue only one short-term rental permit per lot; that permit may be for either a single-unit dwelling or a secondary dwelling, but not both. Section is added to the Sacramento City Code to read as follows: Compliance with CC&Rs. No person shall operate a short-term rental in violation of applicable CC&Rs or similar regulations. 2 Page 12 of 13

13 SECTION 4. A. Subsection B of section of the Sacramento City Code is amended to read as follows: B. All persons operating a short-term rental shall identify the city short-term rental permit number in any advertisement for that rental. B. Except as amended by subsection A above, all provisions of section shall remain unchanged and in full effect. SECTION 5. Section is added to the Sacramento City Code to read as follows: Advertising in violation of this chapter. No person shall make, print, publish, or disseminate an advertisement for any activity that violates this chapter. 3 Page 13 of 13