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CC 2022-09-13_09b Vacation Rentals PP PresentationDISCUSS AND CONSIDER AMENDMENTS TO SHORT TERM RENTAL ORDINANCE 9/13/2022 1 Background Ordinance 663 June 2014 – CC adopted with regulations in response to concerns raised during public review Went into effect 7/10/2014 Developed by both PC and CC Requires compliance with performance standards, adherence to the conditions of approval and presence of local contact to minimize adverse impacts Currently approved: 86 Vacation Rentals 47 Homestays 9/13/2022 2 Sept. 3, 2019 PC Meeting Planning Commission received a status report on STRs Recommended the following: Implementation of parking requirements for STRs; Administrative fines for non-permitted STRs Utilization of compliance technology to address non-permitted STRs; and Reconsideration of current buffer distances or methods 9/13/2022 3 Oct. 12, 2021 City Council Meeting Council directed staff to bring a discussion item to evaluate Ordinance 663 In response to public comments regarding the proliferation of STRs, application and appeal process associated with STRs, and other related issues such as the 300-foot location radius 9/13/2022 4 Mar 22, 2022 CC Study Session City Council reviewed the existing Ordinance and made a number of suggestions for revisions: Cap on number of VR approvals Contract with enforcement company Alter rental buffer distance Establish revocation triggers Require applicants to purchase mailing labels from City Improve performance standards Establish expiration clause Consider parking requirement 9/13/2022 5 Trends Since implementation of Ordinance 663, the City has permitted eighty-six (86) vacation rentals and forty-seven (47) homestays. STR approvals per year: 2014 – Two (2) VR approvals; five (5) homestay approvals 2015 – Two (2) VR approvals; one (1) homestay approval 2016 – Six (6) VR approvals; two (2) homestay approvals 2017 – Five (5) VR approvals; seven (7) homestay approvals 2018 – Seven (7) VR approvals; six (6) homestay approvals 2019 – Eighteen (18) VR approvals; seven (7) homestay approvals 2020 – Ten (10) VR approvals; four (4) homestay approvals 2021 – Nineteen (19) VR approvals; six (6) homestay approvals 2022 – Fourteen (14) VR approvals*; six (6) homestay approvals* *Approvals listed for 2022 reflect approvals granted through the end of June and do not include approvals listed on tonight’s agenda 9/13/2022 6 STR Appeals Since adoption of Ordinance 663, nine (9) vacation rental permits approved by the Community Development Director have been appealed Each appeal denied by Planning Commission due to PC being able to make the findings for approval Of these, two (2) PC decisions appealed to CC Both appeals were denied due to CC being able to make findings for approval Typical concerns included noise, traffic and parking impacts; transient occupation; and loss of property values These concerns were determined to have been addressed during Ordinance development and are addressed by performance standards for all STRs To date, no complaints received that required Code Enforcement action or where revocation of a permit was considered 9/13/2022 7 Housing Needs Housing Element Policy B.6 states: “The City shall continue to regulate the use of existing residences on residentially zoned properties for vacation rentals.” Housing Element Program B.6-1 states: “The City shall monitor the loss of permanent workforce housing from vacation rentals and consider modifying the Development Code to adjust for this loss.” 8/2/2022 8 Housing Needs Continued US Census Bureau estimates that there are 7,847 housing units in City 2,169 of these are rental units 74 Vacation rentals accounts for ~4% of rental units City estimates maximum of 716 vacation rentals with current regulations Would account for ~33% of rental units citywide 9/13/2022 9 Financial Impacts Short Term Rentals required to pay 13.5% of gross receipts for Transient Occupancy Tax (TOT) 10% to City general fund Used to maintain streets and services 2% to Arroyo Grande Tourism Business Improvement District (AGTBID) Used for marketing and promotional efforts for City lodging industry 1.5% to SLO County Tourism Marketing District (SLOTMD) aka Visit SLO Cal Used for marketing and promotional efforts for County lodging industry City collected approximately $150,000 in FY21/22 in TOT from Short Term Rentals 9/13/2022 10 Unpermitted STRs Enforcement of unpermitted rentals is difficult with City’s current resources Enforcement currently conducted on a complaint basis Enforcement companies have contacted the City to monitor permitted and unpermitted rentals Estimates that there are as few as 25 and up to as many as 150-200 unpermitted rentals within City Estimates that City could be missing out on significant TOT revenue Companies can locate and contact any unpermitted rental listing and work directly with owner or property manager to bring property into compliance and ensure full collection of TOT Companies can also work with permitted rentals to ensure particular items appear within listing, such as Business License / Plot Plan Review permit information 9/13/2022 11 Unpermitted STRs Continued City advertised RFP to select firm to assist with rental host compliance Reviewed proposals Interviewed with top three (3) firms Selected preferred consultant In progress on contract execution Identify all rental properties within City Send outreach letters to all rentals City will conduct all enforcement on unpermitted rentals TOT collection through online portal 9/13/22 12 Proposed Ordinance Revisions Cap on total number Council directed staff to cap VRs at 120 approvals Planning Commission concurred with proposed cap Represents ~1.5% of City housing units or ~4% of rental units STR Buffer Buffer currently prohibits any two STRs of the same type within 300’ of one another on the same street Council directed staff to amend this buffer distance for vacation rentals No VRs within 300’ regardless of street address Planning Commission recommended that buffer be increased to 500’ and apply to short term rentals of all types or schools No STR within 500’ radius of another No STR within 500’ of a school PC recommendation included in draft ordinance Revocation Currently no clear triggers for revocation of permit holders operating in violation of performance standards Council directed staff and PC to develop objective performance standards to facilitate harmonious operation and transparent enforcement PC recommends that revocation process be initiated if: Emergency contact unresponsive three consecutive times; OR AGPD issues citation to STR guest 9/13/2022 13 Proposed Revisions Continued Expiration CC study session Operators must remit TOT at least once every twelve (12) months, otherwise approval expires PC recommends permits expire at point of sale City Attorney advises against this recommendation due to inconsistencies with MUP approval process Existing approvals will become legally non-conforming and can continue operation per AGMC 16.48.110(B)(1) Non-conformity could be addressed through amortization if further direction is provided 9/13/2022 14 Performance Standards CC Study Session: Asked PC to develop objective performance standards Goal: make revocation process simpler to initiate for non-compliant rentals Recommended requirement to purchase mailing labels from City PC recommendations: No STRs in PUDs Newly implemented performance standards apply to VRs and Homestays Concurred with requirement to purchase labels from City Buffer distance increased to 500’ and expanded to all STR types and from schools Concurred with cap of 120 approved VRs Revocation initiated after three non-responses from emergency contact or one citation issued by AGPD Concurred that TOT should be remitted once per year at minimum Require 2 parking spaces per VR or 1 space per rented bedroom in homestay 9/13/22 15 Definitions Staff recommends clean-up of definitions to more clearly define rental types Allow VRs on properties with more than one structure Explicitly require that homestay operator is physically on site while renting unit 9/13/22 16 Recommended Action Introduce an Ordinance amending the short term rental regulations within the City 9/13/2022 17 Questions? 9/13/22 18