Short-Term Rental Rules Take Effect

Amid a national backlash over the proliferation of Airbnb-type short-term lodging in the past year, Laguna Beach, along with many other cities, enacted new rules that attempt to quell neighborhood discontent.

Laguna Beach prohibited short-term rentals in all neighborhoods, allowed them to continue in commercial areas and imposed new regulations for existing legal ones that take effect Oct. 1. Then, a moratorium on issuing permits expires.

Of the 36 current legal short-term rental permits in Laguna Beach, the majority, 26, are embedded in neighborhoods. They will continue to operate there despite the ban, which will restrict short-term rentals to the town’s mixed-use commercial zones.

Allowable zones include the downtown, along north and south Coast Highway and Glenneyre Street as well as the hotel-motel zone in Aliso Canyon. In some areas, the zone for legally permitted rentals drops back a full block along Coast Highway. The current 36 permitted properties offer a total of 81 short-term rental units.

The new law must still be approved by the California Coastal Commission, which recently sent a letter to the city stating its concern over limiting what it considers affordable lodging for visitors. Other coastal cities such as Hermosa Beach are facing lawsuits challenging their compliance with Coastal Commission strictures.

The new city law forbids vacation rentals of 30 days or fewer in all residential zones, except for the rentals already sanctioned with an Administrative Use Permit, said Community Development Director Greg Pfost. Permits for the legal rentals were issued prior to the year-long moratorium.

“An AUP can be forever,” Pfost said.

Permits, however, can be lost. Owners of short-term rental properties must relinquish their now-precious income-producing AUPs if they fail to renew their business licenses, pay transient occupancy taxes on their guest’s payments or comply with the conditions of their permit, Pfost said. They also won’t be able to reapply if the units are not rented during a 12-consecutive-month period, he said.

Permits can also be revoked if egregious or repetitive complaints occur, which is something the city hadn’t enforced before despite a high number of repetitive complaints, according to Pfost’s earlier reports. One legal rental provoked 27 disturbance calls, he said.

The new law banning residential short-term rentals in Laguna responds to local residents lodging hours of complaints during weeks of meetings over the exponential growth of short-term rentals in the resort beach town.

Proponents of short-term lodging in Laguna neighborhoods are still reeling from the blanket ban, which was vociferously supported by residents and business owners such as Mark Christy, owner of The Ranch resort in South Laguna, and civic organizations such as Village Laguna, an organization that works to preserve Laguna’s historic character.

Karen Petty owns a legal short-term rental in the Top of the World neighborhood and said she filed a formal complaint saying her ban-supporting neighbors have harassed her 14 times. She told the City Council that her neighbor put signs supporting the ban in front of her windows to block the ocean view for her renters.

“What the city did was wrong,” said Lydia Bell, a member of Home Share Laguna, a group organized to support short-term lodging. Bell and her husband David own rental property in north Laguna.

The Bells used to rent out a cottage in north Laguna short term. “I’ve been doing it illegally for eight years, responsibly,” she said. She said she was told by the city she didn’t need a permit because she wasn’t renting the property full-time.

Now that will have to stop, she said. She will still rent the property for a month or so several times a year, which is legal.

Bell and Petty agree there’s a misconception that eliminating short-term rentals will increase long-term rental stock in the city. People who rent their main home or a second home don’t want long-term renters, they say, due to potential property damage. A certain percentage of long-term renters just don’t care, Bell said. “We put $300,000 into the interior and furnishings,” she said, “so we’re picky who we rent to.”

Staying in a home offers more space and more amenities such as kitchens than a hotel for the same or more money, she said, while bringing more shoppers and diners into the city. Now they’ll stay in nearby cities instead, Petty predicted. Both Dana Point and Newport Beach allow short-term rentals in residential areas.

The new law in Laguna shifts authorization for the operating permit to the property owner rather than the property itself. Before the new law, the permit always ran with the land, Pfost said.

Pfost said the switch occurred because the property owner, not the land, is responsible for ensuring that renters follow regulations. “We wanted to make it personal to the property owner,” he said. If the permit is transferred to a new property owner in a qualified commercial zone, that person must be aware of the rules, he said.

The new ordinance says the permit can be revoked if there are three or more violations, a 24-hour contact person must be provided to handle problems, such as loud noise and parking issues, and the property owner or operator must reside at the residence if the property offers multiple units. The new law also prohibits commercial activities such as weddings and large parties. An AUP costs $302 and a business license costs $66.88 minimum. The AUP must be granted first and depends on a hearing with the community development director, Pfost said. Appeals over the granting or denial of a permit costs $650 each.

Anaheim, another albeit larger tourist town, also banned residential short-term rentals this year, effective Aug 11. Permits for existing residential units will expire over the next 18 months, said Mike Lyster, the city’s spokesman. A licensed short-term rental may operate only until Feb. 8, 2018.

The ban there resulted from residents complaining about “mini hotels” sprouting up in neighborhoods. The ban did not result from too much competition for hotels, Lyster said. Anaheim receives $150 million in taxes from hotels and received $3 million from short-term rentals. That difference, he said, did not present a threat.

Exceptions to the ban, said Lyster, will be considered for financial hardship cases. If owners can show “severe financial consequences,” an extension may be granted until owners can recoup their investment on the property, he said.

There is only one short-term rental in a commercial zone in Anaheim, Lyster said, due to the lack of housing units in those zones. The existing one is more like a boutique hotel, he said. Others in commercial zones are welcome if the right space can be found, he added.