CITY OF PACIFICA
COUNCIL AGENDA SUMMARY REPORT
6/24/2024
1 SUBJECT:
Short Term Rental Study Session
RECOMMENDED ACTION:
Receive updates on the Short-term Rental Program and provide input on Short-term Rental provisions.
STAFF CONTACT:
Stefanie Cervantes, AICP, Interim Deputy Director
(650) 738-7341
[email protected]
Brianne Harkousha, AICP, Senior Planner
(650) 738-7341
[email protected]
Yulia Carter, Assistant City Manager
(650) 738-7301
[email protected]
BACKGROUND/DISCUSSION:
The City Council has requested an update on the implementation of the City’s short-term rental (STR) program and to hold a study session to discuss potential provisions to be considered in an update to the STR Ordinance.
STR Programs are complex. They can be beneficial for communities, and they can present challenges for communities, as summarized below:
• The STR program can serve as a robust driver for the local economy, boosting tourism and hospitality, increasing local spending, supporting local small businesses, and expanding the visitor-serving economy. Visitors who stay in STRs are likely to spend money at local restaurants, shops, and entertainment, further stimulating economic activity. The influx of visitors can lead to job creation and higher income for residents working in the hospitality and retail sectors, further enhancing the local economy. It also contributes to the local tax base in the form of transient occupancy tax, business license tax, sales tax, and permit fees that can be reinvested into essential community services, such as public safety, parks and recreation activities, and infrastructure improvements, creating a better quality of life and making the community a more vibrant and attractive destination for both residents and visitors.
• At the same time, an STR that improperly operates can bring a range of negative impacts that can disrupt the local community and create ongoing challenges for residents and local government. STRs can negatively impact the availability of residential dwelling units for long-term housing needs, potentially reducing the supply of housing stock and contributing to higher housing costs. They can also negatively affect the community’s character, creating issues related to noise, garbage, traffic, and parking and impacting the overall cohesion of neighborhoods. There might be regulatory and Pacifica City Council 2
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enforcement challenges, as well as legal, code enforcement, and safety concerns.
These negative effects, if not properly managed, can outweigh the economic advantages and lead to long-term issues.
The purpose of this study session is to hear from the community – neighbors to STRs and STR owners and operators alike – and for the City Council to discuss whether, and if so, what, changes to the City’s regulations are necessary to mitigate the negative effects and ensure that the positive benefits of STRs do not come at the expense of the well-being and cohesion of neighborhoods.
Effective management and regulation of STRs include enforcing local government standards and regulations to mitigate potential negative impacts, such as noise, overcrowding, and the displacement of long-term residents. The right balance between economic benefits and enforceable regulations can help maintain community support for compliant STRs and ensure that the local economy thrives in a balanced and sustainable manner.
The City Council’s initial direction tonight for potential future STR ordinance amendments will help establish that balance for the Pacifica community.
Current Regulations and Enforcement Process
The term “short-term rental” (“STR”) refers to the use of all or a portion of a residential dwelling unit property for a rental of less than 30 consecutive days. The popularity of STRs has increased steadily over the past decade due in part to the convenience of booking provided by companies such as Airbnb and VRBO and the increased availability of STRs as an alternative to a traditional hotel or motel rental. STRs can also provide a source of income for owners and occupants of the residential dwelling units offered for rent as STRs.
A residential dwelling unit offered as an STR may be exclusively used as an STR (i.e., unhosted), or the property owner/renter may reside on the property (i.e., hosted). The STR Ordinance, as currently drafted, does not distinguish between “hosted” and “unhosted” properties. There is, therefore, no requirement that a host be present during a guest’s stay.
There are two common interpretations for “hosted” STRs. First, it could be a unit or a portion of the house that guests may rent while the owner/renter is on-premises. The other interpretation of hosted STR is that it is offered for rent by guests periodically between occupancy by the property owner/renter. It is currently unknown how many STRs in Pacifica fit into the first or second category, as this question was only recently added to the STR Permit Application. After the next business license and STR permit renewal is completed in October 2024, the City will be able to report on the hosted v. unhosted STR count.
To address the health, safety, and welfare impacts caused by the short-term rental of residential property within the City of Pacifica, and in response to the increasing number of STRs, the City Council adopted Ordinance No. 835-C.S. (“Ordinance”) in 20181. The Ordinance, which added Sections 9-4.4900 through 9-4905 to the Pacifica Municipal Code, permits both owner-occupied and non-owner occupied STRs to operate in the city with established regulatory requirements to minimize potential impacts on surrounding residents. It established a permit requirement for the operation of an STR, certain operating requirements (i.e., “good neighbor” policies), and permit revocation and enforcement processes (“STR Program”). The Ordinance appoints the Assistant City Manager or designee as the responsible City official for the administration of the STR permit process. The operating requirements established in the Ordinance also included certain guest safety standards, including a requirement that a diagram of exits, fire extinguisher 1 City Council Ordinance No. 835-C.S.
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locations, and fire and police contact numbers be printed on-site for the renter.
After a few years of program operation in Pacifica, it became apparent to City staff that it is a difficult and complex program to track and manage. Therefore, in July 2021, the City partnered with a third-party tax administrator, HdL, to provide full management services for transient occupancy tax (TOT) and to assist STR applicants with completing their business license tax and TOT registration and obtaining STR permit, as well as to provide ongoing monitoring and enforcement of tax compliance from STRs within the City limits.
Staff has provided several updates to the Council regarding the STR program over the years.
On June 13, 2022, City staff provided a comprehensive update to the Council on the implementation of the City’s STR Program2. At that meeting, staff provided a detailed report on the implementation of the STR Program, which included information regarding STR locations in Pacifica, the TOT collections from STRs, the impact STRs have on the City’s housing stock, the number of unpermitted STRs, and an update on City enforcement efforts. The City Manager’s recommendation, at that time, was to not undertake any modifications to the STR Program and to continue to gather data on the number and types of STRs, continue to work to identify unregistered STRs, and assess and enforce as necessary any Accessory Dwelling Units (“ADUs”) being utilized as STRs. Ultimately, the City Council did not direct any changes to the STR Program but did direct that potential revisions to the STR Program be revisited during the Council goal setting in 20233 as a priority for FY2023-24.
Following the June 13, 2022, City Council meeting, members of the public expressed their concerns relating to the sale of residential property in Pacifica for the singular purpose of using the property as an STR, which can have negative impacts on the community as they remove a housing unit from the housing stock. As a result, at the October 10, 2022, City Council meeting, staff presented Council information about residential property sales resulting in the use of those properties solely for STR use and asked for direction on whether amendments to the STR Program regulations were warranted4. In response to concerns that increasing STRs would impact the City’s housing stock, a majority of the Council provided direction to amend the STR Program regulations to impose a cap on the total number of STR permits issued in Pacifica to 150 STR units and whether or not to undertake in the future additional potential revisions to the STR Program be revisited during the Council goal setting in 2023 for the FY 2023-245.
The ordinance was amended per Council’s direction, and the Planning Commission held a duly noticed public hearing on the proposed ordinance amendment on January 17, 202367. Public input was heard, and the Commission moved to adopt the resolution and recommended approval to the City Council. On February 13, 202389, the City Council conducted a duly noticed public hearing on the Ordinance for the first reading of the Amendment and on February 27, 2023, for the second reading, before the final adoption of the Ordinance No. 888-C.S. The amended Ordinance No. 888-C.S. revised the definitions section, established a cap of 150 STR permits at any given time, clarified the prohibited use of any Junior Accessory Dwelling Unit (JADU) as STRs, established STR permit requirements subject to the cap, and established additional violations for permit revocation. Public comments received throughout this process for 2 City Council June 13, 2022 Agenda Report, Item No. 14. 3 City Council Minutes June 13, 2022
4 City Council October 10, 2022 Agenda Report, Item No. 10 5 City Council Minutes October 10, 2022
6 Planning Commission January 17, 2023 Agenda Report, Item 2 7 Planning Commission Minutes January 17, 2023
8 City Council February 13, 2023 Agenda Report, Item No. 10 9 City Council Minutes February 13, 2023
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the above-mentioned meetings are included as links to this staff report for reference10.
Collaboration with Coastal Commission
As requested by the Council, staff consulted with California Coastal Commission (CCC) staff regarding the Council’s direction to establish a cap to be applied citywide, including the Coastal Zone. The CCC staff responded with an extensive data request that staff continued to work on with CCC staff. Between March 2023 and June 2023, City staff prepared and submitted an application to the California Coastal Commission to amend its certified Local Coastal Program (“LCP”) for the proposed Ordinance Amendment. City staff prepared responses to the Coastal Commission’s questions to clarify the amendments and their consistency with the LCP. On March 22, 2024, the California Coastal Commission (CCC) deemed the City’s LCP amendment application complete.
Most recently, the CCC scheduled the application for the Commission to take final action on June 13, 202411. While the Commission certified the City’s Local Coastal Program Amendment as submitted on that day, there were many comments from the Commissioners and public indicating that the City should consider additional regulatory measures in any potential upcoming amendments, such as the ones submitted to the CCC via public comment (Attachment A). The Commissioners also voiced concerns over STRs potentially reducing the housing stock and encouraged the City to find the right balance between visitor-serving objectives and preserving affordable housing. Additionally, they emphasized the importance of proper and effective enforcement efforts by the City to ensure compliant operations of permitted STRs. Topics like the danger of housing displacement, hosted v. unhosted, and limiting one STR per natural person to discourage corporate ownership of unhosted STRs came up during the discussion as potential future policy considerations for the City.
Pacifica’s STR Ordinance Implementation and Enforcement The compliance process for STRs is complex, and compliance issues are inevitable. Enforcing a short-term rental (STR) program poses significant challenges for local governments. These challenges arise due to the multifaceted nature of STR operations and their wide-ranging impacts on local communities.
While most operators are keenly interested in operating legally once they understand the requirements, others make attempts to avoid compliance and employ various tactics to hide their STR activity. Therefore, tracing and verifying those listings and property information takes time.
The complexities of regulatory compliance, tax collection, technology integration, community impact, legal hurdles, stakeholder engagement, and resource allocation create a multifaceted enforcement landscape that requires a nuanced and comprehensive approach.
Here are the key complexities involved in STR program enforcement.
1. Regulatory Compliance and Monitoring
Ensuring that STR operators adhere to local regulations is a big part of enforcement. This involves proper registration and permitting processes and may include regular inspections to verify compliance with health and safety standards and building codes, and reporting requirements imposed on hosts. Each of these steps is essential to monitoring the housing market and protecting community welfare. However, the fluid volume of STRs and the 10 Public Comments from CC Meetings
11 California Coastal Commission Summary of Staff Recommendation Pacifica City Council 5
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decentralized nature of platforms like Airbnb significantly complicate these efforts.
Ordinance No. 835-C.S. , adopted in 2018, established a permit requirement for the 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.
Ordinance No. 888-C.S. adopted in 2023 amended the ordinance to include the following additional standards:
• Establishing a short-term rental permit cap of 150 at any given time and establishing a waiting list for applications received after the issuance of 150 short-term rental permits;
• Excluding from short-term rental use junior accessory dwelling units (in addition to accessory dwelling units, which were already prohibited) and any location not approved for use as a permanent dwelling unit;
• Establishing a term for the validity of the permit from the date of issuance to October 31st annually;
• Allowing the permittee to renew the permit annually by October 31st; and • Allowing to revoke a short-term rental permit if the permittee has failed to renew it.
2. Tax Compliance
As lodging providers, STR operators must obtain an STR permit and a City of Pacifica Business License and comply with the requirement to collect and remit Transient Occupancy Taxes as mandated by the City of Pacifica Municipal Code.
STR Rental Permit mandates that STR operators meet specific health and safety requirements, including installing smoke and carbon monoxide detectors. Additionally, operators must adhere to City ordinances, encompassing noise restrictions and social host responsibilities.
Last year, the City Council raised the annual permit fee to $1,622 to help partially offset the significant administrative and enforcement costs of the program, which involves the planning, building, and code enforcement divisions, finance, and the City Manager’s Office and the City Attorney’s Office. The STR permit fees are due annually with the business license renewal every November. The City has collected $291,121 in STR Permit Fees in the FY 2023-24 year to date.
Business License Tax is applicable to STR operators as per Pacifica Municipal Code Section 3-1.103, which prohibits any person from conducting business in the city without obtaining a license. PMC Section 3-1.206 classifies “E” businesses, including motels and property management. The rate for businesses reporting less than $25,000 in annual gross receipts is a minimum of $40. For businesses reporting more than $25,000 in annual gross receipts, the tax is the minimum of $40, plus 63 cents per $1,000 of receipts over $25,000. The City’s business license tax is very low compared to other jurisdictions; business license tax revenue from STRs was under $15,000 for calendar year 2023.
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Transient Occupancy Tax According to PMC, Section 3-7.03 of the Pacifica Municipal Code imposes a 12% tax on all lodging operators, including hotels, motels, and STRs. In 2019, the City entered into a voluntary collection agreement (VCA) agreement with Airbnb that enables this online hosting platform to collect and remit TOT to the City on behalf of the STR operators.
However, since STR operators often list their properties on multiple platforms (such as VRBO, Booking, private listings, etc.), rentals through other platforms may lead to uncollected TOT and outstanding tax liability for those STRs. HdL is assisting the City with tracing these rentals and forcing the STR operators to register with TOT to report their gross receipts to assess the outstanding tax liability. The TOT collection from STR was $1,429,253 FY 2023-24 year-to-date, representing 10 months of the year compared to the $1,231,552 collected from Pacifica’s hotels for the same period. The projected FY 2024-25 TOT taxes from STRs of nearly $1.5 million is about 50% of the projected TOT revenues and 3.2% of the total General Fund revenues.
Tax Compliance in Relation to the Cap
As mentioned above, the City partnered with HdL to provide tax collection and compliance services for the STR program. Despite some STR operators trying to avoid tax compliance, HdL is aware of their tactics and how to counter them. HdL’s system constantly monitors for changes in the STRs inventory and provides the most accurate view of STR activity in the City. As further described in the attachment to this report, it takes up to four months to bring a non-compliant STR operator to full compliance.
As of a June 1, 2024, snapshot in time, Pacifica had 133 active registered and compliant STRs, 63 in the Coastal Zone and 70 outside the Coastal Zone (Attachment E). This is compared to 108 total, 48 Coastal and 60 non-coastal figures reported as of December, 2023.
Additionally, as of June 1, 2024, there were 25 non-compliant STRs (13 in the Coastal Zone, 12 outside the Coastal Zone) that are now in various phases of enforcement orders but are not actively cooperating with the City/HdL to come into compliance. This is compared to 41 noncompliant STRs (20 in the Coastal and 21 outside Coastal Zones) reported in December 2023.
The “non-compliant” category means that the STR does not meet all tax compliance criteria and may be missing one or all tax requirements (business license, TOT account, and permit). The property is not cooperating with the City/HdL to resolve the non-compliance.
Finally, 13 STRs (9 in the Coastal Zone, 4 outside the Coastal Zone) are in the process of becoming compliant and cooperating with the City/HdL, compared to 19 (11 in the Coastal and 8 outside the Coastal Zones) reported in December 2023. The “in progress” means that the STR operator has either not yet completed the permitting process for the current or prior years, Pacifica City Council 7
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owes a permit fee, or remains non-compliant with lodging (TOT) or business license tax but is currently working with the City/HdL to come into compliance.
Now, as the citywide cap of 150 has been approved by the Coastal Commission if all of the noncompliant STRs are closed (some are illegal use of ADUs), and all of the in-progress STRs are permitted, there would be a total of 146 STRs in Pacifica, leaving only four remaining spots available for STR permits, which would prevent the majority of current and future non-compliant properties from obtaining an STR permit unless someone drops out. This will significantly help manage this process, creating a natural competition for only compliant STRs in good standing and abiding by all regulations being allowed to hold and renew their STR permit.
It should also be noted that prior to this reporting, HdL in partnership with the City had closed 60 accounts (26 in the Coastal Zone, 34 outside the Coastal Zone) through the compliance and enforcement process.
Working with STR operators to ensure voluntary compliance with the STR Program has proven to be the most efficient approach to administering this comprehensive program, as evidenced by the increased number of permitted compliant STRs above. However, if all communication efforts outlined in Attachment B fail to produce results, HdL prepares an assessment of non-compliant STRs which leads to calculations for outstanding TOT and Business License tax due and liability for permit fees or any other violation of the STR ordinance (Escalated HdL Compliance Phase).
Subsequently, these delinquent and non-complaint properties are turned over to the City for formal administrative enforcement (Escalated City Compliance Phase). The formal enforcement protocols include using all remedies authorized by the City’s Municipal Code. This includes mailing both the STR property a certified Notice of Violation (NOV) notifying the responsible parties that the property has been declared a public nuisance due to their failure to obtain a short-term rental permit and, if applicable, their failure to comply with the City’s Transient Occupancy Tax Ordinance. The responsible parties are ordered to cease-and-desist operating as an STR until obtaining an STR permit, or a letter will be sent demanding payment of the assessment, cease advertising, and shut down their STR operations. If applicable, the NOV is coupled with a Notice of Determination from the City’s Tax Administrator assessing the amount of the property owner’s TOT tax liability plus penalties and interest.
Property owners who fail to promptly bring their property into compliance after receiving a NOV are then issued citations under the Municipal Code, which include additional fines and penalties.
At the same time, tax liens are placed on those properties who failed to respond to the Notice of Determination from the City’s Tax Administrator.
The City’s Code Enforcement Division has issued NOVs for 17 properties that repeatedly ignored requests by HdL to obtain STR permits and pay outstanding TOT, business license taxes, and permit fees.
Since the NOVs were issued in December 2023, two properties paid the outstanding assessment in full and obtained the STR permit. Three properties changed ownership and no longer operate as STRs. Another three shut down their STR operations but have not paid the outstanding tax liability, so the tax liens are being filed with San Mateo County for these properties.
Three properties shut down for a few weeks after receiving the NOV but recently re-upped their ads, and six properties have not responded and continued operating without compliance. These nine properties will be issued another Notice of Violation with daily administrative citations and liens as appropriate. Two of these properties, with outstanding tax assessments exceeding Pacifica City Council 8
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$10,000, are in the City Attorney’s Office for review.
The table below illustrates the various non-compliance combination factors for this category of STRs as of June 1, 2024.
While the above enforcement activities have proved successful, there are additional tools that could be incorporated into amendments to the STR Ordinance, which could further improve achieving compliance with the STR Ordinance.
For example, to discourage the proliferation of STRs in any one neighborhood, the City could consider requiring a minimum distance between Short Term Rental operators. To discourage the use of STRs as an hourly event center or a flash party, Council could establish a minimum number of nights for each rental period (e.g. 2 to 3 nights minimum) and establish a limit on the number of guests per visit (either per room or per dwelling unit) and/or limit the number of vehicles allowed on the property per visit. Another amendment that could induce greater compliance is to increase the fines and penalties for violating the STR Ordinance. Due to a recent change in State law, cities can now establish increased fines and penalties for violations of a city’s STR Ordinance where the infraction poses a threat to public health or safety at $1,500 for a first violation, $3,000 for a second violation, and $5,000 for each violation of the same ordinance within one year of the first violation. Alternatively, the Council could reclassify a violation of the STR ordinance as a misdemeanor and set fines and penalties at up to $1,000 per violation. Finally, amending the Ordinance to allow the City to issue administrative subpoenas to STR operators would create an expedited and judicially enforceable way to compel STR Operators to disclose their books and records.
Voluntary Collection Agreement (VCA) with Airbnb
The City entered into a VCA agreement with Airbnb in October 2018. The agreement outlined the responsibilities and processes for Airbnb to collect and remit transient occupancy taxes (TOT) on behalf of its hosts for taxable booking transactions made through its platform.
Airbnb agreed to act as a “collector” of the TOT, assuming responsibility for reporting, collecting, and remittance of these tases for all taxable booking transactions. This agreement relieved individual hosts from the obligation to collect and remit TOT for these rentals provided Airbnb fulfills its duties.
Airbnb also agreed to report aggregate tax information to the city and assume liability for any Pacifica City Council 9
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failure to correctly report, collect, or remit TOT, including any penalties and interest imposed by the Pacifica Municipal Code.
The City of Pacifica retained the right to audit Airbnb based on their reporting and agreed not to audit individual hosts or guests unless necessary. This agreement can be terminated by either party with 30 days' notice and does not affect Airbnb's obligation to remit any collected taxes before the termination date. The agreement also included provisions for notification to hosts and guests, choice of law, and other standard contractual terms.
Although Airbnb has been remitting the TOT taxes to the City every month, it provided very little, if any, backup information for these remittances, advocating for the privacy of their host clients.
They also take a strong position that all local regulatory policies and laws related to STRs are the responsibility of the local jurisdiction, and Airbnb would not suspend unpermitted noncompliant STRs from their platform unless they are engaged in criminal conduct or impose open threats to health and safety.
The Assistant City Manager has met with Airbnb multiple times to collaborate and enhance education on STR regulations for Pacifica hosts. These collaborative efforts have led to the recent design and launch of a responsible host page on the Airbnb platform to educate Pacifica STR operators who utilize Airbnb services, representing the vast majority of all Pacifica STRs, about the necessary requirements: Pacifica, CA - Airbnb Help Center Future enhancements, like displaying the STR permit number for Pacifica hosts, were also discussed. However, Airbnb was only willing to make it an optional, rather than mandatory field.
This reinforced Airbnb’s continuing position that the responsibility for enforcing local rules and regulations lies with the local jurisdiction and not the hosting platform.
Overall, continuing collaboration with Airbnb and other platforms to engage stakeholders (STR hosts and residents) is critical to effectively managing the STR program. Hosts must be educated about their responsibilities, while residents' concerns need to be addressed through transparent communication and public meetings. Collaboration with STR platforms is essential to streamline registration, tax collection, and compliance monitoring.
Additional Methods of Regulating the Impact of Problem STRs There are a number of legal and practical enforcement challenges to quickly resolving issues with non-compliant STR properties. To ensure due process, property owners must receive proper notice of their non-compliance, be provided an opportunity to correct that noncompliance, and opportunity to address any concerns to the City through a formal hearing process. Implementing and assessing fines and penalties sufficient to deter violations and/or induce compliance while addressing potential privacy and property rights concerns related to ongoing reporting and monitoring activities are all critical issues that require significant legal attention. Legal battles can be lengthy and costly, draining resources that could be better spent on proactive enforcement measures.
As mentioned above, STR hosts must adhere to all safety requirements and conduct their operations in accordance with PMC provisions, including Noise Violations (PMC Section 5-
10.02), Loud and Unruly Gatherings (PMC Section 5-28.05), illegal parking, and all other violations of the PMC falling under the Public Nuisances category as outlined in PMC Section 1-
2.01. The Pacifica Police Department has experienced calls with STR properties on a sporadic basis over the past few years, typically originating from neighbors reporting issues such as parties, parking problems, and loud noise. Officers respond to calls for service at STR locations in the Pacifica City Council 10 June 24, 2024
same manner as any other calls. They rely upon previous experience at a location and call tracking systems to identify patterns of complaints or calls for service at a specific site.
For impermissible activity at a residence, such as loud parties in violation of the City’s Loud or Unruly Gatherings and Social Host Liability Ordinance, an officer may issue a First Response Notice, alerting the “guests” that additional police calls may lead to fines for the cost of subsequent police responses to that location (per PMC 5-28.07 and 5-28.08). If no violations are observed, the officer may decide to contact the occupants and inform them of the complaint in an effort to prevent future issues, but the complaint will be reported as “unfounded.” There are some instances where the officer will not make contact at the location if no violations are observed.
If the reporting party requests a follow-up from the responding officer on the outcome of the complaint or call for service, the responding officer will call them back with the relevant information. It is worth noting that the majority of reporting parties choose to remain anonymous.
Aside from occasions where there are violations observed by officers, the Police Department has noted occasions where no violations were observed. For example, in the last calendar year, there were 96 total complaints related to 113 STRs. 66 (69%) of them were deemed “founded” involving issues such as noise, party, municipal code, and parking violations. Thirty complaints (32%) were considered “unfounded.” These 66 founded STR cases represent 0.2% of the 37,204 police calls for service throughout the year. Nearly half of the 66 “founded” complaints were due to 4 STR locations.
Staff consulted with the Senior Code Enforcement Officer and the Police Department in preparation for this report to obtain an updated summary of current violations and enforcement activity associated with STRs. The City takes neighborhood safety concerns associated with STRs very seriously to ensure that all STR operators comply with regulations, and those who don’t are ultimately removed from participating in the STR Program. For example, an NOV was issued for one of these four properties with 14 “founded” complaints, and the owner is currently cooperating with the City. Any future founded complaint of the same nature may result in an administrative citation, triggering the STR permit revocation process. The other three properties are currently under review to determine the next enforcement steps. Staff will continue working through the appropriate legal steps to bring all these properties to compliance or ensure their exclusion from the STR Program.
Jurisdictional Research on STR Provisions and STR Impacts City staff collected data and met with eight local jurisdictions that provided information on STR ordinance provisions, implementation of their ordinances, and the potential impact of STR operations on the City finances or housing stock.
Staff researched the ordinances, financial data, and number of housing units (2020 US Census Data) for the City’s of Half Moon Bay, Grover Beach, Capitola, Pacific Grove, Oceanside, Burlingame, Palm Springs, and County of Marin. Staff found that several of these jurisdictions had similar characteristics to Pacifica such as being in the coastal zone or within San Mateo County. Some jurisdictions were identified by the Council or members of the public as providing potential example provisions that may be considered in Pacifica’s STR ordinance updates.
However, most of the researched jurisdictions have very different characteristics than Pacifica, such as being a high-demand tourist destination, having a higher population, and being located entirely within the coastal zone. The data collected from the jurisdictions’ STR ordinances was merely to review the regulation types that each jurisdiction possessed to provide a baseline of the most common regulations or implementation practices within STR ordinances.
A brief summary table is attached that outlines data on the eight sample jurisdictions and the Pacifica City Council 11 June 24, 2024
City of Pacifica, providing estimates on financial impact, housing stock impact, and other general information about STRs and hotel rooms (Attachment C). As shown in this table, some of the jurisdictions have significantly higher number of hotel rooms than Pacifica and generate negligible amounts of TOT from STRs compared to total TOT generated from hotels, while Pacifica, Grover Beach, Capitola, Oceanside, and Palm Springs collect at least 30% or more from TOT generated by STRs compared to total TOT collections. The number of hotel rooms varies amongst the sample jurisdictions, ranging from 100 to close to 7,000 rooms. Burlingame Half Moon Bay and Capitola appear to generate significantly more TOT from hotels compared to STRs due to the wide variety of lodging options and the large number of hotel rooms, which in turn justifies their small number of permitted STRs.
The number of permitted STRs (hosted and unhosted) also varies amongst the sample jurisdictions, ranging from 20 to 1,000, and a majority of the jurisdictions have a citywide cap on the number of permitted STRs.
Amongst the eight jurisdictions, the percentage of permitted STRs compared to the number of housing units varied from 0.16% to 8.01% of the housing stock (2020 US Census Data).
Furthermore, when the percentage of permitted STRs is below 10%, especially under 1% of the number of housing units (which includes Pacifica), their impact on housing stock availability seems minimal.
However, this observation underscores the need to look beyond STR regulations to understand the housing crisis fully. Factors such as long-term tenancy rates, the number of unoccupied sites, and other elements of the housing market significantly influence housing production, independent of the number of STRs. Additionally, simply limiting STRs does not resolve the complex issues these communities face. Jurisdictions with the strictest STR policies often still need substantial city resources to enforce regulations on unpermitted STRs, which is unsurprising given that areas with diverse lodging options and significant Transient Occupancy Tax (TOT) revenues from hotels tend to have fewer permitted STRs. This suggests that while regulating STRs is part of the solution, it is not a comprehensive fix for the broader housing challenges.
The additional data listed below provides a summary of STR regulations and registration requirements, operational standards, performance standards, and monitoring techniques from the eight jurisdictions’ STR ordinances and implementation practices:
• Several required STR operators to obtain an STR Permit, Business License, and TOT. The majority required permits to be renewed on an annual basis. • Several jurisdictions allowed one STR per property.
• Majority required inspections, whether they were self-certified for owner-occupied units or inspections completed by City staff, Building, Fire, or Environmental Health departments for non-owner-occupied units.
• Majority did not have permit exemptions for STR operations. • Majority prohibited ADUs as a dwelling type for STR operations.
Jurisdictions also provided the following operational requirements and performance standards for STRs which included the following:
• All jurisdictions required a 24/7 contact person and response times that ranged from 15 to 60 minutes by phone and/or 30 minutes to 1-hour response in person. • Majority require existing parking spaces on the property to be available for STR guests and consistent with City’s standard minimum parking requirements. • Majority have occupancy limitations, which allow no more than two individuals per bedroom.
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• Majority required compliance with citywide noise ordinance standards. • Majority did not have provisions for pools.
• Half of the jurisdictions did not have provisions for daytime guests, and the other half had limitations on the number of daytime guests, which is calculated based on either the number of bedrooms or the number of occupants.
• Several included definitions for Daytime Guests, Hosted or Owner-Occupied vs Unhosted or Non-Owner-Occupied Short-Term Rentals or Stays, and Primary Residence.
• The duration of stays varied amongst all jurisdictions, with some requiring a minimum of two or three consecutive night stays, permitting a maximum of 60 or 120 days for unhosted overnight stays per calendar year, or requiring a minimum of 12 overnight stays total during the permit year to maintain status of registration.
Jurisdictions also provided the following provisions that would contribute to the ongoing monitoring STRs which included the following:
• The majority have a cap, and the majority do not have a buffer for STRs. One requires a 55’ buffer between STRs, another has a buffer by neighborhood, and another has an overlay district that limit STRs to a specific area of the City. • Majority stated that an STR permit may be revoked for violating ordinance, failure to make payments or other violations consistent with the violations section of the jurisdictions municipal code.
• Half of the jurisdictions differentiate between an unhosted, or non-owner occupied and hosted or owner-occupied stay with particular provisions, and others do not have limits or differentiate between the two stay types.
• Several rely on the provisions of the citywide municipal code violations section to take action on various STR violations.
• A few jurisdictions require audits for compliance reasons or by request.
In summary, staff found that creating an effective STR ordinance requires considering many factors unique to each community. Tailoring the ordinance to the specific characteristics of the jurisdiction is essential while also balancing the various aspects identified above. This customization is crucial for developing a sustainable and accountable STR program unique for each community.
Conclusion
The STR Program is very complex, impacting various City departments and functions, such as administration, planning, code enforcement, finance, and public safety. Pacifica’s STR program plays a pivotal role in the local economy, bolstering the hospitality industry, supporting local businesses, and making a substantial contribution to the City's revenue. This contribution is essential for funding critical municipal services that ensure a high quality of life in the community, encompassing public safety, infrastructure maintenance, and recreation activities.
The STR Program demands significant efforts in monitoring and enforcement. It will continue requiring substantial education efforts for current and future STR operators encouraging responsible and compliant hosting. Staff are working on additional educational materials for the permittees, providing regulatory and tax compliance guidance. The materials should include safety and law enforcement tips on how to reduce complaints such as robust vetting of potential guests and the use of cameras at entrances to monitor the number of guests and their activities, and how to empower property owners to understand their role in compliance and be more “hands-on” in managing their properties.
The City’s STR Ordinance has been an effective tool in mitigating the impact of the STRs, but it can and should be strengthened to provide staff with the additional tools necessary to induce Pacifica City Council 13 June 24, 2024
compliance administratively. Increased fines and the addition of administrative subpoena power will complement the other remedies already available in the City’s Municipal Code. Tightening up the regulatory requirements to require maximum occupancies and a minimum 2-to-3-night rental would further mitigate the negative impacts of these particular uses.
Staff remains committed to ensuring the successful implementation of the STR Program and future STR ordinance updates. We are confident that these efforts, combined with proactive and constructive engagement from the community, will result in establishing a well-regulated STR program that will remain a substantial contributor to the local economy and the City’s revenue base with minimal negative impact on the community.
COUNCIL QUESTIONS/REQUESTED FEEDBACK:
The following list of potential questions is intended to help guide the Council’s discussion for this study session and the direction the City Manager needs for further analysis and work in preparing potential future ordinance revisions:
1. What specific issues related to STRs does Council find important?
2. What constraints has Council identified that make it difficult for the City to enforce the ordinance? Or limitations on the City’s current enforcement activity?
3. What specific policy direction is the Council interested in exploring? PUBLIC COMMENT:
Prior to publication of the staff report, staff received three public comments (Attachment D) from members of the public. The comments included various concerns and recommended regulations for STRs.
ALTERNATIVE ACTION:
None identified, as the purpose of the study session is to receive direction about further analysis and work on potential ordinance revisions.
RELATION TO CITY COUNCIL GOALS AND WORK PLAN:
The Short-term rental program study session is consistent with the following item in the Counciladopted Strategic Plan and Priority Work Plan for FY2023-24:
• Goal 3: Prioritize protection and development of affordable housing. o Strategy B: Update the Short-Term Rental Ordinance.
Additionally, the study session supports the following Council goals:
• “Organizational and Fiscal Stability” The STR program contributes approximately $2 million in taxes and fees to the City’s revenue base annually. • “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:
There is no fiscal impact associated with this study session. However, any specific policy direction to staff may significantly impact the City’s budget and long-term financial sustainability.
ORIGINATED BY:
Planning Department
Pacifica City Council 14 June 24, 2024
ATTACHMENT LIST:
Attachment A - CCC Public Comment Received (PDF)
Attachment B - HdL Compliance Process (PDF)
Attachment C - Jurisdictional Data (PDF)
Attachment D - Public Comment Received Prior to Publication (PDF) Attachment E - Pacifica STR Report HdL - 6-1-24 (PDF)