Agenda Item Wording:
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Short-term Rental Ordinance Update - Receive an update on the City’s Short-term Rental Ordinance and permitting process per Section 17.32.166 Short-term rental (STR) ordinance and consider potential revisions to the STR Ordinance.
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Deadline for Action: 9/3/2024
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, Planning and Community Preservation Director, paul.bernal@visalia.city <mailto:paul.bernal@visalia.city>, (559) 713-4025
Department Recommendation:
Staff recommends that the City Council receive the staff report, presentation, and take public comments. Based on the information received, the City Council may direct staff to initiate further zone text amendment changes to the recently adopted Short-term Rental ordinance (Section 17.32.166) based on the following:
Proceed with drafting ordinance language to address Item No. 1, to include an Enforcement Section, Item No. 2, to include language requiring the implementation of an annual renewal permit process, and Item No. 3, solicit software and services that may help in capturing short-term rental properties that have not applied for the appropriate City permits and licenses.
Any revisions to be considered as part of the Zone Text Amendment process related to Short-Term Rentals may be subject to a future work session discussion with the City Council based on staff’s analysis of the potential changes. Should council elect to direct staff to proceed with a ZTA, staff will return in 90-days with amendments to the ordinance.
Executive Summary:
On October 16, 2023, the City Council introduced the first reading of Zoning Text Amendment (ZTA) No. 2023-01. The ZTA ordinance established codified performance standards regulating short-term rentals occurring in all residential zones (i.e., R-1 and R-M zones). The ordinance took effect on December 6, 2023. During the introduction and first reading of Ordinance No. 2023-11 (STR Ordinance), a majority of the Councilmembers expressed common agreement that the ordinance was a “good start” in establishing requirements to address STRs in the community. However, during the Council’s deliberation on the ordinance, additional statements were made, and Council direction given, that further consideration on potential changes to the STR ordinance be discussed at a future Council meeting. The City Council requested that staff return in 60 to 90 days after the STR ordinance took effect for further discussion on potential revisions to the ordinance.
On February 20, 2024, staff presented an update on the STR ordinance and included additional information that could be further considered to help in getting STR owners/operators legally permitted. The following items were presented to the City Council for consideration:
1. Requirement for the short-term rental permit to be reapplied annually.
2. Consideration of a buffer or spacing requirement between STRs.
3. Other limitations staff may find suitable that other agencies have applied.
During the discussion of this work session item, a majority of City Council concluded that due to the limited data provided on STR application submittals, staff should return in six months to update the Council on the Ordinance’s implementation and to determine if additional measures would be merited to get STR owners/operators legally permitted.
Outreach:
The process of getting operators into compliance was known to be a difficult endeavor as the online STR platforms do not provide addresses or contact information for operators until a reservation is secured. However, staff worked with the Communications Division to publish Public Service Announcements (PSAs) regarding the newly adopted STR ordinance via the City’s various social media accounts. The Communications Division also included a one-page notice about the newly implemented STR ordinance and need of a permit in the Parks and Recreation Department - 2024 Spring Live & Play Guide (see Attachment 3).
Additionally, through the initial work sessions and implementation of the ordinance, staff was also contacted by an Airbnb representative. The Airbnb representative informed staff that any informational material issued by the City regarding STR permit process/requirements could be shared with STR owner/operators who use the Airbnb platform within the city. Staff provided the Airbnb representative with the information provided in the Spring Live & Play Guide and asked that the platform inform operators of their obligation to apply for a STR permit.
To gage if this information was being provided to STR owners/operators, staff asked applicants that submitted an STR application (when they’ve called or come to our front counter) how did they find out about Visalia’s STR ordinance and permitting requirements. The majority identified that they saw the social media posts, while only one identified they decided to apply for their permit because of the Airbnb’s platform notification of the City’ of Visalia’s permit process.
STR Permitting Implementation:
STR permits are typically initiated by the applicant starting with the Business Tax Division, where the STR owner/operator will also fill out the business license application, which are then both routed to the Planning Division for review and subsequent approval. This process is similar to the Home Occupation Permit process which staff identified as the process both the Planning and Business Tax Division’s would follow given the familiarity of this process between both divisions.
To date, staff has only received a total of 45 application submittals, with only 33 approvals being granted. Some applications were rejected for the simple fact that the ordinance does not allow multiple STRs on one site, others have code violation infractions that need remedying before a permit may be approved, while the majority of the others lacked the required grant deed which is required when submitting the STR application.
However, in FY 2023/24, Visalia received $623,570 of transit occupancy tax (TOT) from short-term rentals, which indicates over $6 million in room receipts in that fiscal year. The majority of TOT remitted to Visalia is typically a lump sum payment received from AirBnB that collects TOT from those operators who have opted to have TOT collected through AirBnB platform. This is not the case for those owners/operators that opt out of having AirBnB collect TOT.
Additional Outreach Notification:
Although staff’s approach for compliance, as noted above, has proven to not be the most effective in getting a larger number of STRs permitted, Planning staff has engaged the Finance Department to help in ascertaining ways of getting the City’s STR regulations out to STR owners/operators that still may not be aware of the City’s STR requirements. One tool that has been recently implemented is a purchased list of potential short-term rental properties that are advertising within the City. The list provides addresses to properties in Visalia that may be operating as short-term rentals. This list is currently being generated and will be provided to the City within 60-90 days. Once staff has the active list, letters will be mailed to all listed property addresses detailing the City’s adopted requirements and informing STR owner/operators of the legal requirement to get their properties properly licensed. The letter informs these owners that they have 30 days to respond and failure to comply may result in fines if staff substantiates the property is operating an STR without proper approvals. A copy of the draft letter that will be mailed out has been provided as Attachment 4.
Potential STR Updates for Council Consideration:
Based on the number of potential STR’s located in the community that have not submitted for their appropriate licenses and permits, the enactment of the STR ordinance to date has not resulted in the anticipated increase on getting STR owners/operators legally permitted in Visalia. To address additional methods for getting STR owners/operators into compliance, staff recommends the Council reconsider the discussed compliance measures with some additional options as follows:
1. Addition of Enforcement Section to STR Ordinance
In coordination with the Finance Department, staff identified the need to include enforcement metric language that explicitly identifies the penalty fee to be assessed for owners/operators who fail to comply with the STR ordinance and/or fail to apply for all the necessary permits. Staff recommends the City Council direct staff to amend Section 17.32.166 Short-term rental permits to explicitly list the penalty fines as stated in Section 8.28.220.B “Solid Waste Collection and Disposal”. However, the penalty amounts noted in the STR Ordinance would be the fees identified in Section 1.12 “General Penalty” of the Municipal Code, which assesses fees for noncompliance, after first notice, in the amounts of $100, $200, and $500.
Staff Recommendation: Staff recommends Council direct staff to incorporate this change to the current STR ordinance.
2. Establishment of an Annual STR Permit Renewal Process:
Implementation of an annual renewal permit process can be enacted and would be consistent with other permit types the City issues. Procedurally, language can be drafted that clarifies STR Permits are valid for one-year and the permits are automatically void upon expiration, unless renewed with City. Permits may be renewed subject to the provisions and restrictions that could be outlined in a revised STR ordinance. Proposed modifications to clarify the STR Permit annual renewal application process, requirements, and limits would need to be drafted for consideration.
Staff would seek input from the City’s Business Tax Division to establish the regulatory timeframes that may best coincide with the Business Tax Certificate renewal process, which is done bi-annually, given that STRs are required to have a Business Tax Certificate to operate and are required to submit their transit occupancy tax with the Finance Department. Establishing an annual renewal STR permit process ensures that operators of SRTs are fully aware and in compliance with the adopted regulations. Failure to comply with all adopted codified requirements may result in non-renewal of the STR permit.
If desired, the City Council may direct staff to incorporate revisions to the STR ordinance to codify duration of Short-Term Rental permits and draft language on annual renewal application processes, requirements, and limits.
Staff Recommendation: Staff recommends Council direct staff to incorporate changes to the current STR ordinance to establish annual permit processing requirements.
3. Use of Third-Party Compliance Software
Council may also consider directing staff to solicit software and services that may help in capturing short-term rental properties that have not applied for the appropriate City permits and licenses.
Planning and Finance staff has recently been in contact with two vendors that offer software and services for tracking and enforcement. Information that can be provided by these services include the following:
1. Back-tracking at least 12-months to identify rental postings across multiple platforms (removing duplicates);
2. Identify addresses of rentals within the City;
3. Identify hosts and associated contact info;
4. Rental frequency;
5. Rental type [room(s), whole home, RV, etc.];
6. Identify compliance issues with established ordinances.
Finance Department staff is currently seeking software for Business License and several of these Companies offer a module for TOT collections, STR tracking, and other services as well. Initial fees for services can vary between $5,000 to $30,000, yearly, with cost escalating with additional service add-ons.
Staff Recommendation: Staff recommends the City Council direct staff to continue to explore options on increasing enforcement, tracking, and services.
4. Establishing an Overall Number of STR Permits Allowed
Staff reached out to multiple local agencies in California and the most responsive and helpful has been the City of Santa Rosa. Staff found that the City of Santa Rosa, through multiple revisions of their STR ordinance, has similarly implemented STR regulations to address STRs in their community. Key features to their approach, which the City’s current STR ordinance does not address are as follows:
1. Separate “Hosted” from “Non-Hosted” STR approvals.
a. Allow unlimited “Hosted” STRs.
i. A Hosted STR is defined as-a Short-Term Rental where, throughout the rental period, the host resides on-site. Hosted STRs may be limited to only the primary residence on any property containing more than one legal dwelling unit.
b. Limit “Non-Hosted” STRs.
i. A Non-Hosted STR is defined as a Short-Term Rental where the Host does not reside on-site throughout the duration of the rental period.
2. Require permit renewals.
a. Provide a 60-day notice and 30-day deadline for STR application renewals.
3. Determine that Non-Hosted STRs not meeting the application deadline be eliminated from the overall permissible amount of Non-Hosted STRs permitted within the community.
Staff Recommendation: Staff is not opposed to this option as a means to get STR owners/operators into compliance with the risk of knowing that the City may limit the number of STR permits issued Citywide. Staff recommends this option be considered after letters have been mailed and an enforcement attempt has been made by City staff.
If the City Council directs staff to proceed with option limiting the number, staff will work on establishing the parameters of how the STR ordinance will need to be revised to account for the changes as noted above. In addition, Planning staff will work closely with other City divisions on how this will be implemented and tracked to ensure that STR owners/operators are in compliance. Prior to bringing a formal Zone Text Amendment for adoption, staff anticipates bringing the framework of the revised STR ordinance for Council’s input on the drafted language and procedural requirements through the work session format.
5. Consideration of Buffer / Spacing Requirements:
As stated in previous work sessions, consideration of a buffer / spacing requirement could be considered. Similar to the City’s Smoke Shop establishment ordinance, an established buffer or spacing requirement (e.g. 500-ft., 1,000-ft.) could be further analyzed if directed to pursue this requirement. Please note this requirement would need to be supported in the record prior to adoption. Challenges to SRT regulation have compared the transitory nature of an SRT to allowed usage such as small group homes or transitional/supportive housing and argued that similar types of transitory uses should be permissible and constitutional protections for equal protection should apply. Given that over 80% of the City’s General Plan land uses are dedicated to residential land uses, establishing the necessary mapping and tracking mechanisms could be difficult to regulate if a buffer or spacing requirement were considered.
Furthermore, buffering requirements could be challenged if uses such as bed and breakfast inns or boutique hotels are not subject to spacing requirements from residential uses, under the argument that similar uses should be treated in the same manner under the zoning ordinance. Buffers, by their nature, must be tracked by staff, which would require additional internal review.
Staff, with the help of the GIS Division, conducted a mapping exercise implementing a 1,000-foot buffer within designated residential land use areas. Currently, there is a total residential land use area of approximately 820,234,917 square feet (18,830 acres). When applying the 1,000-foot buffer to the total residential land area, it resulted in approximately 261 “lots”, or potentially only providing for approximately 261 short-term rental permits. Please note this number should be considered hypothetical because it is not likely that each buffer’s center aligns perfectly with a residential land use.
Staff Recommendation: Staff does not recommend this option be considered. As noted above, establishing the necessary mapping and tracking mechanisms could be difficult to regulate if a buffer or spacing requirement were considered. Staff concludes the options in the report where staff is supporting the direction on proceeding with the changes as noted in those sections gives staff the ability to establish the necessary framework language to get STR owners/operators into compliance based on limiting the number of STR’s permitted to operate in the City of Visalia.
6. Consideration of an Outright STR Ban:
The City Council could also consider an outright ban on STRs. There have been numerous articles written that short-term reduce the availability of long-term rental properties, driving up housing costs, frequent turnover of short-term renters can disrupt the sense of community and lead to noise and safety concerns, and the difficulty on City staff to ensure at all times STR’s are complying with regulatory requirements.
Discussions with Santa Rosa City staff found that the impact to staffing workloads to regulate STRs lead to the decision makers implementing an attrition style ordinance which could eventually lead to a ban of certain STRs in their community.
Based on the State of California declaring a housing crisis, the Council could consider a ban on STRs. It should be noted that staff will not be recommending this option at this time as figures have shown STRs (867 spaces listed in Visalia) to only account for roughly one percent of the current housing stock.
Staff Recommendation: Staff does not support an outright ban on STRs. Rather, implementing the revisions to the STR ordinance as discussed in this report and presented during the work session will help in bringing STR owners/operators into compliance thereby ensuring that these owners/operators understand the City’s rules and regulations and if a STR is operated in a manner not consistent with these requirements, the owner/operator will be at risk of losing their ability to operate a STR in the City of Visalia.
Fiscal Impact: None.
Prior Council Action:
• May 1, 2023, City Council Work Session: The City Council, on a 5-0 vote, directed staff to analyze potential operational standards for short-term rentals, and begin a Zoning Text Amendment.
• October 16, 2023: The City Council, on a 3-2 vote, approved the first reading of Zoning Text Amendment No. 2023-01 (Ordinance No. 2023-11), proposing to provide the framework for staff to implement a registration and permitting process for all short-term rentals occurring in all residential zones (i.e., R-1 and R-M zones) within the city.
• November 6, 2023: The City Council, on a 4-1 vote, approved the second reading of Ordinance No. 2023-11 was held and served as the final action the City Council took in order for Zoning Text Amendment No. 2023-01 to take effect 30 days following adoption of the second reading.
• February 20, 2024: Staff presented an update on the STR ordinance and included additional information that could be further considered to help in getting STR owners/operators legally permitted. During the discussion of this work session item, a majority of City Council concluded that due to the limited data provided on STR application submittals, staff should return in six months to update the Council on the Ordinance’s implementation and to determine if additional measures would be merited to get STR owners/operators legally permitted
Other:
• August 28, 2023: The Planning Commission received a presentation and informative report regarding short-term rentals which included a synopsis of staff’s previous presentation to the City Council and explanation of directives received. The Planning Commission expressed agreement with Council’s directives.
• September 25, 2023: The Planning Commission voted 5-0 to recommend approval of Zoning Text Amendment No. 2023-01, to the City Council.
Alternatives: The City Council may, in lieu of the recommended motion, consider any of the following alternatives:
1. Receive the staff report and take no further action at this time.
2. Continue the matter to a future City Council hearing for additional information.
Recommended Motion (and Alternative Motions if expected):
recommendation
I move to direct staff to begin drafting revisions to the STR Ordinance based on the City Council’s desired options as follows:
1. Proceed with drafting ordinance language to address the items presented in Item No. 1, include Enforcement Section, Item No. 2, include language requiring the implementation of an annual renewal permit process, and Item No. 3, solicit software and services that may help in capturing short-term rental properties that have not applied for the appropriate City permits and licenses.
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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:
1. Ordinance No. 2023-11
2. Short-Term Rental FAQ
3. Parks and Recreation Department - 2024 Spring Live & Play Guide - Pg. 10
4. Compliance Letter