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HomeMy WebLinkAbout11-12-2013 ac friedmann ss1Goodwin, Heather From: Sent: To: Subject: Attachments: AnthonyJ. Mejia I CityClerk (:ål;\¡ {}l' *.rr: l*ls (lltì¡$p(} gqo Palnr Sl.roqt 5an Luis ilbispo, C'\ g34or Ìei | 845 7ilt.7ro: From: Christianson, Carlyn Sent: Monday, November 04,2013 10:23 AM To: Mejia, Anthony Subject: FW: Issues Document Carlyn Christianson Member, San Luis Obispo City Council 990 Palm Street, SLO 93408 cchristi@slocÍW,org 805-550-9320 cell 805-752-1021 home (for city calls) Mejia, Anthony Monday, November 04,20L3 L0:38 AM Goodwin, Heather FW:lssues Document Residence Stays pro con.docx Rl::(-..D NO\/ 0 4 2013 $Lt")c!-. AGENDA CORRESPONDENCE From: Kurt Friedmann Ikurt@kfmail.com] Sent: Sunday, November 03, 2013 11:34 PM To: Max, Jan; Smith, Kathy; Christianson, Carlyn; Carpenter, Dan; Ashbaugh, John Subject: Issues Document Dear City Council Members, V/hile the issue of short-term rentals is important to our SLO Host group, we understand that you have many important issues to address each week. Although we want to heard, we are sensitive to the fact that it takes a lot of time to address so many individual concems via email from our group. 'We want to help! Attached is an informative document that includes most, if not all, of the major issues surrounding residence stays in the City of SLO, Having all of the issues in one document, complete with a pro/con analysis for each one, should help you understand the issues from a residence stay perspective. This way we don't have to make all of our points individually, which should save you a lot of headaches, In return, we simply ask that you please read through the document completely. Likewise, we want to be considerate of your time at city council meetings, This Tuesday, we will only have one speaker at the meeting, who will be the voice for the entire SLO Host group, This will save you all a significant amount of time. Please feel free to contact me directly with any questions regarding the content within the attached document, I'll be happy to help. Best regards, Kuft Friedmann (80s) 234-0648 kurt@kfmail.com 2 City of San Luis Obispo Short-Term Rental lssues Residence Stay Perspective Background ln 1988, the City of San Luis Obispo passed an ordinance banning all short-term rentals within the city limits, At the time, only a handful of short-term rentals existed in the city, and as such, the need for enforcement of the ban was nearly non-existent. With the advent of vacation rental sites such as Airbnb, VRBO, and HomeAway, more short- term rentals became available in the city. Despite an increase in the number of short-term rentals, for the past 30 years, homeowners in the City of San Luis Obispo conducted short-term rentals with very few complaints or problems. According to the San Luis Obispo Community Development Department, there have been just five documented vacation rental complaints in the last 30 years, one of which was regarding a primary residence, Most of these homeowners never knew about the short-term rental ban because it was not actively enforced. ln fact, the ordinance was so obscure, that some homeowners were actually issued business licenses to conduct short-term rentals by city employees who were uninformed of the law, These business licenses were later rescinded when the city began enforcing the law in May of 2013. The reason the city began enforcing the law was not due to any significant number of noise or public safety complaints. Enforcement began because one or two individuals, who were aware of the law, challenged the city simply for not enforcing it. They saw short-term rentals being advertised on Airbnb and VRBO and felt compelled to challenge the city for not imposing the ban. After persistent, continued pressure and threats of legal action, the city was forced to comply with the enforcement demand. ln May of 2013 homeowners began receiving cease and desist notices from the city. Soon thereafter, a group of approximately 25 local homeowners formed SLO Hosts, an advocacy group devoted to decriminalizing the practice of short-term rentals by owners of primary residences in the City of San Luis Obispo. SLO Host members live onsite at the properties they rent and are asking for the city to approve a new lodging use description called "residence stays", which would allow owners of primary residences to rent out rooms for less than 30 days, ln October of 2013, the city council voted 4:1, with mayor Jan Marx opposing, to study the topic of vacation rentals within the city limits. The study session, which is open to the public, takes place at 6pm on November 'J,2,2013 al the regularly scheduled city council meeting. Following is a list of issues that have commonly been advanced by those supporting and opposing short-term rentals and residence stays: Home Ownership Affordability for Local Workforce Case for Residence Stays Due to the h¡gh cost of housing in the City of San Luis Obispo, the percentage of owner-occupied residences in the city is approximately 35%. The rate of home ownership by our local workforce continues to decline as investors increasingly purchase available properties due to a lucrative rental market, which now stands al 65% non-owner occupied. Short-term rentals provide owners of primary residences additional income that can be used to offset the high cost of a mortgage, thus making home ownership for our local workforce more attainable within the city, Further, because owners of primary residences rent rooms at the property where they live, availability of housing for other citizens is generally not impacted to the degree that it is for non-owner occupied housing. Case Against Residence Stays Opponents believe that allowing residence stays will actually drive up the price of owner-occupied housing within the city, thus making home ownership even less affordable. Likely Outcome Because the number of short-term rental units are a relatively small percentage of the overall housing market in the City of San Luis Obispo (less than % of t percent), permitting short-term rentals for owners of primary residences would likely have little impact on the availability of affordable housing or general real estate prices. A limited number of homeowners could be forced to sell their homes without the extra income afforded by short-term rentals, which could create an even greater number of non-owner occupied residences, but again, not in large numbers. Effect on Neighborhoods Case for Residence Stays Because owners of primary residences live on-site at the properties they rent, they are more inclined to have relationships with neighbors and be protective of the homes in which they live. As such, owners of primary residences who rent to short-term guests are generally more selective about the people to whom they rent. Further, owners of primary residences are readily available to address issues, should they arise, and take immediate action. The fact that there has only been one documented complaint against a vacation rental by the owner of a primary residence in the past 30 years is proof that any negative effect on neighbors is negligible. Neighbors generally prefer occasional short-term renters to a home of full-time students, which is a likely outcome for secondary income property. Further, because occupancy rates for short-term rentals are normally less than 50%, there is less impact on the neighborhood than in a long-term rental situation. lssues such as parking, noise, and general congestion are actually reduced by short-term rentals, Nearly half of the income derived from short-term rentals is spent on home improvements to make the home more beautiful, thereby enhancing the overall value of the neighborhood. Case Against Residence Stays Neighbors often want to know who is living next to them and are sometimes suspicious of people in the neighborhood who they don't know. There is a fear that the owner of the primary residence will not be present when guests are in the home. Opponents of short-term rentals believe that short-term renters are more likely to commit crimes in the neighborhood than someone who is a long-term renter. Additionally, concerns regarding proliferation of short-term rental housing, on-street parking availability and noise are primary issues for opponents of short-term rentals. Iikely Outcome For the past 30 years, owners of primary residences in the City of San Luis Obispo have conducted short- term rentals with very few complaints or problems - just one complaint. Until recently, most of these homeowners never knew about the short-term rental ban because the City of SLO never enforced it. As mentioned in the background section of this document, the law was so obscure, that some homeowners were actually issued business licenses to conduct short-term rentals by city employees who were ignorant of the law. It's hard to imagine that the future would be much different than the past if the ordinance changed because few homeowners knew of the law in the first place. So if complaints for actual rental proliferation, noise, parking, or crime violations were going to be a real issue in the future, they would have certainty showed up in the past in greater numbers than they have. Looking at the factual evidence, there is no data to suggest that short-term renters pose any greater safety or noise impact than long-term renters or residents. Likely, student populations pose the greater risk of noise and safety issues within neighborhoods. There is factual evidence to suggest that owners of primary residences, who derive income from short- term renters, do make substantial investments to beautify their homes. Guests often rate the quality of their stays on vacation rental sites, which encourages homeowners to enhance their properties, Protection of Affordable Rental Housing Case for Residence Stays Proponents of residence stays propound that short-term rentals by owners of primary residences do not significantly decrease the availability of affordable rental housing for young professional couples or students. The reasoning for this is that homeowners are not generally inclined to have a student living in one of their spare bedrooms while they are also occupying the same home, Owners of primary residences generally will not rent a spare room out full time, as they want the extra room to be available for family and friends on an occasional basis. Further, young professionals are typically not inclined to live in an owner-occupied house. ln the case of a detached l-bedroom "granny unit", the economics of renting out short term are generally not compelling enough for most property owners. After taking into account advertising, cleaning, coordination, utilities, supplies, and occupancy rates, renting short term is typically not financially beneficial compared to long-term rentals of separate 1-bedroom units. Case Against Residence Stays Opponents believe that allowing residence stays will reduce the availability of affordable long-term rental housing. Because the nightly rate for vacation rentals seems so lucrative, opponents feel that property owners will be compelled financially to rent short term, reducing the availability of affordable long-term rentals. This is especially the case in l-bedroom secondary dwelling units on the property, Likely Outcome Because the number of short-term rental units are a relatively small percentage of the overall housing market in the City of San Luis Obispo, permitting short-term rentals for owners of primary residences would likely have little impact on the availability of affordable rentalhousing. Only a smallfraction of the 35% of owner-occupied primary residences in the city have elected to rent rooms out on a short-term basis (less fhan I/2 of !%1. There is no reason to believe that the number would increase substantially in the future given there was no effective ban in the past. The same fears existed when the city first considered allowing bed & breakfasts. The fear was that, due to lucrative rental rates, B&B's would proliferate. But that did not happen because there are only so many people who are willing to do the work that it takes to successfully rent rooms to tourists short-term. The evidence of that is clear as only a small number of B&B's exist in the city today and that number is dropping rather than expanding. The same issue that limits the number of B&B's will limit the number of residence stays, namely, it's hard work and many homeowners are not prepared to host travelers at thelr personal residence. The economics of renting a 1-bedroom secondary dwelling unit short term does not appear to be compelling in comparison to long-term rentals. Following is a financial example: Long-Term Detached 1-Bedroom Rental: Average Monthly Rent: S1,100 Utilities: Paid by renter Short-Term 1-Bedroom Rental: Average Monthly Rent: $1,800 (assumes 50% occupancy, $f ZO/night) Utilities: ($175 monthly) paid by owner Advertising: ($50 monthly) Cleaning: ($:00 monthly) assuming $75 fee x 4 rentals per month Furnishings: (550 monthly) amortized Supplies: ($75 monthly) lnternet / Cable: ($100 monthly) Coordination: (S200 monthly) assumes 10 hours monthly x S20/hour Net Monthly lncome: $850 Competition w¡th Local Hotels Case for Residence Stays Travelers who stay at owner-occupied properties seek a unique lodging experience that cannot be offered by hotels or bed and breakfasts. While proponents of residence stays believe that competition is healthy for the tourism industry, short-term rentals generally do not compete with local hotels because the clientele preferences are very different. Additionally, residence stays provide an overflow option for tourists who find it difficult to find traditional lodging options during certain events when hotels have no vacancies, particularly during the summer. Residence stay proponents believe that short-term rentals should be subject to the Transit Occupancy Tax (TOT) to create taxat¡on parity and even competition with hotels. Case Against Residence Stays Opponents believe that short-term rentals may negatively impact the local hotel trade and create unfair competition. L¡kely Outcome As evidenced at the most recent TBID (Tourism Business lmprovement District) meeting in October of 20L3, the majority of hotel owners and managers do not see residence stays as a threat to their business. They simply want the playing field to be fair by ensuring that all short-term rentals include the TOT. The likely outcome of permitting residence stays is an increase of approximately S150,000 in yearly TOT income to the city. For comparison, Santa Barbara, a city that decided not to enforce its current vacation rental ban, has generated 5711,000 in TOTfrom 159 vacation rentals in 2013. By comparison, the estimate for San Luis Obispo is very conservative, lncreasing Local Tourism Case for Residence Stays Proponents of residence stays state that offering short-term rental options increases tourism by promoting additional choices for travelers. Evidence in the form of letters from past tourists indicate that if short-term rental options are not available, travelers will choose other communities for their vacations. The average length ofstay by a short-term rental guest is over double that of a typical tourist, (4 days vs. 1.7 days) which increases tourism revenue. Due to high guest satisfaction ratings, proponents suggest that residence stay tourists are far more loyal, visit more frequently, stay longer, spend more, and recommend the City of SLO more often to friends, neighbors, and business associates. Money generated from short-term rentals remains in the local community and increases local revenue because rent is paid to primary residents that then spend locally. Further, tourists who are considering moving to San Luis Obispo want to experience the feel of living short term in an actual neighborhood prior to purchasing a home. Case Against Residence Stays There is currently no opposition to residence stays on the basis of promoting increased tourism Likely Outcome Based upon the 55 short-term rentals that were operating at the time that the vacation rental ordinance was enforced, projections of yearly direct economic benefit to the city is estimated at approximately S7,6 million. There is l¡ttle doubt that residence stays positively affect tourism and benefit the local economy. Following is a summary of how the 57.6 million is economic benefit estimate is derived: Number of short-term rentals prior to ban enforcement: t 55 Average length of stay: 3,5 days Average occupancy: 3.2 Average daily rental rate: S150 per property Average Occupancy Rate: 50% Expected ToT at 10%: $148,500 (5150 x 180 days x 55 rentals) Average spent in community per day: SZ+O Total direct economic impact: 57.6 million (5240 x 180 days x 55 rentals x 3,2 occupants) Regulation and Enforcement Case for Residence Stays SLO Hosts are in favor of creating a new zoning use description classification to allow short-term rentals for owners of primary residences in the City of SLO, They are not asking for the current vacation rental ban to be overturned. The reason for this is that owners of primary residences are generally available to oversee guest behaviors, which is different than the typical vacation rental scenario. As a result, complaints by neighbors are relatively rare and can be handled directly by the property owner. ln the event that a particular homeowner received multiple valid complaints, they could lose their right to conduct residence stays. SLO Hosts believe that the regulations and enforcement procedures for short-term rentals should be the same as those that are already in place for long-term rentals. Attached is a sample "residence stay ordinance" created by SLO Hosts, which explains how residence stays could be regulated, lfaccepted, the SLO Hosts ordinance proposal would be among the most restrictive short-term stay regulations in the country. Case Against Residence Stays Opponents of residence stays believe that regulations and enforcement for short-term rentals should be much more restrictive than those of long-term rentals. ln particular, opponents believe that enforcement will be difficult and that substantial time will need to be spent to handle violations and complaints. [ikely Outcome For the past 30 years, homeowners in the City of San Luis Obispo have conducted short-term rentals with very few complaints or problems, Until recently, there was little enforcement of the ordinance because legit¡mate complaints were extremely isolated. The one documented complaint against an owner of a primary residence was handled through existing city ordinances. It's hard to imagine that the future would be much different than the past because few homeowners knew of the vacation rental ban in the first place. So if complaints for actual noise, parking, or crime violations were going to be a real issue in the future, they would have certainty shown up in the past in greater numbers than they have. Looking at the factual evidence, there is no data to suggest that short- term renters pose any greater safety or noise impact than long-term renters or residents. Because occupancy rates are less than 50%, actual impact on neighborhoods, and therefore the need for enforcement, would likely be exponentially reduced. The likely outcome is that residence stays w¡ll require little additional enforcement time than what is currently being expended for enforcing the current vacation rental ban. ln fact, cities that distinguish between primary residences and non-primary residences in their ordinances have far fewer regulations, if any, for primary residences. The distinction is made in communities such as Austin, Texas and Ashland, Oregon because primary residence short-term rentals have been shown to cause very few complaints. Homeowner's Right to Privacy and Equal Protection Case for Residence Stays SLO Host advocates believe that homeowners have a right to be left alone in the privacy of their own homes, provided that they do not infringe upon the rights of neighbors. Part of that protection includes having the right to choose with whom to live, regardless of how long a guest stays. Additionally, homeowners renting to short-term guests may have equal protection under the law to be treated the same as homeowners who rent their properties long term, Case Against Residence Stays Opponents of residence stays believe that homeowners who rent their property to short-term guests do not have the same rights as homeowners who rent long term, and therefore, are subject to special rental conditions that are not required of long-term rentals, Likely Outcome Court decisions in the State of California such as the Coalition Advocating Legal Housing Options v. the City of Santa Monica support the SLO Host position case based on right to privacy and equal protection laws. Case law in this community set a precedent that may prevent the City of San Luis Obispo from discriminating against a homeowner's right to privacy and equal protection. Other case law examples in California could challenge right to privacy protect¡on, making the likely outcome of a legal case against the city unknown and unnecessary.