Moratorium Halts More Short-Term Rentals

The explosion of unpermitted short term rentals in private homes coupled with complaints from residents about their impact on neighborhood character led the City Council Tuesday to impose a 45-day moratorium on issuing any more short-term lodging permits.

The city will later consider imposing stricter regulations and even an outright ban on rentals of under 30 days.

Laguna joins other coastal cities attempting to deal with the metamorphosis of homes into high turnover vacation rentals and its consequences: the difficulty of extracting bed taxes from landlords flying under the radar, the reduced inventory of rental homes, and the impact on neighborhood culture.

“Our obligation is to the residents of Laguna Beach,” said Council member Toni Iseman, who advocated revoking any rentals under 30 days, called for steep fines for scofflaws, and proposed the 45-day moratorium while staff investigates solutions.

Whether or not the rules are changed, Mayor Pro Tem Steve Dicterow wants to identify and deal with violators. He proposed trying to penalize web sites for listing properties without permits.

While staff could look into laws that might reign in the worst consequences of the short-term rentals, Mayor Bob Whalen said the city’s priority must be to enforce compliance of the old laws or new ones.

Thanks to the advent of online booking services such as Airbnb, homeowners in popular tourist destinations have turned extra rooms into spare cash. Investors are also buying properties in coastal towns with the sole intention of renting them as vacation units, flooding established neighborhoods with a parade of visitors.

“Imagine an otherwise peaceful and quiet neighborhood turned into a motel zone,” said local artist and South Laguna resident David Milton in an interview. His life has been disrupted since nearby property owners began renting their homes to vacationers, who exhibit little concern for the work and sleep routines of long-term residents.

Owners renting out homes without permits have become adept at avoiding detection, said Assistant City Manager Christa Johnson, who compiled a comprehensive overview of the situation.

They tell renters to describe themselves as non-paying guests, if asked, and omit addresses and identifiable photos when marketing their homes online, she said.

Laguna established a permit process for short-term lodging in 1999. Of 100 applications since then, 64 received approval. More are coming in now. Even so, the hundreds of Laguna homes listed on rental websites far exceed the number of permit holders.

Homeowners wishing to rent to weekenders currently must pay a $275 fee to apply for a permit and notify neighbors of their intent. If no one objects, the city’s planning manager will approve the permit and the homeowner is required to obtain a business license and pay a 10 percent transient occupancy tax on the rental rate.

If the permit is denied, owners will often continue to rent illegally, because the financial gain outweighs any nominal fines, according to anecdotal reports. Some people are getting $30,000 to $40,000 a month illegally catering to short term renters, said resident Mark Gold.

The city received 56 complaints about unpermitted renters in 2104 and 19 new complaints last month alone, Johnson reported. While Airbnb started as a place for people to rent out a room or even a couch, almost all complaints in Laguna have been about entire units used as vacation rentals, she said.

The loss of inventory to short-term rentals is contributing to rates for long-term rentals that have never been higher, said ReMax realtor Nicola Peterson Willhoit, in an interview.

Johnson proposed immediate measures, such as maintaining a list of the permitted short-term rentals on the city’s website, proactive enforcement, rather than relying on complaints and supporting state bills on stricter regulation. She also the Council could follow the tack of other cities.

San Clemente, for example, hired a consultant for $5,000 to monitor booking sites, reaping $300,000 in increased bed taxes. Other cities have made progress getting web sites to share information. Santa Monica just last week banned the rental of full units, only allowing homeowners to rent out a portion of their home while they remain on the premises.

Local residents expressed concerns about losing neighborhood ambiance.

Over the past three years the short-term rentals have “brought hundreds of strangers into a community of 22 homes,” said Lynn Rappaport, who lives on Seacliff in South Laguna. “We the residents pay for their enjoyment by eliminating ours,” she said, insisting on more serious consequences to deter absentee owners who rent out properties.

Earlier, the Council granted the appeal of Reed Street homeowner Ronnie Rogers who lives in his guest house while renting the main two-bedroom house to vacationers. City planners denied him a short-term lodging permit based on opposition from neighbors.

The Council voted 4-1 to reverse that decision, in part because no one had ever complained about Rogers’ tenants. But they stipulated that the permit expire in a year and required Rogers to remain in residence during rentals.