Agenda Item Wording:
title
Consideration of and direction on initiating potential Municipal Code Updates related to Short-Term Rentals (STRs).
body
Deadline for Action: 5/1/2023
Submitting Department: Community Development
Contact Name and Phone Number:
Josh Dan, Senior Planner, josh.dan@visalia.city <mailto:josh.dan@visalia.city>, (559) 713-4003
Paul Bernal, Community Development Director, paul.bernal@visalia.city <mailto:paul.bernal@visalia.city>, (559) 713-4025
Renee Nagel, Finance Director, renee.nagel@visalia.city <mailto:renee.nagel@visalia.city>, (559) 713-4375
Department Recommendation:
Staff recommends that the City Council conduct a review of current processes and standards related to Short-Term Rentals and consider the information presented in this staff report. Based on the staff report, presentation and comments received, the City Council may direct staff to formulate potential changes related to Short-Term Rentals and begin processing a Municipal Code Text Amendment to implement these changes. Revisions to be considered as part of the Municipal Code Text Amendment process related to Short-Term Rentals will be subject to a future work session discussion.
Background Discussion:
A Short-Term Rental (STR) is defined in the California Government Code Section 36900(d)(2) as a residential dwelling, or any portion of a residential dwelling, that is rented to a person or persons for 30 consecutive days or less. (Please note this definition is different than group homes licensed through the state. Also different are board and care facilities which are defined in the Zoning Ordinance.) STRs are commonly booked through third-party internet hosting platforms such as Airbnb and VRBO. In addition, guests may also book STRs through travel sites such as Expedia or Hotwire, or directly with a homeowner or tenant via social media platform marketplaces or word of mouth.
Complaints from local residents in the community identifying concerns and issues with SRTs have been brought to the City Council’s attention and questions asked regarding if this use should be regulated differently in our community.
Based on direction from City Council, staff has researched regulation of STRs to better understand how other agencies are addressing STRs in their communities. Through this research, staff is presenting various options that the City Council may consider should the Council elect to move forward with directing staff to begin formulating a draft ordinance that will address and regulate how SRTs are reviewed in the future.
Current City of Visalia Municipal Code Sections Related to Transient Rental Uses:
Currently, the Visalia Municipal Code (VMC) does not explicitly address STRs. Staff has addressed STR requests like most other forms of home-based businesses, as detailed below:
1. An interested STR operator files for a business license with the Business Tax office.
2. Business Licenses are reviewed and processed by the Business Tax and Planning Divisions for compliance with the Municipal Code.
3. Once approved, the STR operator is permitted to rent out their home in short intervals.
Transient Occupancy Tax
The City’s Finance Department collects a Transient Occupancy Tax (TOT) as detailed in Title 3 Revenue and Finance, Chapter 3.28 Transient Occupancy Tax. This chapter defines and details the percentage of tax levied for the privilege of occupancy in any hotel by a transient (ten percent of the rent charged by the operator, VMC 3.28.020). Further, the chapter details an operator’s duties, obligation to report TOT, and possible penalties for failure to comply with or report TOT subject to the requirements of the chapter. (Please note California Government Code Section 13000 governs the collection of transient occupancy tax, and more specifically, Section 13204 lists a variety of uses not to be considered hotels and thusly are exempt from TOT, which include any hospital, convalescent home, sanitarium, medical clinic, home for aged people, foster home, or similarly operated for the care or treatment of human beings, etc.).
Section 3.28.060 of the Municipal Code details an operator’s requirement to report tax collected to the tax collector on the last day of the month following the close of each calendar quarter, or at any interval required of the operator by the tax collector. Figures provided by the Finance Department have shown that while Airbnb actively collects and submits a monthly TOT payment to the department on behalf of operators, the platform does not detail collected monies in any category (i.e., the number of operators or collection amounts from specific addresses). For reference, Airbnb submitted $411,000 in TOT to the City for fiscal year 2021/2022. In addition, other STR platforms (ex. VRBO) place the requirement of TOT collection and reporting on the operator. STR proprietors that use social media and word of mouth may have no knowledge of a requirement to collect or report TOT.
Number of Short-Term Rentals within the City:
There are several websites that host STR’s. Due to the number of websites available, staff reviewed two of the major platforms that list SRTs in Visalia, Airbnb and VRBO. Airbnb is the most popular of all STR platforms, a search on their website identified a range of 340 to 867 spaces listed in Visalia, depending on availability and dates. The second most popular site, VRBO, identified a total of 93 properties. As noted above, the number of active STRs is difficult to quantify. Foremost, the City’s Business Tax office does not currently distinguish STRs from other types of landlord business licenses. Subsequently, TOT collected is reported after the fact as mentioned above, and unless a specific operator reports and posts TOT payment to the Finance Department, it is very difficult to understand how many active STRs are currently operating within the city.
It should be noted that staff could not query the list for properties only within the City’s limits and the site may have included properties within the vicinity of the city. Additionally, some STR operators may advertise their properties on both platforms, producing some overlap in figures.
There are short-term compliance service companies, one of which the Finance Department previously worked with to identify short-term rentals. However, staff found that the service did not yield the desired outcome. A list of operators/owners of STRs was compiled by referencing various rental sites and state revenue reporting; but very few operators/owners responded to City letters for compliance with obtaining a Business License and submitting TOT. However, if the City Council, based on information received, desires to have staff research further the benefits of using a third party service to track STRs operating in the community, staff can research this further and present our findings a future work session.
What Other Cities and Counties Have Done:
Staff’s research of other agencies throughout the valley and across the state have presented a common concern that the proliferation of unregulated STRs has the potential to impact housing for future home buyers or renters, and negatively erode neighborhood character. Many communities have described the necessity of establishing regulations derived by complaints about loud parties and a general disregard for community hospitality. While some agencies have taken a heavy-handed approach, processing STRs as a land use entitlement requiring a public hearing, the majority of communities researched have adopted requirements within their code’s finance chapters to identify the use and charge nominal annual registration fees via business license requests.
The following is a list of agencies reviewed which require some form of STR permit process:
|
Short-Term Rental Data Collection |
|
Agency |
Permit Required? |
Process |
|
City of Clovis |
Y |
Business license / Home Occupation Permit |
|
City of Fresno |
Y |
Application with Finance Dept. |
|
City of Kingsburg |
Y |
Business license / Home Occupation Permit |
|
City of Long Beach |
Y |
Application with Development Services (Code Enforcement) |
|
City of Los Angeles |
Y |
Application through Planning |
|
City of Morro Bay |
Y |
Application with Business License |
|
City of Sutter Creek |
Y |
CUP with Community Development and Finance Dept. Business License |
|
Contra Costa County |
Y |
Community Development STR application |
|
Inyo County |
Y |
CUP with Planning Dept. and Finance Dept. TOT |
|
Placer County |
Y |
Application with Development Services (Code Enforcement) |
|
Tulare County |
N |
Draft Ordinance presented, nothing currently adopted. |
(No agencies in Tulare County have ordinances or policies, although Tulare County has proposed an ordinance.)
Nearly all agencies researched have some form of conditions of approval associated with the operation of a STR. Primarily, the requirement that the operation of a STR be within a portion or entirety of a primarily or accessory dwelling unit and not within an unpermitted or nonhabitual space (i.e., garage, shop, shed, recreational vehicle, etc.). Limitations on the total number of STRs seem to be a common approach to coastal and scenic communities. Placer County, for example, has identified that 28 percent of Eastern Placer County housing stock are STRs (Lake Tahoe area). However, enforcement of a STR cap can understandably prove difficult to enforce without the reporting of STRs by operators or by code compliance complaints.
The cities of Clovis, Fresno, and Kingsburg each have simple permitting application processes established through their finance departments via business license applications. These applications, similar to Visalia’s own business license application process, are home occupation applications reviewed by planning or community development departments for consistency with code requirements. While each agency differs slightly in their regulation of STRs, each provide some language on limitation to occupants based on rooms or off-street parking figures.
Conversely, Inyo and Sutter Counties have established application processes requiring a Conditional Use Permit be obtained prior to operating a STR in a residence. Completed applications would include the applicant and subject property information, detail on the total square footage and number of bedrooms within the dwelling, operational statements, and a property owner acknowledgement complying with the ordinance. Additionally, the Tulare County planning staff presented a draft ordinance to the board of Supervisors which requires applicants apply for an administrative special use permit with the Resource Management Agency (RMA); however, this STR ordinance has not been adopted by Tulare County.
Considerations for Potential Direction on a Visalia STR Ordinance:
Given the concerns expressed at a prior City Council meeting regarding STRs, staff is seeking input and potential direction from the City Council on whether the Council wants to make any changes with regards to STRs. If that is the Council’s direction, then staff would like to discuss whether to pursue a Zone Text Amendment to amended various sections in the municipal code (i.e., Finance and Zoning sections) or draft a “stand-alone” STR ordinance that would detail application, operating standards, and processing requirements in the City of Visalia. Staff has provided the following options for the City Council’s consideration and direction as summarized below. Please note the following are examples of what an STR ordinance may include to address application submittal requirements, operating, and processing standards for STRs but does not encompass the wide array of options that could be considered. Based on direction received, staff will work on drafting a draft SRT ordinance that will be presented at a future work session.
1. Zone Text Amendment (ZTA) vs. Stand-alone SRT Ordinance
Option 1, ZTA Process: Using the ZTA process, staff would seek to amend various sections in both the Finance and Zoning Chapters of the municipal code to insert language and provision requirements to regulate STRs. This process could be implemented but would require applicants to navigate various sections of the municipal code on how to apply for an SRT.
Option 2, Stand-alone SRT Ordinance: This process would create a separate “stand-alone” section within the Zoning Ordinance clearly identifying process and operating requirements, while cross referencing to the transient occupancy tax section found in the Title 3 Revenue and Finance of the municipal code. Creating the stand-alone section regulating STRs would provide a clear and concise process for applicants seeking to operate STRs in the City of Visalia.
Option 3, Retain current process and use existing ordinances: Directing staff to retain current processes still requires operators/owners of STRs to obtain a business application, enroll in TOT collection and remittance to the Finance Department, and any site that becomes a public nuisance due to an increase in calls for service”) will be subject to administrative enforcement citations to correct the issue. Please note pursuant to Visalia Municipal Code Section 8.40.060.C.1, “for an individual residential unit, whether the unit is a standalone residence or part of a multi- family complex, more than six substantiated police and/or fire calls over a one-year period (other than a medical emergency) can result in the property being declared a public nuisance.
Staff Recommendation: Option 2
Staff recommends Option 2 be directed as this option would provide a stand-alone section within the Zoning Ordinance, preferably under Section 17.32 “Special Provisions”, that would seek to establish all processing and operating provisions in one section rather than dispersed throughout the municipal code. Please note that this option will require a cross-reference to the City’s Title 3 Revenue and Finance Chapter 3.28 of the municipal code specifying requirements related to Transient and Occupancy Tax registration, collection, and reporting requirements.
2. Processing of STRs - Administrative Approval or Use Permit
Administrative Approval Process: If the City Council desires to keep the STR process simplified, maintaining an “Administrative Approval Process” would keep the review and approval of STR application request with the Community Development Director and/or their designee similar to the Administrative Adjustment (Chapter 17.04) and Temporary Conditional Use Permit (Chapter 17.38) processes. Approval of an STR application through an administrative process will be subject to any codified requirements that the Council may consider as part of the STR process. Codified requirements for City Council’s direction/discussion are provided in Section 3 below.
Use Permit Process: The process would entail that any STR application submitted be subject to the public hearing process that requires a notice to be published in the local newspaper and public hearing notices to be mailed to property owners within 300-feet of the proposed STR use. This process will also require the assessment of the Use Permit fees noted in the City of Visalia Fee Schedule.
Staff Recommendation: Option 1
Staff recommends that Option 1 be directed as this option would allow STR applications to be processed in a timely manner similar to Administrative Adjustments and Temporary Conditional Use Permits, but subject to codified STR requirements as outlined in Section 3 below.
3. Existing STRs and “Grandfathering”:
As mentioned in prior sections of the report, current rental operators are required to apply for business licenses. Short-term rentals currently operating within the city will be subject to any new regulation that the City Council may enact and implement. Should a procedural and/or operating standard be established, existing operators will be required to apply for whichever means of licensing or processing may be required of them.
It has been identified that “grandfathering” will likely only become a concern if the City Council determines to limit the total number of STRs in Visalia. If that is the desire and direction of the City Council, operators/owners of existing STRs will likely need to demonstrate their operation’s compliance with current Business Tax and TOT obligations to demonstrate they are pre-existing.
4. Potential STR Codified Operational Standards:
Recently identified issues regarding the current state of STRs in the City of Visalia is the lack of codified requirements that STRs are currently not subject to any operating requirements. To ensure that both owners/operators and renters of STRs are aware of local requirements, many jurisdictions have adopted codified operating standards as a way to manage the rapid growth of short-term rental properties in their communities. The following are examples of operating standards that the City Council may direct staff to further analyze and include as potential codified operating standards. Please note that there are several cities that codify requirements that are explicitly tailored for their communities given their geographical location to entertainment venues and/or natural amenities. Additionally, codified requirements are only enforceable when an STR is known to staff; where, as mentioned previously, many STRs are discovered and will likely be brought into compliance after the facts. The following are examples of what could be considered but are not intended to be exhaustive of what other requirements could be applied.
1. Limit the number of STR’s allowed in the City of Visalia.
The City Council could consider limiting the number of STRs allowed to operate in the City of Visalia. Limiting the number of STR approvals could be a way to ensure that the conversion of residential units into STRs does not result in a loss of availability of housing options for long-term renters or home buyers in the Visalia community. In addition, limiting the number of STRs in local residential neighborhoods has the potential to prevent the transition of residential communities into “communities of transients”.
2. Establish an application and registration/verification process.
As part of the codified operating requirements, clearly identify an application and registration process to ensure that the owner/operator of the STR provides staff with the appropriate information including how the STR will be properly managed.
3. Require that the property owner of the STR reside in the unit.
The City Council, if desired, could seek to have a codified requirement that the owner of the property be required to reside on-site in order to operate the STR. Similar to some state statutes requiring owner occupancy, this is achieved by having the STR operator sign an agreement acknowledging that they will reside within the home for a determined period of time. The document may be recorded with the property or kept with staff.
4. Transient Occupancy Tax (TOT) Registration.
Codified operating requirements will explicitly detail that an owner/operator of an STR shall be subject to registering and paying TOT to the City of Visalia Finance Department. As part of this process, the owner/operator shall be fully responsible for the renewal, collection, and monthly remittance of TOT to the City of Visalia Finance Department. Please note the tracking of STRs to ensure compliance with TOT registration can be time consuming and may be at times difficult to verify given the wide variety of online platforms that host STR postings.
5. Parking Requirements.
Codified provisions to be considered include establishing a parking ratio for the number of occupants and/or guest allowed. As an example, a parking ratio consideration could be one on-site parking space for every four occupants and guests. On-street parking by renters and guests could be prohibited and not included in determining the maximum occupancy of the site.
6. Establishing Quiet Hours.
Potential operating requirements can include provisions that established observed “quiet hours”.
7. Limiting the Use of an STR.
Establish language that would prohibit use of a short-term residential rental unit for any other purpose other than dwelling, lodging, or sleeping. Prohibited uses that could be included are weddings, receptions, meetings, conferences, parties, commercial filming, or any other similar uses.
8. Limiting the number of occupants in an STR.
Establish codified requirements that limit occupancy of an STR to a specific number of occupants based on the number of bedrooms, while identifying a maximum number of occupants permitted.
9. Establish Suspension/Revocation process for STR.
Include language that identifies a revocation process if an operator fails to comply with codified operating standards.
Potential codified operating requirements will also include provisions regarding the suspension and/or revocation of an STR permit if the owner/operator fails to comply with adopted regulations.
Next Steps:
If directed by the City Council, staff will return with a draft ordinance to be presented at a future work session to go over the details contained in the draft STR ordinance prior to seeking direction to proceed with moving forward with an STR ordinance through the public hearing process.
Fiscal Impact:
None.
Prior Council Action: N/A
Other: N/A
Alternatives:
The City Council, in lieu of the recommendations provided, may direct staff to consider the following:
1. Receive the staff report and take no further action at this time.
Recommended Motion (and Alternative Motions if expected):
recommendation
I move to direct staff to begin drafting an STR Ordinance based on the City Council’s desired options as identified in the staff report and during the work session presentation.
end
Environmental Assessment Status:
No environmental assessment required at this time. The adoption of any ordinance changes will require environmental documentation pursuant to the California Environmental Quality Act (CEQA) to be completed by City staff.
CEQA Review:
The adoption of any ordinance changes will require environmental documentation pursuant to the California Environmental Quality Act (CEQA) to be completed by City staff.
Attachments: None.