Fremont City Council Meeting: 12/12/23 07:00 PM
3300 Capitol Avenue Div/Dept: Code Enforcement
Fremont, CA 94538 Category: Code Adoptions & Amendments
SCHEDULED
Sponsors:
COUNCIL STAFF REPORT (ID # 5047) DOC ID: 5047
Updated: 12/7/2023 9:18 AM by Susan Gauthier Page 1
SHORT TERM RENTAL ORDINANCE – Introduce an Ordinance Adding Chapter
5.100 Short-Term Rentals to the Fremont Municipal Code and to Consider a Finding that the Ordinance is Exempt from the Requirements of the California Environmental Quality Act (CEQA) per, Each as a Separate and Independent Basis, (1) Title 14 of the California Code of Regulations, Section 15061(b)(3) and Section 15378.
Contact Persons:
Name: David Wage Dan Schoenholz
Title: Code Enforcement Manager/Senior
Planner
Community Development Director
Div/Dept: Code Enforcement
Phone: 510-494-4447 510-494-4438
E-Mail: [email protected] [email protected]
Executive Summary: A short-term rental (“STR”) is a rental of all or a portion of a residential unit for periods of less than 30 consecutive nights. The popularity of online booking platforms, such as Airbnb and VRBO, has increased the market demand and supply of short-term rentals. There are approximately 300 to 400 unique STR listings in Fremont.
Short-term rentals provide positive benefits, including the economic benefit of rental income for the host and increased spending in the local economy. However, if unregulated, short - term rentals can negatively impact the long-term housing supply and result in nuisance activities which affect neighborhoods. Staff has developed a draft STR ordinance that would allow STRs to continue to operate in the City and would include provisions to address nuisance conditions that are sometimes associated with STRs.
Staff recommends amending Title 5 (Business Licenses and Regulations) to adopt a STR Ordinance that would allow STRs as an ancillary use in residential units with approval of a STR permit and that includes standards to address potential nuisance and neighborhood compatibility issues associated with STRs.
BACKGROUND: A STR is a rental of all or a portion of a residential unit for periods of less than 30 consecutive nights. Common examples include renting a house or an apartment associated with business travel or vacations. STRs are mostly offered and rented through online hosting platforms, such as Airbnb and VRBO. Online booking sites have increased the number of STR bookings.
STRs can provide positive benefits to travelers by allowing an alternative form of lodging for business travel or vacation. The STR host can derive benefits from the supplemental income through monetizing their home. Supplemental rental income can assist residents with fixed incomes or who are trying to make ends meet. This income helps to offset the currently high cost of housing and property taxes in the Bay Area. The short-term nature of the rental adds flexibility, allowing the host to adjust the rental schedule as needed.
Council Staff Report (ID # 5047) Meeting of December 12, 2023 Updated: 12/7/2023 9:18 AM by Susan Gauthier Page 2
STRs also have the potential to negatively impact neighborhoods if unregulated. The popularity and profitability of STRs has spurred an industry where dwellings are bought and used exclusively for STRs. Local governments across the country as well as locally have adopted STR ordinances to manage the impacts of the growing popularity of STRs. ST R Ordinances commonly include provisions to address issue such as:
• So-called “party houses” homes that are rented to large groups of people, which can impact neighbors and result in calls for service for the Police Department; • Short-term renters may not always know or follow local rules, resulting in public safety issues, noise, trash and parking problems for neighbors; • Conversion of residential units into full time STRs can result in reduced availability of affordable housing options and higher rents; and
• Lack of regulation and limitations on effective enforcement may cause tension between STR operators and neighbors.
There are approximately 300 to 400 unique STR listings in Fremont. This represents less than one percent of the City’s housing stock. STR listings in Fremont are distributed evenly across the City and are predominately single-family residential homes, which make up 79 percent of all short-term rentals. 45 percent of the units rent out their entire home and 55 percent rent out a portion of their home. From 2022 to 2023 the number of STR listings grew 26 percent year over year. Based on its proximity to major employers in Silicon Valley and other Bay Area regional attractions and low hotel vacancy rates, the demand for Fremont STRs is likely to continue to increase.
Fremont does not currently have specific STR provisions in the Municipal Code. STRs have been allowed to operate in accordance with the room and board provisions included in the residential zoning districts (FMC Section 18.90.080). Room and board is listed as an accessory use and allows the rental of a dwelling unit for up to two persons. While originally intended for long-term rentals (30 days or longer), this provision has also allowed STRs to operate in the City.
Many other jurisdictions in the Bay Area have already developed programs and regulations related to STRs. A brief overview of programs is provided in Informational Item No. 1 (Summary of STR Standards in Other Cities).
DISCUSSION/ANALYSIS: STRs are widespread and currently operating throughout the City of Fremont. Staff is proposing a new chapter to Title 5 (Business Licenses and Regulations) to create a STR Ordinance that would include a ministerial permitting process to allow STRs in the City, while providing tools to address the issues commonly associated with STRs.
The proposed ordinance is intended to fit the characteristics of the community, recognizing that Fremont is not a common destination for traditional tourists, but people do commonly stay in the City for business or medical travel or to visit family. Consequently, Fremont has a relatively small number of STRs compared to tourism-oriented cities; however, the number of new listings in Fremont has continued to grow over time. The majority of STRs operate in the City without reported incident, but there are issues that arise affecting neighborhoods. The City receives approximately an average of two STR related complaints per month. There are currently few standards that STR hosts are required to follow and few code enforcement tools available to address the issues that arise. The proposed STR Council Staff Report (ID # 5047) Meeting of December 12, 2023 Updated: 12/7/2023 9:18 AM by Susan Gauthier Page 3
ordinance is intended to fit the City’s policy objectives, such as preserving its long -term housing stock as well as neighborhood character and quality of life, while also continuing to allow residents to operate STRs.
Below is a summary of the proposed ordinance:
FMC
Section or
Subsection
Section Title Description
Addition of Chapter 5.100, Short Term Rentals
5.100.010 Purpose and Intent Clarify intent of the STR ordinance:
• Allow STRs while preventing the
conversion of long-term rentals to
STRs
• Protect neighborhood character and
address adverse impacts of STRs
• Provide a registration process to track
STRs and enforce the requirements of
the Ordinance
5.100.020 Definitions Defines terms used in the STR Ordinance such as: Host, Owner, Primary Residence,
STR unit, Local Contact Person, etc.
5.100.030 STR Permit Establish the requirement to obtain a STR Permit to operate a STR and STR permit
application requirements.
5.100.040 General Regulations • STR must be the Host’s primary Residence
• STR can include individual bedrooms
or an entire unit
• STR permitted in primary dwellings
only (not ADUs, JADUs, accessory
structures or RVs)
• No limit on the number of days STR
may be rented
• STRs not permitted in BMR units or
units created by an Urban Lot Split
(SB9)
• STRs may be prohibited by CC&Rs -
written approval to operate a STR
from HOA required where applicable
• Only one STR per unit
• Host is limited to one STR in the City
• Host responsible for compliance with
FMC
5.100.050 Requirements for all short- • Must meet Federal, State and local Council Staff Report (ID # 5047) Meeting of December 12, 2023 Updated: 12/7/2023 9:18 AM by Susan Gauthier Page 4
term rentals and
operations
laws
• Max. occupancy of two per bedroom
• STR guest parking must be provided
onsite
• No exterior alterations to the unit are
allowed
• STR signage is prohibited
• Trash and refuse must be stored out of
public view in proper container
• Local contact person is required to
respond to complaints within sixty
minutes
• Host must have liability insurance
• Commercial and assembly uses
prohibited
• Host must share Good Neighbor
Guidelines with guests
• Host must ensure the STR meets
health and life/safety requirements
• Host must include permit information
in STR listings
• Host must notify neighbors within 100
feet of STR permit to operate and
contact information for the host and
local contact person
• STR permit cannot be transferred or
assigned to another person
5.100.060 Administrative Regulations The City Manager or designee may adopt administrative regulations necessary to
implement the Ordinance
5.100.070 Grant or denial of a STR
permit
Permit may be denied for
• An incomplete application
• Material misstatement or omission
• STR would not meet applicable laws
and regulations
• Applicant is a minor
5.100.080 Grounds for revocation or
suspension of a STR permit
Permit may be revoked or suspended for
• Violations of the ordinance
• Host or agent of STR has engaged in
fraud
• Continued operation after a permit has
been suspended
5.100.090 Appeal of denial, revocation
or suspension
Establishes procedures for permit denial,
revocation or suspension
5.100.100 Violations and Remedies Establishes procedures and remedies for STR related violations pursuant to the FMC and
Government Code
5.100.110 Amnesty Period Establishes a one-year amnesty period to conform to the requirements of the STR
Council Staff Report (ID # 5047) Meeting of December 12, 2023 Updated: 12/7/2023 9:18 AM by Susan Gauthier Page 5
Ordinance
Allow Limited Short-Term Rental Uses While Preventing Loss of Housing Stock STRs have generated concerns from the California Department of Housing and Community Development (HCD) that they reduce housing stock available for long term residents. The popularity of STRs, and the substantial average rent that may be collected per night has incentivized the use of dwellings as exclusively STRs. In certain cases, one or two weeks of STR revenue may equal the average monthly rent of a standard dwelling, motivating property owners to remove dwellings as a “residence” and shift them into permanent STRs.
This is a significant issue in a time when demand for housing already substantially exceeds supply. Adoption of a STR Ordinance was included as a General Plan Housing Element implementation measure (Program No. 9) intended to prevent long-term units from being converted into STRs and preserve the City’s housing inventory. Per the Housing Element implementation schedule, the City has committed to complete this measure by adopting a STR Ordinance by January 2024.
The proposed ordinance would only allow STRs in a host’s primary residence, where the homeowner or long-term tenant lives and can provide evidence of residency, such as a driver’s license, income tax statement or property tax statement with a homeowner’s exemption. This would ensure that STRs are not displacing residents from existing housing stock. A STR host could not buy multiple properties and rent them on a short-term basis under the proposed ordinance requirements.
The proposed STR Ordinance would also preserve housing stock by reinforcing the existing prohibition on STRs in Accessory Dwelling Units (ADUs) or Junior Accessory Dwelling Units (JADUs) in accordance with State law and the City’s ADU Ordinance. Pursuant to California Government Code section 65852.150, the California Legislature found and declared that, among other things, California is facing a severe housing crisis and ADUs are a valuable form of housing that meets the needs of family members, students, the elderly, in-home health care providers, people with disabilities, and others. HCD considers ADUs an essential component of California’s housing supply.
The City adopted an update to the Accessory Dwelling Unit Ordinance (FMC Section
18.190.005) on July 11, 2023, which implemented recent changes in State law related to ADUs. The ADU Ordinance update reflected a state requirement to allow “Statewide Exemption ADUs”1 which are the State’s statutory minimum requirement for ADUs and JADUs. State law expressly prohibits STRs in these units. 2
The ADU Ordinance also includes provisions to allow and regulate additional ADUs beyond the statutory minimum, which is enabled by state law and encouraged by HCD. 3 State law allows cities to prohibit STRs in these units, which was included in the City’s ADU Ordinance.4
1 California Government Code Section 65852.2(e)(1)
2 California Government Code Section 65852.2(e)(5)
3 California Government Code Section 65852.2(a)(1)
4 FMC Section 18.190.005(b)(6)
Council Staff Report (ID # 5047) Meeting of December 12, 2023 Updated: 12/7/2023 9:18 AM by Susan Gauthier Page 6
The proposed STR Ordinance would not allow STRs to obtain a permit to operate in an ADU or JADU, which is consistent with State law and the ADU Ordinance. It would also provide additional tools to enable the enforcement these prohibitions, which is consistent with Housing Element Program No. 9.
Preserve Neighborhood Character and Quality of Life
Additional concerns with STRs include effects on neighborhood character and quality of life issues. A rotating series of guests may lead to a lack of neighborliness and result in associated noise, parking and traffic impacts. On-site hosts can intervene and address these concerns; however, un-hosted rentals do not have management on-site to solve problems.
Some cities have adopted STR Ordinances that require a host to be present and prohibit un - hosted STRs. Some STR Ordinances allow un-hosted STRs but limit the number of nights the STR can be rented.
Based on recommended best practices and examples of STR Ordinances recently adopted by other local agencies, the proposed STR Ordinance includes provisions that allow both hosted and un-hosted STRs, but also includes a requirement for a designated local contact person when someone operates an un-hosted STR. The local contact person would be required to respond and take remedial action on complaints within one hour of receiving the complaint.
Staff is encouraging STR hosts or their local contact person to find solutions to addres s potential issues. The designation of a local contact person emphasizes private solutions and neighborliness, as opposed to involvement by the Police Department or Code Enforcement Division. Allowing un-hosted STRs with a designated local contact person would provide flexibility for STR operators, while still including provisions that encourage issues to be addressed privately and in a timely manner.
Other new proposed standards to address potential neighborhood impacts include:
• Prohibition on “Special Events” – Weddings, commercial functions, and similar events would be prohibited as a component of any STR activity. These activities, when not associated with residency, are commercial in nature and inconsistent with the residential character of a residential district.
• Maximum occupancy limit – A maximum occupancy limit would be established based upon two guests per bedroom in the STR.
• On-Site Parking – On-site parking must be made available for the STR guests. This is intended to minimize conflicts in the use of shared on-street parking.
• STR Good Neighbor Guidelines– Hosts must be familiar with the STR Ordinance and understand they are responsible for ensuring they are good operators. Hosts will be required to provide guests with a copy of the STR Good Neighbor Guidelines designed to make the guest familiar with noise, trash, parking and other rules of conduct that preserve neighborhood character and reduce potential conflicts. Staff would complete the guidelines prior to the ordinance becoming effective and it would be made available on the City’s website. It is anticipated to be an approximately two-page document that can be easily reproduced by hosts.
Monitoring and Compliance
Council Staff Report (ID # 5047) Meeting of December 12, 2023 Updated: 12/7/2023 9:18 AM by Susan Gauthier Page 7
Enforcement and the ability to implement regulations is a key consideration for any STR Ordinance. Tracking and identifying STRs can be challenging, as well as enforcement of reported violations. The City’s Code Enforcement Division and Police Department would continue to enforce the ordinance through the issuance of notices of violations and citations or any other enforcement action necessary. It can be difficult or impossible to collect the evidence required to effectively enforce a STR ordinance without tools and assistance. Staff has investigated using a contracted software solution to assist with identifying STRs and ensuring they meet City standards. Many communities outsource portions of the STR regulation compliance monitoring and enforcement to host compliance companies, which specialize in the field and use technology to minimize the implementation and compliance resources required. Host compliance companies can efficiently monitor STR activity, identify non-compliant listings and provide City staff with documentation or evidence of non - compliance if enforcement is necessary.
Amnesty Period
STRs are widespread and have been operating throughout the City for several years. Staff recognizes that many existing STRs have lease agreements up to a year away, and that it will take time for residents to bring their STRs into compliance with the proposed ordinance.
However, a shorter time frame to compliance may reduce impacts on neighborhoods and housing stock. The proposed ordinance would include an approximate one-year amnesty period for hosts to bring their STRs into compliance with the adopted regulations.
If the proposed STR Ordinance is adopted, the City would contact property owners operating STRs to advise them of the new requirements, the registration platform, and a timeline by which registration must be completed by to achieve compliance.
General Plan Conformance
The proposed STR Ordinance allows STRs to operate in the City, while also adopting standards that discourage the conversion of long-term housing into short term lodging.
Program No. 9 in the City’s adopted General Plan Housing Element calls for the City to implement a STR Ordinance that discourages or disallows STRs that remove housing units form the market.
Housing Element Program 9: Short Term Rental Ordinance. The City does not currently have an ordinance in place specifically for the regulation of short-term rental units. Based on current estimates, there are more than 300 short term rental units active in the City. Some of these units are full homes or apartments for rent, which removes units from the long-term housing rental market. Others consist of portions of a unit that is occupied by an owner or tenant. The City shall implement a short-term rental ordinance that discourages or disallows short-term rentals that remove housing units from the market. The City shall also consider a program to promote the conversion of short-term rentals into long-term rental housing options, like ADUs.
The proposed ordinance would allow hosts to operate a STR in their primary residence, which would ensure the unit remains a residential unit and that operation of a STR would be an ancillary use for a primary resident. The STR Ordinance fulfill the requirements of Program No. 9 and meet a commitment the City made to adopt a STR Ordinance by January 2024.
Council Staff Report (ID # 5047) Meeting of December 12, 2023 Updated: 12/7/2023 9:18 AM by Susan Gauthier Page 8
Public Engagement
A City of Fremont website for the STR Ordinance was created and went live on September 26, 2022, to share information, answer questions, and receive input. The webpage included options to take a survey, provide comments through a discussion forum, ask questions, or set up a virtual office hours appointment with City staff to discuss the potential ordinance in greater detail. The STR survey results are included as Informational Item No. 1 and the STR online forum discussion is included as Informational Item No. 2.
On October 19, 2022, City staff held a virtual stakeholder/community meeting regarding the proposed ordinance. Staff presented the purpose and intent of the proposed ordinance, potential standards that could be included in a STR ordinance, received feedback from the public, gave an overview of the process and shared additional opportunities to provide feedback. There were approximately eight attendees. Comments included concerns from existing residents about the neighborhood impacts of existing STRs. Representatives of neighborhood Homeowners Associations (HOAs) expressed concerns about the City allowing STRs where they may be prohibited by CC&Rs. There were no comments at the community meeting in opposition to a STR Ordinance.
Four individuals requested a meeting during virtual office hours. Attendees were all current operators of STRs with questions about the scope of the ordinance, concerns about a potential ordinance impacting their current STR operations and questions about the process of adopting an ordinance.
Articles on the development of a STR ordinance were published in the Fremont Connection on September 30, 2022 and October 14, 2022, City Development Digest Newsletter in September 2022 and October 2022, and the Winter 2022 edition of City News.
FISCAL IMPACT: Staff is not proposing any new fees to obtain a STR permit at this time; however, staff intends to evaluate the program on an ongoing basis, including the costs associated with processing permits and administering the ordinance. Any future fees would require consideration and adoption by the City Council.
Staff intends to contract with a host compliance company to assist with implementation of the STR Ordinance and enforcement. A Request for Proposals was sent to prospective host compliance companies to gauge the cost of their services. Based on the responses received, the estimated annual cost could range between $30,000 and $70,000 depending on selected services the City asks the host compliance company to provide. If the Council adopts the STR Ordinance, staff would return to Council at a later date with a request to approve a contract for host compliance services.
ENVIRONMENTAL REVIEW: The proposed text amendment is exempt from the requirements of the California Environmental Quality Act (CEQA) per, each on a separate and independent basis, (1) Title 14 of the California Code of Regulations, Section 15061(b)(3), that this is not a project which has the potential for causing a significant effect on the environment, and (2) CEQA Guidelines Section 15378 in that the proposed ordinance is an organizational or administrative activity that will not result in direct or indirect physical changes in the environment.
Council Staff Report (ID # 5047) Meeting of December 12, 2023 Updated: 12/7/2023 9:18 AM by Susan Gauthier Page 9
ATTACHMENTS:
• Draft Short-Term Rental Ordinance Title 5
• Informational Item No. 1 - Summary of STR Standards in Other Cities • Informational Item No. 2 - STR Public Survey
• Informational Item No. 3 - STR Public Forum
RECOMMENDATIONS:
1. Find that the short-term rental ordinance is exempt from the requirements of the California Environmental Quality Act (CEQA) per, each as a separate and independent basis, (1) Title 14 of the California Code of Regulations, Section 15061(b)(3), that this is not a project which has the potential for causing a significant effect on the environment, and (2) CEQA Guidelines Section 15378 in that the proposed ordinance is an organizational or administrative activity that will not result in direct or indirect physical changes in the environment.
2. Waive the first reading and introduce the attached ordinance adding Chapter 5.100 to the Fremont Municipal Code.
3. Direct staff to prepare and the City Clerk to post and publish a summary of the ordinance accordance with Government Code Section 36933(c)(1).