Elected officials on Tuesday, Aug. 9, are expected to decide between two proposed ordinances to regulate short-term lodging in Laguna Beach, a divisive issue in a town with an affordable housing shortage and a responsibility overseen by the Coastal Commission to promote lower-cost visitor accommodations.
One measure drafted by the city’s Planning Commission would restrict rentals of less than 30 days to visitor-serving, commercial areas, while the other, devised by a council subcommittee, would allow homeowners to rent out their premises in neighborhoods on a limited bases, just two 14-day periods a year.
Over the last year and in previous hearings, many residents expressed vociferous objections to short-term lodging, raising concerns about the city’s ability to enforce regulations and investors converting long-term rentals into short-term ones.
Homesharing 4 Laguna Beach, whose 100-plus members endorse the rental concept popularized by online websites, urge city officials to reject new rules and instead allow the old rules to continue, which allowed short-term rentals anywhere under a permit process where neighbors were noticed and property owners paid bed tax. No new permits have been issued since May 2015, when a moratorium, due to expire Oct. 1, was imposed. Nevertheless, scores of scofflaws continue to operate. While just 34 legal permits exist, Airbnb for example, lists 116 rentals in Laguna Beach currently.
“The proposed regulations are a de facto ban,” said Jason Vogel, one of the group’s organizers and five-year local resident. He owns one rental property in Laguna Beach and a score of others in Los Angeles. “Let’s not be the test case; let’s see where the courts come down on this,” Vogel said.
Indeed, other coastal cities that have enacted short-term rental regulations are confronting legal challenges to their ordinances.
The San Clemente Vacation Rental Alliance sued the city of San Clemente and the Coastal Commission in Orange County Superior Court on June 20, asking the courts to set aside restrictions that the group says will reduce vacation rentals by 87 percent.
In May, the San Clemente City Council voted to restrict most vacation rentals to designated visitor-serving sections, impose parking constraints and give existing operators in residential neighborhoods two years to shut down.
As San Clemente lacks an approved local coastal plan, which certifies that land use complies with the Coastal Act, the city is required to seek approval for its ordinance from the Coastal Commission.
Hermosa Beach, which also lacks a local coastal plan, adopted a total ban on short-term lodging May 24. The city was sued in Los Angeles Superior Court on June 27 by Jim Holtz, who claims the city can’t enforce its prohibitions without seeking approval for its ordinance from the Coastal Commission.
“When you take all these units off the market, it changes the intensification of use,” said Alan Block, Holtz’s Los Angeles attorney, who in the 1980s worked as counsel to the Coastal Commission in the attorney general’s office. “One of the primary purposes of the Coastal Act is to promote public access,” he said.
And the Coastal Commission staff, in issuing advisory letters to Hermosa Beach and Laguna Beach, has made no secret of its endorsement for regulations rather than bans on short-term lodging. But in its letter to Laguna, staff also described proposed restrictions in residential areas as “overly restrictive” and would likely be found inconsistent with the Coastal Act, said Charles Posner, a planning supervisor for the Coastal Commission. He suggested as part of any ordinance, the city provide a utilization study with demand projections.
Whatever is approved by the City Council, before it becomes effective, it will require certification for consistency with Laguna’s local coastal plan by the Coastal Commission, Community Development Director Greg Pfost said. “We’ll see what happens; they’re making their point,” he said, though the city lacks a study of the town’s vacation rental operations.
“This is an evolving area in policy and law.” said Laguna Beach City Manager John Pietig. “We’re all trying to learn from each other,”
As courts make rulings, the ordinance could be revised again, Pfost said.
For his part, David LaMontagne, who owns a rental home next to his own, suggests allowing market forces to play out. The market for rentals is but 12 weeks long, said LaMontagne, who in 2005 traveled with his family to 28 countries in 10 months. “We went from flat to flat,” he said, contacting the Chamber of Commerce in each town to find home rentals.
“It’s a bummer to feel at odds with my own community,” he said.
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Under the proposed ordinance the following is an estimate of a typical landlords situation.
$6,000 Gross Rental Income (2 times for 2 weeks = 4 wks x $1500 per week)
$375 Airbnb, B2B, HomeAway, VRBO 1 Year Listing fee ($350-$400)
$240 4% Credit Card Transaction fee (3% – 5%)
$1200 Insurance required to cover tenants (in addition to Homeowners Policy)
$350 City application fee
$690 City Conditional Use Permit (Per Scott Drapkin)
$407 City business license & Home Occupation Fee
$600 City transient occupancy tax (currently 10%)
$? City Transient occupancy registration certificate
$250 1st 300′ Public Notice Mailing (2nd mailing $200)
$? Fire department safety inspection fee
$50 Landlords additional utilities
$4162 Total Fees & Expense = 69% of Gross
$1838 Landlords Net Profit = 31 % of Gross
It is clear that the new ordinance is a de facto prohibition of STR. The numbers above illustrate it from an economic perspective, but ultimately the hassle of going through a ridiculously invasive AUP will disincentive the permitting process and incentive the underground economy. Exactly what the new ordinance was NOT supposed to do.
What is really amazing is the our City staff continues pushing something that they know is NOT going to pass the Coastal Commission approval. This will lead to more community rift, more wasted hours of City government, and more negative impact to the economy of Laguna.
We need our City Council to lead and stop being managed by the bureaucrats that should be enacting instead of dictating policy.
Unfortunately, the Laguna Beach City Council is considering adopting regulations that would effectively ban our vacation rental industry, thereby potentially discouraging visitors from coming to see what our city has to offer. These would place an onerous burden on property owners and managers who, in the spirit of entrepreneurship that is so native to California, want to take advantage of the full extent of their property rights to rent out their homes.
Eliminating STRs fails to take into account the many benefits they have brought our community – not to mention the untapped tax revenue and economic activity that could result from embracing the industry. By our estimation, imposing a recommended 11.5 percent transient occupancy tax on STRs, similar to the tax paid by hotels, would bring $1.6 million into city coffers. We estimate the spending from STR visitors to total $15 million in gross sales at our local grocery stores, restaurants, and retail shops. This increased activity is no small deal.
[…] looking to rent out their homes on a short-term basis, and the groups are fighting similar opposition to short-term rentals elsewhere as cities clamp down on rental […]