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HomeMy WebLinkAbout2014-06-10; City Council; 21626; Short Term Vacation Rentals CITY OF CARLSBAD -AGENDA BILL AB# MTG. DEPT. 21626 6 10 14 City Manager RECOMMENDED ACTION: DISCUSSION AND DIRECTION REGARDING SHORT TERM VACATION RENTALS IN THE CITY OF CARLSBAD DEPT. DIRECTOR CITY ATTY. CITY MGR. Approve Resolution No. 2014-119 directing staff to develop recommendations to expressly allow short term vacation rentals and establish short term vacation rental operating permit policies and procedures. ITEM EXPLANATION: 1 Currently, short term vacation rentals are not explicitly addressed in the city's Municipal Code. The term "short term vacation rental" has generally and historically been interpreted to mean residential dwellings that are not occupied by the owner and are rented on a short term basis to persons seeking a vacation stay of typically 30 days or less. Under Municipal Code Chapters 3.12 and 3.37, vacation stays of less than 30 days would require collection of the 10 percent transient occupancy tax (TOT) and the $1 per room night assessment to support the Carlsbad Tourism & Business Improvement District, respectively. Also, the city's Zoning Ordinance (Municipal Code Title 21) does not currently list "short term vacation rental" as a specific permitted use in any zone, and therefore, the use is considered prohibited. Currently, over 400 short term vacation rentals exist in Carlsbad and city records indicate that at least 15 businesses maintain business licenses for short term vacation rentals and contribute TOT to the city (over $233,000 in FY 2012-13). However, as the practice is not explicitly permitted, new applicants seeking business licenses to use residential dwellings as short term vacation rentals have been denied. The inconsistencies in city policies and practices has created an untenable situation regarding short term vacation rentals. Expressly allowing short term vacation rentals and requiring operating permits and standards of operation would establish clear guidelines for property owners, staff and the public to follow. Exhibit 1 provides additional detail including the current environment in Carlsbad, practices in other cities, California Coastal Act implications, complaint history, and alternatives. Staff will return in approximately six months with specific ordinance and policy recommendations to implement City Council's direction. FISCAL IMPACT: There is no fiscal impact with the proposed action to direct staff to develop recommendations to expressly allow short term vacation rentals and establish operating permit policies and procedures. ENVIRONMENTAL IMPACT: Pursuant to Public Resources Code section 21065, this action does not constitute a "project" within the meaning of CEQA in that it has no potential to cause either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment, and therefore does not require environmental review. EXHIBITS: 1. Memorandum to Ci~ Manager dated 5/29/14: Short Term Vacation Rentals Policy Recommendation 2. Resolution No~Ol4-1~egarding short term vacation rental policy development DEPARTMENT CONTACT: Steve Didier 760-602-2014 steven.didier@carlsbadca.gov FOR CLERK USE. COUNCIL ACTION: APPROVED CONTINUED TO DATE SPECIFIC □ DENIED [I CONTINUED TO DATE UNKNOWN □ CONTINUED □ RETURNED TO STAFF □ WITHDRAWN □ OTHER -SEE MINUTES □ AMENDED □ REPORT RECEIVED □ Exhibit I Memorandum May 29, 2014 To: Steven Sarkozy, City Manager From: Gary Barberio, Assistant City Manager Via: Steve Didier, Management Analyst Barbara Kennedy, Associate Planner Cheryl Gerhardt, Business Improvement District Manager Re: Short Term Vacation Rentals Policy Development {'cityof Carlsbad This memorandum provides detail regarding the short term vacation rental (STVR) industry in Carlsbad, current regulations, practices in other cities, and staff's recommendation to develop ordinance, policy and procedure changes that would expressly allow short term vacation rentals in the City of Carlsbad, require operating permits, establish operating regulations and enforcement capabilities, and create procedures for collection of associated taxes and assessments. 1. How does the City of Carlsbad currently regulate Short Term Vacation Rentals? Currently short term vacation rentals (STVR's) are not explicitly addressed in the city's Municipal Code. The Municipal Code does not define or refer to the term "vacation rental"; however, the term has generally and historically been interpreted to mean residential dwellings that are not occupied by the owner and are rented on a short term basis to persons seeking a vacation stay. "Short term" is generally considered 30 days or less, which is consistent with the city's transient occupancy tax (TOT) and Carlsbad Tourism & Business Improvement District (CTBID) assessment regulations in Municipal Code Chapters 3.12 and 3.37, respectively. The City's TOT regulations require a tax of 10 percent to be paid for any structure that is rented to persons for a period of 30 consecutive days or less for the purpose of "dwelling, lodging or sleeping." The CTBID assessment is $1 per room night. Neither payment of TOT or the CTBID assessment, nor acquisition of a business license, would in and of itself authorize operation of a use that is not permitted by the Municipal Code. The Zoning Ordinance (Municipal Code Title 21) does not currently list "short term vacation rentals" as a permitted use in any zone. The Zoning Ordinance is structured such that it only permits those uses that are specifically listed in each zone, as well as uses determined to be substantially similar to specifically permitted uses. While the current interpretation is that the use is not permitted in any zone, anywhere in the city, the history of this interpretation has been varied. While STVR's are not currently permitted, over 400 currently exist throughout the city. City records also indicate that at least 15 businesses maintain business licenses for STVRs and City Manager's Department 1200 Carlsbad Village Drive I Carlsbad, CA 92008 I 760-434-2820 t 2 Short Term Vacation Rentals Policy Development May 29, 2014 Page 2 contribute TOT to the city ($233,000 in FY 2012-13). However, applicants who are currently seeking business licenses to use residential dwellings as STVRs have been denied due to the city's current zoning interpretation. There is also a concern for equity with Carlsbad hotels that routinely contribute TOT, while many unregulated short term vacation rentals do not. 2. How many complaints does the city receive about STVRs? The city's code enforcement staff receives on average five formal complaints per year about STVRs, typically in residential areas located near the beaches and lagoons. Key issues associated with complaints are loud noise, crowds, parking problems, excessive trash, and concerns for the residential character of the neighborhood. Code compliance actions related to STVRs have been resolved on a case-by-case basis, but have had inconsistent resolution from a land use perspective. The inconsistencies in the city's land use, business license, TOT, and code enforcement policies and practices are central to staff's recommendation to expressly allow STVRs and require operating permits with standards of operation and enforcement capability. Over the past few years, the city has also experienced formal complaints about several STVRs routinely operating as special event venues for large events such as weddings, corporate parties, and retreats. This type of use could be expressly prohibited under the operating standards for permitted short term vacation rentals, or the city could regulate this use through the development of separate city ordinances. 3. How does the California Coastal Commission (CCC) view STVRs? Any amendment to a city's Zoning Ordinance to expressly limit or prohibit STVRs in the coastal zone requires CCC approval of a Local Coastal Program (LCP) amendment. The CCC has historically and successfully opposed attempts by other cities to prohibit/limit STVRs in the coastal zone, contending that they 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. In consideration of the need to quickly address the STVR concerns, staff anticipates developing STVR policy alternatives that would not require an LCP amendment or a lengthy CCC approval process. 4. How do other cities regulate STVRs? Solana Beach The City of Solana Beach allows STVRs in all residential zones throughout the city and requires owners to apply for an operating permit and comply with operating standards. They also require a minimum stay of 7 days and no more than 30 days. A copy of the operating permit with code compliance contact information must also be posted inside of a front window and be clearly visible. This system has worked well and provided an adequate level of operational oversight and better means to collect TOT. Staff also contacted Solana Beach and learned that they have had no complaints for at least a year. Short Term Vacation Rentals Policy Development May 29, 2014 Page 3 Encinitas Encinitas initially proposed a LCP amendment to prohibit STVRs in all residential zones. But after lengthy opposition from the CCC the city ultimately opted for a municipal code amendment that requires operating permits and standards of operation similar to the City of Solana Beach. Encinitas allows STVRs in all residential zones with an operating permit for periods of 30 days or less. They also allow STVRs in some nonresidential zones with a conditional use permit. Coronado The City of Coronado LCP was approved in 1983 and prohibits STVRs for a period of less than 26 days. Short term vacation rentals are only permitted in motels, certain lodging houses, and a multi-family residential zone in their Orange Avenue Corridor Specific Plan. Oceanside The City of Oceanside does not regulate STVRs. Transient occupancy tax is collected on a voluntary basis through any real estate agencies or other licensed businesses that manage STVRs. 5. How many STVRs are in Carlsbad and how are they managed? Review of vacation rental industry websites and discussion with industry representatives suggests there are over 400 short term vacation rentals in Carlsbad. Short term vacation rentals are typically managed either by the property owner or through a real estate firm specializing in management of STVRs. Many property owners advertise through various internet services, such as Vacation Rentals by Owner (www.vrbo.com). Others hire real estate firms to advertise their properties and manage housekeeping and maintenance for them. Staff has already held preliminary discussions with three representatives from a cross section of the Carlsbad STVR industry who are among the top TOT contributors for STVRs. One firm manages the largest single number of small to medium sized STVR properties. Another represents primarily investment owners for very high-end, upscale STVR properties. And the third is the owner of a single, large and very unique STVR property. They shared their perspective on the vacation rental industry in Carlsbad and initial thoughts about the city's approach to regulating STVRs. Staff will continue to coordinate with this stakeholder group and others in the development of formal policy recommendations. 6. How would Home Owners Associations (HOA) be affected by STVR regulations? Home Owners' Associations typically require property owners to comply with a set of Codes, Covenants and Restrictions (CCRs) specific to the neighborhood. Most CCRs prohibit the rental of a private residence for a period of less than 30 days. Any policies developed to regulate STVRs within Carlsbad would not override more stringent regulations already in place which essentially prohibit STVRs within most HOAs. It is important to note that the city is not Short Term Vacation Rentals Policy Development May 29, 2014 Page 4 responsible for enforcing neighborhood CCRs, nor do city regulations need to be consistent with neighborhood CCRs. 7. What alternatives are available to regulate STVRs? Options Recommended '' ' Discus$ion Would require a Zoning Ordinance revision and LCP A. Clarify that STVRs amendment that would likely be denied by the CCC are not allowed No after a lengthy review process. Would also require anywhere immediate enforcement action against 400+ STVRs that are currently known to exist in Carlsbad. This option would also require an LCP amendment and Zoning Ordinance revision to clarify which zones would allow STVRs. A lengthy CCC approval process would also be required. May also require B. Allow STVRs only enforcement action against STVRs in some zones. in certain No Would likely result in relatively little change to the residential zones current environment since the CCC would not approve any restrictions in the coastal zone, where most STVRs are located in Carlsbad, and most neighborhoods situated inland from the coast have HOAs that already regulate STVRs, so additional regulation is not needed. C. Expressly allow This option could be implemented locally without a LCP amendment or CCC approval process. The STVRs throughout proposed method of requiring operating permits and the city and standards of operation has shown to be a successful require operating Yes model in neighboring cities. Would be relatively easy permits and to implement. Requires the least amount of city standards of resources for success. Quickly increases TOT and operation CTBID assessment revenues. CONCLUSION Staff estimates that it will take approximately six months to fully research and develop recommendations that must be vetted by a variety of city departments and internal and external stakeholders. If City Council approves, staff will begin immediately working to further research and develop the required ordinance revisions and policy documents to carry out City Council's direction. < 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Exhibit 2 RESOLUTION NO. 2014-119 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, DIRECTING STAFF TO DEVELOP RECOMMENDATIONS TO EXPRESSLY ALLOW SHORT TERM VACATION RENTALS AND ESTABLISH SHORT TERM VACATION RENTAL OPERATING PERMIT POLICIES AND PROCEDURES. WHEREAS, short term vacation rentals (STVR's) are not explicitly addressed in the city's Municipal Code, and the Zoning Ordinance (C.M.C. Title 21) does not currently list "short term vacation rental" as a permitted use in any zone; and WHEREAS, the Zoning Ordinance is structured such that it only permits those uses that are specifically listed in each zone, as well as uses determined by the City Planner to be substantially similar to specifically permitted uses; and WHEREAS, over 400 STVR's are currently known to exist throughout the city. WHEREAS, city records indicate that at least 15 businesses maintain business licenses for STVRs and contribute transient occupancy taxes (in excess of $233,000 in FY 2012-13) and Carlsbad Tourism & Business Improvement District (CTBID) assessments to the city; and WHEREAS, the city has received formal complaints relating to the operation of STVRs in Carlsbad requiring code enforcement action; and WHEREAS, staff has completed preliminary research and determined that the inconsistencies in the city's land use, business license, TOT/CTBID, and code enforcement policies related to STVRs have created an untenable situation. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as follows that: 1. The above recitations are true and correct. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2. II II II II II II II II II II II II II II II II The City Council directs staff to develop recommendations to expressly allow short term vacation rentals and establish short term vacation rental operating permit policies and procedures. 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council ofthe City of Carlsbad on the 10th day of June 2014, by the following vote to wit: AYES: Council Members Hall, Packard, Wood, Schumacher, Blackburn. NOES: None. ABSENT: None. MATT HLL, Mayor ATTEST: