Permits for Short-term Rentals Still on Hold

Anyone hoping to earn some extra cash by renting out space in their home this summer to short term visitors will have to make other plans if they want to go about it legally.

The City Council Tuesday voted 4-1, with Mayor Pro Tem Steve Dicterow dissenting, to extend for 90 days a moratorium they imposed last month on issuing short-term lodging permits.

The action was taken to give staff more time to figure out the best ways to enforce or revise current regulations to address residents’ complaints. Staff suggested a 10.5-month extension to make viable recommendations, but the Council demanded a more timely response.

Vacation destinations up and down the coast are now grappling with how to regulate the new phenomenon created by online booking services, such as Airbnb, that allow ordinary homeowners to land paying guests and pad their bank accounts. Some residents offer a room or guesthouse, but investors also see opportunity, buying up homes with the sole purpose of providing tourist accommodations.

This week’s decision to hold off on new permits may placate residents who describe once-quiet neighborhoods transformed into hotel zones, just as it may frustrate those who expected to make ends meet by sharing their home with summer vacationers, unless they already have permits or plan to fly under the radar.

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, according to an earlier report by Assistant City Manager Christa Johnson.

Tourism office Visit Laguna Beach recently fielded calls from six tourists who said the reservations they made through AirBnB were cancelled when the homeowners learned of the moratorium, Johnson reported Tuesday.

The moratorium extension only prevents staff from processing new applications for permits. It won’t affect existing permit holders and it likely won’t matter to scofflaws.

Owners renting out homes without permits have become adept at avoiding detection, as evidenced by the hundreds of Laguna homes listed on rental websites that far exceed the 64 or so permit holders, Johnson’s report says. The city received 56 complaints about unpermitted renters in 2014 and 19 new complaints in April alone, she said.

Council member Kelly Boyd lamented that the illegal renters were not only taking business away from bed-tax-paying hotels, but were also not paying the bed taxes themselves.

“It’s not about the money. It’s about people being able to live in their home and not be disturbed by a bunch of fraternity boys who just get drunk and rowdy,” said Council member Toni Iseman. “And because we can’t source the rental agency in order to enforce compliance, they’ve given us no choice,” she said.

While last month’s hearing was dominated by residents who aired their grievances about disrupted lives, this week drew testimony of people opposed to imposing restrictions.

Resident Michael Brown questioned how officials could be so sure that short-term renters were truly the source of all complaints about rowdiness, and suggested that it was unfair to impose restrictions across the board after hearing from “a few people who have problems.”

Resident Howard Hills expressed disappointment that staff had not figured out a solution to the perceived problems with short-term rentals before the original moratorium expired. He also questioned the legality of establishing that moratorium on an urgency basis in the first place. “If you’re going to regulate it, regulate it,” he said.

Mayor Bob Whalen agreed that Hill’s question was valid, but added that if they didn’t extend the moratorium there might be a host of people rushing to get permits for fear of an imminent crack down. And the extension would allow tweaking permit regulations and studying whether short term lodging should be prohibited in some zones.

Council member Rob Zur Schmiede said the regulations need to be rewritten to grant short-term rental permits to specific homeowners, with annual renewal requirements, rather than the current approach that grants permission tied to the land.

Whalen said he personally hoped for a solution that would allow some form of short-term rentals, and called for solutions within 90 days.

Dicterow saw the need to address concerns over neighborhood disruption and also to accommodate responsible homeowners who want to take in short term renters, but called for extending the moratorium no more than 30 days to find solutions. “I think we need to move faster,” he said. Prohibiting permits encourages people to violate the law, he said, adding that we need to work with the rental sites to help us with enforcement.

Staff intends to come back to the City Council with recommendations by Aug. 18, said City Manager John Pietig.

Homeowners currently must pay a $275 fee to apply for a short-term rental 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.