CITY OF PACIFICA
COUNCIL AGENDA SUMMARY REPORT
6/13/2022
1 SUBJECT:
Update on Implementation of the Short-term Rental Program RECOMMENDED ACTION:
Receive update on Short-term Rental Program.
STAFF CONTACT:
Christian Murdock, AICP, Acting Planning Director
(650) 738-7341
[email protected]
Yulia Carter, Chief Financial Sustainability Officer
(650) 738-7301
[email protected]
BACKGROUND/DISCUSSION:
The City Council has requested an update on implementation of the City’s short-term rental (STR) program which it established in 2018. The term “short-term rental” refers to the use of all or a portion of a residential dwelling unit for a rental of less than 30 consecutive days. A residential dwelling unit being offered as an STR may be exclusively used for that purpose, or may be offered as an STR periodically between occupancy by the property owner or renter.
The popularity of STRs has increased steadily over the past decade in part due to the convenience of booking provided by companies such as AirBNB and VRBO. STRs provide an alternative experience to traditional hotel and motel accommodations for visitors to Pacifica.
They also provide a source of income for owners and occupants of the residential dwelling units offered for rent as STRs.
Because STRs utilize existing residential dwelling units, these so-called transient occupancies (i.e., occupancies lasting less than 30 days) are often located in closer proximity to owneroccupied and long-term rental housing units than traditional hotels and motels which tend to be limited to commercial zoning districts. In many cases, STRs are interspersed with predominantly single-family residential neighborhoods or throughout apartment/condominium units in multi-family residential buildings. This attribute of STRs can prompt consideration of their compatibility with surrounding residential uses and potential impacts on the availability of residential units for long-term occupancies.
The ease of listing a residential dwelling unit as an STR can also lead to casual operators who are unaware of the legal requirements to register in accordance with local laws including but not limited to the City of Pacifica’s business license and transient occupancy tax (TOT) registrations. The emergence of STRs as a new type of land use led the City Council to adopt Ordinance No. 835-C.S. (“Ordinance”) in 2018. The Ordinance established a permit Pacifica City Council 2
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requirement for operation of an STR, certain operating requirements, and permit revocation and enforcement processes. The operating requirements established in the Ordinance included the following guest safety standards:
• A diagram of exits, fire extinguisher locations, and fire and police contact numbers; • The STR permittee's contact information;
• The City's noise regulations (PMC Title 5, Chapter 10); and • The City's Social Host Liability Ordinance (PMC Title 5, Chapter 28) The Ordinance requires that an operator must provide the guest safety information to guests before arrival and make the information available in printed form within the STR.
A. STR Ordinance Implementation
The Ordinance appoints the Assistant City Manager or designee as the responsible City official for administration of the STR permit process. Other staff primarily in the Finance Division of the Administrative Services Department are responsible for assisting applicants with completing their business license tax, TOT, and STR permit registrations.
The Finance Division has engaged a consultant, HdL, to assist with additional program support including TOT compliance verifications for STRs and hotels/motels. The City engaged HdL for this purpose beginning in July 2021.
Since enactment of the Ordinance, the City has registered numerous STRs. As of May 2022, the City had 77 registered and compliant STRs. For comparison, HdL has identified a total of 103 active listings1 as of May 12, 2022, distributed throughout Pacifica as shown in Figure 1, below (blue dots are listings with identified properties, and yellow dots are listings in an approximate location but that are not yet associated with an identified property).
1 The number of active STR listings frequently changes as new properties are added and existing properties are removed by operators.
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Figure 1. Short-term rental (STR) locations in Pacifica Registration of STRs ensures collection of TOT, or Transient Occupancy Tax. The TOT is a tax charged on occupancies of less than 30 consecutive days. Collection of TOT from STRs since adoption of the Ordinance in 2018 has totaled approximately $1.2 million through June 30, 2021 (the end of FY 2020-2021), as summarized below in Table 1:
FY 2018-19 FY 2019-20 FY 2020-21 Total
$248,947 $365,825 $592,205 $1,206,977
Table 1. Transient Occupancy Tax (TOT) Collections from Short-term rentals (STRs) since 2018
The average daily rental rate for STRs in Pacifica is $236 and peak rental activity occurs in April, July/August, and December according to HdL’s data. HdL estimates that if all STRs that it has identified as active on the current market were brought into compliance, Pacifica City Council 4
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the City could be receiving approximately $742,000 per year in TOT collections from STRs based on the current number of listings and level of activity. It is important to keep in mind that the number of current STR listings and corresponding TOT collections are volatile and change frequently based on seasonality and local economic factors. Staff and HdL will continue monitoring the STR revenue activities to further refine the projection assumptions each quarter while bringing identified properties into compliance.
B. STRs and Housing Stock
As noted above, the City has identified 103 active STR listings within Pacifica, although this number can vary periodically. These STR listings are located throughout the City in a variety of neighborhoods and dwelling unit types (e.g., single-family residences, multifamily residences, condominiums, accessory dwelling units2 ), as summarized in Figure
2, below.
Figure 2. Short-term rental (STR) by housing unit type
More than two-thirds of STR listings offer the entire residential dwelling unit, with just over one-quarter renting only part of the residential dwelling unit. More than half of STRs in Pacifica are offered in studio or one-bedroom dwelling units, as shown in Figure 3, below. Three- and four-bedroom residential dwelling units make up slightly more than one-quarter of STR listings.
Figure 3. Short-term rental (STR) by bedroom count
The City of Pacifica has a total of 14,652 dwelling units3. Of these, three-quarters are single-family detached units, and only one-fifth are in buildings with three or more units, as further summarized in Figure 4, below4. The homeowner vacancy rate was 0.5 percent, while the renter vacancy rate was 1.5 percent, for a combined vacancy rate among all dwelling units of 3.0 percent5. Factoring in vacancy rates, approximately 14,212 dwelling units are occupied for use.
2 Rental of an accessory dwelling unit (ADU) for a term of less than 30 consecutive days is prohibited pursuant to Pacifica Municipal Code section 9-4.453(a)(6). 3 U.S. Census Bureau, Table H1 (2020).
4 U.S. Census Bureau, American Community Survey 2015-2019. 5 Ibid.
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Figure 4. Pacifica Housing Stock by Dwelling Unit Type
Nearly half of Pacifica’s dwelling units have three bedrooms. There are roughly equal proportions of two- and four-bedroom units6. Studio units make up about 1 percent of dwelling units and one-bedroom units comprise about 10 percent of dwelling units. A summary of dwelling unit sizes is provided in Figure 5, below.
Figure 5. Pacifica Housing Stock by Bedroom Count
Overall, the 103 STRs identified by HdL comprise less than 1 percent of Pacifica’s total housing stock. Table 2 compares the number of active STRs in Pacifica to a selection of other coastal communities in the region:
6 Ibid.
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Community Number of
STRs
Number of
Total Dwelling
Units
STR as Proportion
of Total Dwelling
Units
Capitola 74 5,485 1.35%
Half Moon
Bay 47 4,833 0.97%
Pacific
Grove 92 8,121 1.1%
Pacifica 103 14,180 0.72%
Table 2. Number of Active Short-term Rentals (STRs) as share of total dwelling units in June 20227.
STRs are present throughout the city, although some degree of concentration appears to exist in the West Sharp Park and Pedro Point neighborhoods. Such concentrations may be expected given those neighborhoods’ proximity to large, easily accessible beaches.
Comparing the HdL data to Pacifica’s existing housing stock, there appears to be a disproportionate number of studio and one-bedroom units offered for rent as STRs.
While only comprising 11.5 percent of Pacifica’s housing stock, studio and one-bedroom units comprise 57 percent of STR listings. Multi-family residential units currently comprise a relatively small proportion of STR listings although HdL currently does not have data to indicate the number or proportion of multi-family residential buildings that may be operating entirely as STRs (i.e., discontinued use for long-term rentals). There also appears to be a sizable proportion of accessory dwelling units, or ADUs, among the currently active STR listings, contrary to the City’s Zoning Regulations, which warrants further analysis by staff.
C. Unpermitted STRs
While many STR operators have complied with the City’s regulations, there remains a number of unpermitted STRs operating in Pacifica. Some may be knowingly operating without registering with the City to avoid taxation, while others may simply be unaware of the requirement to register with the City. The Finance Division of the Administrative Services Department has engaged the consultant HdL to assist with administration of the STR program. HdL supports the business license tax, TOT, and STR permit registrations for operators. It also assists with investigation of identified STRs listed on various websites, apps, and other services to identify and contact the operators and advise them of the requirement to register with the City.
Since engaging HdL for STR administration services, it has identified approximately 26 potential operators that are unregistered with the City. City staff with HdL’s support is continuing to work towards 100 percent registration of all active STR operators.
Registration of unregistered STRs is important because it facilitates compliance with the guest safety standards of the Ordinance, ensures collection of TOT to fund important City services utilized by STR guests, creates a fairer cost comparison between STRs and hotel/motel lodging options, and provides the City with contact information for operators in the event of a concern. For these reasons, staff and HdL will continue its efforts in this regard.
7 U.S. Census Bureau, Table H1 (2020)
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D. Enforcement Activities
Staff consulted with the Police Chief and Code Enforcement Officer in preparation of this report to obtain a summary of enforcement activity associated with STRs. While most STRs have been operated without incident since adoption of the Ordinance, there have been a small number of STRs that have caused quality of life concerns or otherwise failed to comply with the operating requirements contained in the Ordinance.
In general, the number of STR complaints to the Police Department and Code Enforcement Division has been relatively low. The Police Department receives complaints about STRs infrequently while the Code Enforcement Division has only identified six STRs that required investigation and follow-up to achieve compliance.
Many complaints do not result in any identified violations, and appear related to neighbors disapproving of the operation of STRs in their neighborhoods. Other complaints have related mainly to overall neighborhood parking congestion rather than citable offenses for improper parking. Of complaints received, a common one relates to noise from music or parties. Most operators have resolved these issues within a few months of being contacted by the City. In some cases, the operators have installed devices within the STRs to monitor noise levels and to receive notifications from the device when noise levels exceed an established threshold.
Since adoption of the Ordinance, the City has found the need to initiate STR permit revocation proceedings for only one operator. The City has since revoked the permit and the residential dwelling unit has returned to use for long-term occupancy. Overall, most STR operators have complied with the City’s operating requirements or have promptly addressed violations after contact by the City.
E. Summary and Recommendation
The City’s STR program is still relatively new. The number of STRs is a small percentage of dwelling units, especially for a coastal community. There does not appear to be significant neighborhood problems or impacts to public health, safety, and welfare from STR operations, and the limited number of violations reported have been promptly resolved. For these reasons, and due to staffing limitations in the Planning Department and numerous high-priority planning projects, the City Manager does not recommend undertaking modifications to the Ordinance at this time.
Staff will continue to gather data on the number and types of STRs, their relationships with other residential dwelling units, and best practices of other local agencies with respect to balancing operation of STRs with public health, safety, and welfare. In addition, staff will continue its efforts with the assistance of expert consultants to identify unregistered STRs to bring them into compliance with the Ordinance and all applicable tax and other regulations. Staff will also continue to monitor the STR program to determine if modifications to the Ordinance may be required in the future, and will begin steps to assess, and enforce as necessary, the situation with respect to ADUs being offered as STRs.
ALTERNATIVE ACTION:
None identified.
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RELATION TO CITY COUNCIL GOALS AND WORK PLAN:
• “Fiscal Sustainability” The City’s efforts to ensure registration of all STRs should increase tax revenues in a manner consistent with this City Council Goal. • “An Engaged Community” Consideration of the STR program in a public forum expands public participation in a manner consistent with this City Council Goal. • “A Healthy and Compassionate Community” Evaluating the relationship of STRs to the City’s housing stock is consistent with this City Council Goal.
FISCAL IMPACT:
Actions to ensure registration of all STRs will increase collection of the City’s business license and transient occupancy taxes. These collections should have a net positive impact on the City’s revenues after considering enforcement costs.
ORIGINATED BY:
Planning Department
ATTACHMENT LIST: