STAFF REPORT SAUSALITO CITY COUNCIL

STAFF REPORT SAUSALITO CITY COUNCIL MEETING DATE: January 8, 2019 AGENDA TITLE: LEAD DEPARTMENT: Short Term Rental Pilot Discussion Community Development RECOMMENDATION Receive presentation and provide direction on how to address short term rentals, including the following: Direct staff to continue current prohibition on short term rentals; or Direct staff initiate a Zoning Ordinance Amendment for a Short Term Rental Pilot SUMMARY Short term rentals (rental of a home, dwelling unit, bedroom, room or rooms in a dwelling unit for a period of less than 30 days) are currently prohibited in Sausalito. On October 9, 2018 the City Council discussed short term rentals in Sausalito and directed staff to return on October 30, 2018 with a draft ordinance regulating short term rentals for consideration and direction. On October 30, 2018 the Council continued this item without discussion. On November 27, 2018 the Council directed staff to enter into a contract with Host Compliance for short-term rental monitoring and compliance services. This staff report supplements the staff report from October 9, 2018. 1 DISCUSSION Staff has prepared a draft ordinance that would establish a pilot program to allow shortterm rentals in residential areas of Sausalito for one year subject to a permitting process, registration, a business license and payment of transient occupancy tax (see Attachment 1 for the draft ordinance). The regulations for short-term rentals include, but are not limited to requirements that: The host must be the primary resident of the unit (i.e., the unit may not be rented short-term on a permanent basis, rather it must have a primary long-term occupant). This prevents landlords from evicting tenants to create full-time shortterm rentals. 1 View the staff report and watch the recording here: https://www.sausalito.gov/city-government/citycouncil/meetings-agendas Page 1 of 15

Limits on the number of unhosted days a unit may be occupied as a short-term rental (currently limited to 90 days in a calendar year) A limit on the number of short-term rental permits the City may issue (currently capped at 100) Parking requirements (amount to be discussed by the Council) The pilot program be publically reviewed on a quarterly basis for program compliance and any unintended consequences and semi-annually for program costs and permit fee revenues. A summary of program features, including direction requested by the City Council, in provided in Attachment 2. The summary of program features includes a column for Council direction/discussion of the pilot program, including: Confirm short-term rental permits could be issued for the following residential neighborhoods: R-1-6, R-1-8, R-1-20, R-2-5, R-2-2.5, R-3. PR (Planned Residential) was not included as the two PR sites in the City are the Whiskey Springs and Anchorages condominium areas, which do not allow short-term rentals pursuant to the CC&Rs of those developments. Confirm sunset of program one year after first permit issued with a provision whereby the City Council could by resolution extend the pilot program period, with renewal requirements for short-term rental permits. Confirm maximum number of permits to be issued in pilot program. Discuss method of issuing permits (lottery or first come first serve). A first come/first serve approach would allow permits could be issued as they are found to be complete, which could more evenly spread the permitting activity out over a longer period of time rather than an intense period of time after lottery-winners are selected. See the different approaches below. Type of System First come/first serve Timing Could issue permits as they are received/found complete Management Planning activity more evenly spread out over a longer time period as permits would be process as they are received Page 2 of 15

Type of System One-time Lottery Multiple lotteries Timing Would need to wait to issue permits until after the City receives more than 100 applications Staff could identify a cut-off date to receive applications. If by the cut-off date the number of applications are less than 100, staff could issue permits to all applicants with a complete application. A second round of applications with a new cut-off date could then be selected. If by the cut-off date the number of applications are greater than 100, staff could select applicants through a lottery system. Management Planning activity in processing permits confined to a shorter more intense period after lottery-winners selected as permits would be issued after lottery-winners selected This would be a middleground which would allow for applications to be processed in waves. Confirm short-term rental permit is available for a primary resident who occupies a primary residence (see definitions in draft regulations). Confirm a primary resident is someone who has been physically present for no less than 183 days in a calendar year at the primary residence and a person may only have one primary residence. Confirm evidence of a primary resident s primary residence includes, but is not limited to, documentation from income tax statements or a driver s license. Confirm maximum number of days per year for unhosted stay is 90 maximum. Page 3 of 15

Confirm there is no maximum number of days per year for hosted stays. Hosted stay is when a primary residence is occupied by a short-term renter for a portion of the primary residence and when the primary resident is present. For Council direction: What constitutes a presence by the primary resident? Examples from Redwood City and Berkeley are provided below: City Redwood City Berkeley What Does Primary Resident Present Mean? When they are on the premises at all times between the hours of 10:00 p.m. and 6:00 a.m. When they are living in the primary residence during the short-term rental period. Council should give direction on what constitutes a primary resident s presence. Council could consider the time period required by Redwood City and if it is too restrictive. For those who work a night shift, would like to go to a late movie, get stuck in traffic or are involved in emergency situations these hours may be too restrictive, and as written, inflexible. To address this, Council could consider adding an emergency situations exception. The Council could also could consider if requiring a primary resident to be present when they are on the premises a minimum of eight hours per day is too lenient, or if it addresses the requirement that a primary resident be present at the short-term rental for a portion of the day. Council could also adopt the language as required by Berkeley. Confirm that responsibility of providing compliance with health/safety codes is with the primary resident in the form of a building inspection report submitted to the City. The building inspection checklist shall be completed by a certified thirdparty general contractor, building or home inspector. The inspection report shall use a form approved by the City. An inspection by the City may be required, depending on inspection report findings (inspection to be paid for by applicant). Confirm that a local contact person for unhosted stays is a person who resides in Sausalito who is available 24 hours per day, 7 days per week during the term of any unhosted stay; and hosted stays is the primary resident who is available 24 hours per day, 7 days per week during the term of any hosted stay. Confirm: Local contact person must respond within 30 minutes of being contacted. Page 4 of 15

Confirm that parking requirements should be discussed by the Planning Commission, with the intent to require parking for the short term rental unit. Staff could provide parking requirements from other jurisdiction s shortterm rental requirements for the Planning Commission to consider and make a recommendation on. Planning Commission could consider parking requirements for hosted vs. unhosted stays and parking requirements commiserate with occupancy. Confirm that the primary resident shall submit monthly statements from hosting platforms to the City of Sausalito detailing the number of nights rented on a hosted and unhosted basis, and the amount of rent collected per night. Discuss Street Width. The Council directed staff to incorporate the ADU regulations which require an on-site parking space for the ADU for streets in Sausalito less than 16 feet in width (where the ADU would not typically require any parking requirement). This would mean that a short-term rental would not be approved unless it provided an on-site parking space for the short-term rental. If parking for all short-term rentals is required (see discussion above), then this additional requirement (that the short-term rental not be allowed in areas where the street width is less than 16 feet without providing an onsite parking space) is redundant and staff would recommend that it be removed. If the intent is to not allow short-term rentals in areas where the street width is less than 16 feet regardless of availability to provide on-site parking then this provision should remain, and be modified so that shortterm rentals are prohibited outright in such areas. A current map showing the streets in Sausalito less than 16 feet is provided in Attachment 4. Confirm that grounds for revocation are appropriate; included is a ground that if a citation is issued the permit can be revoked. Typically, issuance of a citation would follow a courtesy notice and a compliance order (therefore, it would be the third step in the series). Determine if verbal agreement from Host Group to act as ambassadors is sufficient. Page 5 of 15

In drafting the regulations, and in consideration of correspondence received by the public, staff found that the following provisions could be considered by the Council, in order to enhance the pilot program. These items have not been added to the pilot program, but could be discussed by the Council, and given direction to be included: Standards: Temporary Structures. Other jurisdictions have prohibited temporary structures from being erected in association with short-term rentals. Suggested language: Tents, yurts, recreational vehicles, campers, mobile homes, and comparable temporary dwellings are not allowed to be utilized in conjunction with a short-term rental permit. Special Events. Other jurisdictions have prohibited special events in association with short-term rentals. Suggested language: Weddings, corporate events, commercial functions, and any other similar events, which have the potential to cause traffic, parking, noise or other problems in the neighborhood, are prohibited from occurring at the short-term rental property as a component of shortterm rental activities. Advertising- On-site. Other jurisdictions have prohibited signage at the physical short-term rental site announcing the availability of the short-term rental. Suggested language: Short-term rental availability shall not be posted on the primary residence property. Advertising- Only with valid permit. Larkspur has prohibited any advertising of activities which are in violation of the Larkspur Municipal Code. Enforcement of a short-term rental pilot program would be made more straight-forward if advertising of non-permitted short-term rentals was prohibited. Suggested language for consideration: No individual may print, publish, advertise, or disseminate any commercial notice or advertisement for a short-term rental unless a valid short-term rental permit has been approved for the subject primary residence. Records of Compliance. Other jurisdictions require primary residents to keep records of compliance. Suggested language: Page 6 of 15

The primary resident shall retain records documenting the compliance with these requirements for a period of three (3) years after each period of short-term rental, including but not limited to records showing payment of transient occupancy taxes by a hosting platform on behalf of a primary resident. Upon reasonable notice, the primary resident shall provide any such documentation to City upon request for the purpose of inspection or audit to the City Manager or his/her designee. Liability Insurance. Berkeley requires hosts to maintain liability insurance. Suggested language: Liability insurance is required of the Primary Resident, or Hosting Platform on behalf of the Primary Resident, in the amount of at least $1,000,000. Affidavit from property owner. Correspondence from the public has been received indicating that without a property owner s notarized affidavit consenting to the application, a tenant could forge their landlord s signature on the shortterm rental permit application. Suggested language to be added to Section D: A notarized affidavit from the property owner affirming that they own the subject property and that they acknowledge the primary resident is their tenant and are permitted to apply for a Short-term Rental Permit. Staff has prepared a table summarizing other Marin County jurisdiction s short term rental regulations (see Attachment 3). NEXT STEPS FOR A PILOT PROGRAM In order to enact the pilot program, a Zoning Ordinance Amendment would be required to be initiated. Zoning Ordinance amendments requires one noticed hearing by the Planning Commission and two noticed hearings by the City Council. General Plan Consistency If the Council initiates a Zoning Ordinance Amendment to allow short-term rental use incidental to a primary residence as a pilot program for one year Staff would review the City s General Plan to determine if the proposed amendments were consistent with the General Plan. Currently short-term rental use is prohibited in Sausalito although shortterm rental activity continues to occur. Host Compliance has estimated that 156 unique properties are being advertised for short-term rental use in Sausalito. Allowing shortterm rental activity could make efficient use of space by allowing residents to host guests in a room or unit when it might otherwise go unused. The City has received testimony from individuals who use short-term rentals as a way to help afford their own home and have meaningful, culturally enriching interactions with visitors from around the world. Short-term rentals could help offset the housing cost burden for families. As the pilot program is currently structured, it would only allow primary residents who live in their homes long-term (more than half the year) to rent their home short-term for Page 7 of 15

a limited duration (90 days maximum) unhosted (while they are not present) and unlimitedly hosted (while they are present aka home-sharing ). No person can claim to be the primary resident of more than one dwelling unit. No short-term rental permit would be granted to anyone other than a primary resident. Due to these provisions, which require that a permanent resident of Sausalito only be allowed to rent their home on a short-term basis for a maximum of 90 days out of the year unhosted and homeshare for the remainder of the year, residential housing stock would be protected. Additionally, the permits which could be issued would be capped at 100. Therefore, the pilot program seeks to strike a balance by providing a regulatory framework that reflects the City's policy objectives around preservation of housing and residential character. Staff has identified a number of General Plan Goals, Policies and s that the proposed pilot program could be found to be consistent with. See the table below. General Plan Goal, Policy or Land Use and Growth Management Objective LU- 1.0 Land Use and Growth Management LU- 2.2.1 Text of Goal, Policy or Protect and Maintain the Character of Residential Neighborhoods Maintain the character, diversity and long term viability of the City s residential neighborhoods by establishing residential land use districts that reflect the predominant land use, scale, density and intensity of existing development Funding Downtown Enhancement Investigate potential funding programs that will assist in the enhancement of the Downtown. Staff Comment Regarding Pilot Consistency with Goal, Policy or Under the proposed pilot program the residential character of the residential neighborhoods would be maintained. Unhosted shortterm rental use would be allowed on a limited basis, and only in a home that has a long-term resident. TOT from short-term rentals could be targeted towards funding improvements in the Downtown area and beyond. Page 8 of 15

General Plan Goal, Policy or Housing Goal 1.0 Housing Policy 1.3 Text of Goal, Policy or Preserving housing and neighborhood assets Maintain and enhance the quality of existing housing and ensure that new residential development is compatible with Sausalito s small town character. Maintenance and Management of Quality Housing Support good management practices and the long-term maintenance and improvement of existing housing through code enforcement and housing rehabilitation programs. Staff Comment Regarding Pilot Consistency with Goal, Policy or Under the proposed pilot program the residential character of the residential neighborhoods would be maintained. Unhosted shortterm rental use would be allowed on a limited basis, and only in a home that has a long-term resident. The pilot program contains provisions which addresses adverse impacts on neighbors by imposing conditions that must be complied with for the duration of the permit, including but not limited to provisions for parking, trash, noise, good neighbor policies, limits on number of days/year for renting entire homes, requirement for a local contact, and requiring that the permit holder is a primary resident of the home. In addition, the City has contracted with a vendor who provides a 24/7 hotline for short-term rental complaints. Short-term rental use is a valued source of income for some individuals. This income could be used to maintain and improve housing in the community. Additionally, code enforcement would investigate complaints to determine if there are violations of an issued permit or if an short-term rental is operating illegally. TOT will be collected to fund code enforcement program to respond to complaints. Page 9 of 15

General Plan Goal, Policy or Housing Goal 3.0 Housing Policy 5.2 Housing Policy 1.4 Circulation and Parking Objective 5.0 Text of Goal, Policy or Enhancing Housing Affordability Expand and protect opportunities for households of all income levels to find housing in Sausalito and afford a greater choice of rental and homeownership opportunities. Senior Housing Support development and maintenance of affordable senior rental and ownership housing and supportive services to facilitate maximum independence and the ability of seniors to remain in their homes and/or in the community. Rental Housing Conservation Continue to conserve the existing rental housing stock by limiting the conversion of rental units to ownership or nonresidential uses. Explore Funding Methods to Implement Local Improvements Explore methods to improve and fund local circulation, parking and public transit projects. Staff Comment Regarding Pilot Consistency with Goal, Policy or Short-term rental use is a valued source of income for some individuals. This income can be necessary in order to allow continued residency in the face of escalating housing costs. Short-term rental use is a valued source of income for some individuals, especially seniors with a fixed income. This income can be necessary in order to allow continued residency in the face of escalating housing costs. Shortterm rental use could allow seniors to live independently but concurrently have someone around in case they need assistance/attention. The proposed pilot program conserves existing rental housing stock by requiring a primary resident to live in the proposed short-term rental permanently, with provisions to allow for unhosted short-term rental use on a limited basis. Rental housing would not be converted to ownership units or non-residential uses under the pilot program. TOT and permitting fees from short-term rentals can be targeted towards funding local improvements. Page 10 of 15

General Plan Goal, Policy or Economic Objective E-3.0 Text of Goal, Policy or Encourage Business Which Enhances Quality of Life Encourage business in Sausalito which enhances the residents quality of life. Staff Comment Regarding Pilot Consistency with Goal, Policy or Short-term rentals are a valued source of income for some individuals. This income can be necessary in order to allow continued residency in the face of escalating housing costs. The pilot program contains provisions which addresses adverse impacts on neighbors by imposing conditions that must be complied with for the duration of the permit, including but not limited to provisions for parking, trash, noise, good neighbor policies, limits on number of days/year for renting entire homes, requirement for a local contact, and requiring that the permit holder is a primary resident of the home. In addition, the City has contracted with a vendor who provides a 24/7 hotline for short-term rental complaints. California Environmental Quality Act If the Council initiates a Zoning Ordinance Amendment to allow short-term rental use incidental to a primary residence as a pilot program for one year, staff would complete an initial study pursuant California Environmental Quality Act (CEQA) Guidelines Section 15063(c) to determine if the project may have a significant effect on the environment. CORRESPONDENCE Correspondence attached to the October 9, 2018 and October 30, 2018 staff reports and received as late mail for that meeting is listed on the agenda for the October 9, 2018 and October 30, 2018 City Council meetings at https://www.sausalito.gov/citygovernment/city-council/meetings-agendas. Correspondence received after October 30, 2018 is provided in this correspondence section in this staff report. Page 11 of 15

In total, 107 pieces of written correspondence has been provided from the community since the October 9, 2018 staff report both in support and in opposition to the pilot program. A summary of concerns expressed in public testimony, grouped into themes, has been provided below, in addition to staff comment on how the concern has been addressed in the pilot program. Concern Identified Concern for Safety Strangers coming and going. No Ownership of Neighborhood/Transiency People Coming and Going/Loss of Neighborhood and Community Character Parking Impacts Impact to Rental Market/Lack of Affordable Housing Safety issues (building/fire) Change to zoning concern that the City would allow hotel use in residential zones Limit on number of permits that can be issued by the City How Issue is Addressed in Pilot Pilot program limits the number of days for unhosted short-term rental in a given year to a maximum of 90 days. For the remainder of the year, the primary resident resides on the property. Local contact is required to be available 24/7 for neighborhood concerns. Pilot program limits the number of days for unhosted short-term rental in a given year to a maximum of 90 days. For the remainder of the year, the primary resident resides on the property. The intent of the program is to require on-site parking for short-term rentals. Amount TBD. The proposed pilot program conserves existing rental housing stock by requiring a primary resident to live in the proposed short-term rental permanently, with provisions to allow for unhosted short-term rental use on a limited basis. Rental housing would not be converted to ownership units or non-residential uses under the pilot program. The pilot program requires that a building inspection report be submitted to the City upon initial application. The building official or his/her designee may conduct a follow-up inspection to ensure the accuracy of information provided to the City and inspect any deficiencies that may need correction. The pilot program would allow short-term rental use as an accessory use to the use of the property as a primary residence. As a primary resident is required to live in the home, there is not a conversion of use. The pilot program limits the number of permits that can be issued by the City to 100. Page 12 of 15

Concern Identified Enforcement of primary residency requirement Impact on City s Housing with regard to conversion of ADUs to short term rentals Enforcement Subleasing a rental space without property owner knowledge or against CC&R regulations How Issue is Addressed in Pilot The pilot program requires that the primary resident sign an affidavit indicating that the short-term rental unit is primary resident s primary residence and is their home, and they have been, and will continue to be, physically present for no less than 183 days in a calendar year at the primary residence. They must also provide evidence of a primary resident s primary residence including, but is not limited to, documentation from income tax statements or a driver s license. Host Compliance data could also be used to investigate the number of nights the property is available as a short-term rental in a given calendar year, if there are permitting compliance uncertainties. The pilot program prohibits use of an ADU as a short-term rental. However, even if ADUs were allowed to be rented short-term under the pilot program, the proposed pilot program conserves existing rental housing stock by requiring a primary resident to live in the proposed shortterm rental permanently, with provisions to allow for unhosted short-term rental use on a limited basis. Rental housing would not be converted to ownership units or non-residential uses under the pilot program. Host Compliance has been retained to provide data collection, monitoring and compliance services. A valid short-term rental must provide their permitting number in all advertising. Code enforcement officer would investigate complaints to determine if there are violations of an issued permit or if an unpermitted short-term rental is operating. The Council could add a requirement to the pilot program such that advertising of non-permitted shortterm rentals is prohibited in order to make the violation more straightforward to establish. The short-term rental permit applicant will be required to be signed by the property owner, and in addition, the draft ordinance requires that the applicant sign an affidavit certifying that the primary resident will comply with, and the primary resident will be responsible for short-term renters to comply with any applicable provisions of a homeowners agreement, timeshare ownership agreement, condominium board regulations, tenant organization rules, lease or other agreements or covenants that apply to the dwelling unit. To enhance this, Council could add a requirement that the property owner sign a notarized affidavit acknowledging that their tenant is applying for a short-term rental permit. Page 13 of 15

Concern Identified Increase in tourism Noise, garbage, overcrowding, parties How Issue is Addressed in Pilot The pilot program caps the number of short-term rental permits that can be issued to 100 permits. Host Compliance has estimated that currently in Sausalito 157 properties are being rented on a short-term basis. Therefore, the program would reduce the number of short-term rentals currently in Sausalito and regulate their impacts. Notification to neighbors of the short-term rental is required prior to use of the home as a short-term rental in order to indicate that the subject property will be the location of a short-term rental and provide the name of the local contact person, the phone number and email address for the local contact person, the phone number and the email address of the Sausalito short-term rental hotline, and the street address of the short-term rental. The primary resident is required to inform the short-term renter about unreasonable use of the short-term rental unit property, unreasonable noise or disturbance, disorderly or unlawful conduct, overcrowding of the shortterm rental unit, or any other requirement or limit set forth in the program or in the city s administrative policy and procedures. The primary resident is required to provide a good neighbor handbook to all short-term rental users. A 27/4 hotline for complaints will allow for neighbor complaints or concerns. The primary resident is required to make a local contact available to respond in a reasonable and timely manner to reported concerns or complaints pertaining to, but not limited to, the following: unreasonable use of the shortterm rental unit property, unreasonable noise or disturbance, disorderly or unlawful conduct, overcrowding of the short-term rental unit. TOT will be collected to fund code enforcement program to respond to complaints. Page 14 of 15

STAFF RECOMMENDATIONS Receive presentation and provide direction on how to address short term rentals, including the following: Direct staff to continue current prohibition on short term rentals; or Direct staff initiate a Zoning Ordinance Amendment for a Short Term Rental Pilot ATTACHMENTS 1. Draft Ordinance Allowing Short-Term Rental Use Incidental to a Primary Residence as a Pilot for One Year 2. Summary of Features with Direction From Council Requested 3. Marin County Jurisdictions: Short Term Rental Regulations Summary 4. Streets in Sausalito Less than 16 Feet 5. Correspondence 2 a) Hammond b) Merete, pt 1 c) Merete, pt 2 d) Roberts e) Whizz f) Lobanovsky g) decastro h) Geisler i) Heredia j) Kawala k) Merete PREPARED BY: Lilly Whalen, Community Development Director REVIEWED BY: Mary Wagner, City Attorney SUBMITTED BY: Adam W. Politzer, City Manager 2 Correspondence attached to the October 9, 2018 and October 30, 2018 staff reports and received as late mail for that meeting is listed on the agenda for the October 9, 2018 and October 30, 2018 City Council meetings at https://www.sausalito.gov/city-government/city-council/meetings-agendas. Correspondence received after October 30, 2018 is provided in this correspondence section. Page 15 of 15