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Home My WebLink About2024-04-11; Short-Term Vacation Rentals Update (Districts -All); Barberio, Garyr • To th0 members of the: ,,P'ff_ ~OUNCIL ✓ Date~ CA /'__ CC - CM __LACM ~M (3) V Council Memorandum April 11, 2024 To: From: Via: Re: Honorable Mayor Blackburn and Members of the City Council Gary Barberio, Deputy City Manager, Community Services Jeff Murphy, Community Deve~irector Scott Chadwick, City Manager Short-Term Vacation Rentals pda e (Districts -All) {city of Carlsbad Memo ID# 2024024 This Council Memorandum is an update to the Council Memorandum dated February 26, 2019 (Attachment A), which provided an overview of the city's codes and policies associated with short- term vacation rentals. This update includes recent information on the city's vacation rental implementation and enforcement program and an overview of upcoming efforts to streamline permit review and possible fee increases to recover program costs. Background A short-term vacation rental (STVR) is generally defined as a rental of a home or accessory dwelling unit for a short period of time (under 30 consecutive days). The availability of STVRs have been around for decades but exploded in popularity around 2010 with the emergence of online lodging companies like Airbnb, VRBO, and HomeAway. In response to the growing number of STVRs and the impact such transient uses have on established residential neighborhoods, many jurisdictions, particularly coastal cities, looked at ways to limit and even prohibit the proliferation of STVRs. During this time the California Coastal Commission took the position that STVRs are an allowed use within the Coastal Zone (Attachment B) and advised coastal cities that they could not explicitly or implicitly ban STVRs in the coastal zone. In response to growing challenges associated with unregulated STVRs in the city, the City Council on May 5, 2015, adopted an ordinance that specified the operational regulations and locational requirements for STVRs in the city. Although adopted before the California Coastal Commission's actions, the city's STVR regulations are consistent with the 2016 policy statement. Some of the city's more significant STVR regulations are listed below. • STVR's are permissible only on property zoned for residential use and located within the Coastal Zone or in the La Costa Resort and Spa Master Plan area. • Properties located outside Coastal Zone or in the La Costa Resort and Spa Master Plan area are strictly prohibited from operating an STVR. • STVR permits shall be valid for one year, renewed annually. • STVRs are subject to the city's transient occupancy tax. • The number of occupants is limited to two people per bedroom, plus one person per unit. Community Services Branch Community Development Department 1635 Faraday Avenue I Carlsbad, CA 92008 I 442-339-2600 t Council Memo -Short-Term Vacation Rentals Update (Districts -All) April 11, 2024 Page 2 • A contact person must be available 24 hours per day, 7 days per week to respond within 45 minutes to complaints. Following the adoption of the STVR regulations, city staff diligently worked to educate the owners of STVRs on the new operational regulations and permitting requirements. As the enforcement effort progressed, staff identified areas where the STVR regulations could be improved and on July 24, 2018, the City Council adopted certain changes to the STVR ordinance. Some of the more significant code changes, which are consistent with the California Coastal Commission 2016 policy, included the following. • STVRs may only be used for residential purposes; commercial activities/special events are prohibited. • Three administrative citations incurred by an STVR within a 24-month period may result in permit revocation for a period of 36 months. • STVRs must maintain an "Impact Response Plan," which includes information on how to contact the STVR property owner to report a complaint concerning the rental/tenant. Refer to Attachment A for additional information on the city's STVR regulations during this period. Discussion Following the actions in 2018, the department made three additional process improvements that have further helped implementation ofthe STVR program: 1) improved STVR monitoring services; 2) increased penalties; and 3) program staffing adjustments. STVR Monitoring Services Identifying whether a home is being used as an STVR can be very challenging. Online lodging platforms like Airbnb and VRBO offer several different choices for STVR stays with multiple photos of the home/surrounding views, number of bedrooms offered, and the community where the home is located ---but platforms generally do not list the property address on their website. This makes STVR program enforcement extremely difficult because jurisdictions often lack the expertise and resources necessary to investigate and confirm whether a home is being used as an STVR. As such, many cities contract with companies who specialize in STVR monitoring. Dissatisfied with the prior STVR monitoring vendor, the city in 2021 entered into a new contract with a company who was able to provide accurate, real-time listings of active STVRs which staff can easily cross reference with the city's permit system. This has allowed staff to quickly identify and shutdown unpermitted STVRs (those outside the Coastal Zone) and bring other STVRs into compliance, including collecting back taxes owed . Increasing STVR Citation Amounts Because STVR hosts can charge a relatively high rate for Carlsbad vacation rentals, the standard administrative penalty amounts typically imposed for Carlsbad Municipal Code violations can be written off as just a cost of doing business. In response, Senate Bill 60, which became effective as Council Memo -Short-Term Vacat ion Rentals Update (Districts -All) April 11, 2024 Page 3 of September 2021, authorized jurisdictions to raise the maximum penalty amounts for violations of a short-term vacation rentals ordinance that pose a threat to health or safety. As part of a package of proposed administrative code enforcement remedies, the City Council, on September 27, 2022, increased the maximum penalties as reflected in the table below. CITATION First administrative citation Second administrative citation Third & subsequent administrative citation OLD FEE $100 $200 $500 NEW FEE $1,500 $3,000 $5,000 Since the new fees became effective, no qualifying health or safety violations have been reported that warrant application of the higher penalty amounts. Staffing Adjustments Since inception, implementation responsibility of the STVR program was largely allocated to part- time staff within the code enforcement division of the department. Given the importance of consistent STVR enforcement, staff included as part of the fiscal year 2023-24 Budget the conversion of three part-time Code Enforcement Officer positions into one full-time Code Enforcement Officer that is entirely dedicated to the STVR program. This new position has not only consistently maintained STVR enforcement responsibilities, but the current Code Enforcement Officer has also identified opportunities to improve the program, as reflected in the next section. Current Statistics The table below summarizes the enforcement actions in 2023, which shows that over 85% of violators become compliant with city codes following a warning letter (notice of violation). COMPLIANCE TYPE # of permitted (legal) STVRs (total) # of unpermitted STVRs, resulting in an enforcement action % STVRs in compliance following a Notice of Violation (warning) % STVRs in compliance following issuance of pt citation % STVRs in compliance following issuance of 2nd citation Next Steps 2023 446 128 86% 94% 100% One of the department's guiding principles is to consistently find ways to improve processes and reduce costs. In keeping with this guiding principle, staff has identified a strategy that would streamline STVR reviews while also increasing city revenues. Under the current program, property owners wanting to start an STVR apply to the Finance Department for a business license. That application gets routed to the Planning Division and Code Enforcement Division for review and approval, which can take anywhere from a total of two to Council Memo -Short-Term Vacat ion Rentals Update (Districts -All) April 11, 2024 Page 4 four hours to complete. Once approved, code enforcement staff notify the Finance Department who then issues the business license once the license fee is paid. However, the purpose of a business license is to simply give a business authorization to sell goods or services in the city; it is not designed to act as an STVR permit application. Furthermore, the business license fee was never intended to cover staff costs associated with the review of an STVR request. Within the coming months, the department will launch a new STVR permit application form that can be submitted directly to the Code Enforcement Division for processing. Once approved, the permit holder will be required to secure a business license before they can operate. While staff time to review an application will remain largely the same, this process will reduce the number of departments involved in the review/routing, which will reduce overall processing time by about 15%. Additionally, this revised process is consistent with how other permits are processed in the department and will address a longstanding enforcement issue (permits, not business licenses are typically revoked for failing to comply with city standards). Consist ent with the Cit y Council's cost recovery policy (Attachment C), the depart ment will also be pursuing a new STVR application fee. The application of such a fee is not unique, as reflected in the table below and staff estimates that the city could generate an estimated $100,000 each year once a fee is adopted. PERMIT BUSINESS TRANSIENT JURISDICTION APPLICATION FEE LICENCE FEE OCCUPANCY TAX Ca rlsbad $0 $50 -$100 10% Oceanside $250 $0 10% Encinitas $425 $24 -$39 10% Huntington Beach $624 $0 10% Solana Beach $107 $0 13% Chula Vista $250 · $54 10% San Clemente $140 $105 10% St aff will be coordinating with the Finance Department on developing an appropriat e application fee that will be included in the 2024-25 Master Fee Schedule, which is anticipated to be presented to the City Council along with the 2024-25 Budget later this May. Attachments: A. Council Memorandum dated February 26, 2019 (on file with the City Clerk's Office) https://records.carlsbadca.gov/Weblink/DocView.aspx?id=4518326&dbid=0&repo=CityofC arlsbad B. Coast al Zone map C. City Council Policy Statement No. 95 (on file with the Cit y Clerk's Office) https://records.carlsbadca.gov/Weblink/DocView.aspx?id=6400678&dbid=0&repo=CityofC arlsbad Council Memo -Short-Term Vacation Rentals Update (Districts -All) April 11, 2024 Page 5 cc: Geoff Patnoe, Assistant City Manager Cindie McMahon, City Attorney Gary Barberio, Deputy City Manager, Community Services Branch Allegra Frost, Senior Assistant City Attorney Zach Korach, Finance Director Tina Ray, Communication & Engagement Director Mike Strong, Assistant Director of Community Development Sarah Lemon, Senior Program Manager Natalie Reed, Community Relations Manager Laureen Ryan, Senior Management Analyst Amber Dan, Contract Administrator Robbie Hickerson, Code Enforcement Manager Jamie Lenos-Terfehr, Senior Code Enforcement Officer Jamie Fiske, Code Enforcement Officer Helen Gallagher, Administrative Assistant