PISMO BEACH COUNCIL AGENDA REPORT
Agenda Item #12.A
SUBJECT/TITLE:
SHORT-TERM RENTAL REGULATIONS AND ENFORCEMENT
RECOMMENDATION:
1. Receive a report and provide direction to staff on potential changes to the City’s Short-Term Rental regulations.
2. Should changes to the Short-Term Rental regulations be desired, adopt an Urgency Ordinance imposing a moratorium on the issuance of Short-Term Rental licenses pursuant to Government Code Section 65858.
BACKGROUND:
At the January 28, 2022, Special Goals Workshop, staff presented the City Council with information about the City’s current short-term rental (STR) regulations and enforcement process for violations of the regulations. At that time, the Council directed staff to return at a future meeting with further information about the enforcement of the City’s STR regulations and related options.
The City’s existing land use regulations governing STRs were adopted by the City Council on May 15, 2018, by Ordinances O-2018-006 (coastal zoning ordinance) and O-2018- 007 (non-coastal zoning ordinance). These regulations and the associated Local Coastal Program/Implementation Plan amendment were certified by the Coastal Commission on August 10, 2018, with a unanimous vote of the Coastal Commission, which called it a model ordinance at the time. Following certification by the Coastal Commission, the City Council adopted Ordinance O-2018-013 to establish the necessary administrative policy changes to implement the land use ordinances.
There are currently 28 STRs licensed to operate within Pismo Beach. While most of these permitted rentals operate without issue, the City has continued to receive concerns from the community regarding these uses. Additionally, since the City’s ordinances were certified, other communities have adopted regulations that include more stringent limitations on rentals. As such, a review of the regulations as requested by the Council is timely.
Regulatory Structure
The regulations governing STRs are found in two places in the Pismo Beach Municipal Code (PBMC). Chapter 5.22 (administrative code) regulates the licensing of STRs and homestays. The 1983 and 1998 zoning codes each have a chapter dealing with STRs:
Chapter 17.113 (1983 coastal zoning code) and 17.09 (1998 non-coastal zoning code), which regulate the applicable land use considerations. The PBMC is available online at www.pismobeach.org/municode .
Under both Chapters 17.113 and 17.09, STRs and homestays are permitted only at single-family properties that are the primary residence of the property owner. A property Council Agenda 6-21-2022 12.A-1
owner can only have one primary residence at one time for purposes of the STR ordinance, and the property owner is required to provide the City proof of primary residence each year. STRs may not be owned by corporations, LLCs, partnerships or other business or commercial entities; they must be owned by individual owners, or trustees of a trust.
When the City receives an application for an STR/homestay, the City conducts an inspection to confirm bedroom count, on-site parking and applicable safety standards.
The City may re-inspect a property if complaints are subsequently received about the operation of the STR/homestay. The City also has created a “good neighbor policy” (Attachment 2), which the property owner must sign. A brochure summarizing this good neighbor policy is required to be placed or posted in a clearly visible location within the unit. There are various other rules and limitations placed on the operation of STRs and homestays like maximum occupancy, visitors, trash, traffic, parking, and noise.
Furthermore, in keeping with the requirement that the unit be the owner’s primary residence, a qualifying STR property is limited to a maximum of 182 rental days per rolling year (counted from a particular date one year, through the same date the previous year) without the owner being concurrently on site. In the event that the owner is concurrently on site, there is no limit to the number of days a property may be used as a homestay.
The property owner is also required to obtain a business license and a transient occupancy tax certificate, so the owner may remit to the City the applicable TOT and lodging assessments.
Primary Residency Requirement
As stated above, STRs may not be owned by corporations, LLCs, partnerships, or other business or commercial entities. Rentals must be owned by individual owners or trustees of a trust and, importantly, must be the primary residence of the individual applying for the STR license. Subsection 5.22.100.C. of the PBMC defines primary residence as:
“the dwelling owned and occupied as the property owner’s principal place of residence, where the owner lives more than fifty percent of the year, defined herein as one hundred eighty-three days or more per year. For purposes of short-term rental or homestay licensing, a person can only have one primary residence at any time.”
During initial implementation of the regulations, property owners were required to submit property tax exemptions from the County Tax Assessor to establish primary residency. In the last two years, applicants for STR licenses have been required to provide additional proof of primary residency, including Schedule E of the owner’s income taxes (with confidential information redacted) and copies of driver’s licenses with address of the STR shown. Applicants may also submit copies of vehicle registration, voter registration, and utility bills to assist in proving primary residency. Additionally, over the last two years the City has required ownership of the property for six months before approving an STR license, to reduce the number of applications received by speculative owners. This documentation is required to be provided annually to ensure continued primary residency.
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To provide an example of the types of concerns residents have about these uses, in recent months, the City has received complaints regarding a license for a rental that the owner had not been living in for the previous six months. This is not an explicit requirement of the regulations to issue an STR license, but this is a requirement that could be implemented or extended if desired by Council.
Rental Activity Monitoring
The monitoring of STR rentals and activity requires sophisticated software, as the platforms available to advertise and conduct rental activities are numerous. The City currently contracts with Rentalscape to comb internet rental sites and identify STR listings within the city. This system utilizes data from listings to help identify the properties advertised for rent. However, site identification has become increasingly difficult because of the anonymization of listings by those posting them, apparently intended to skirt enforcement, as well as to reduce crime against vacant properties. Staff monitors Rentalscape to identify and notify unpermitted rentals prior to citation proceedings.
Rentalscape is also utilized to provide an estimate of rental activity for licensed STRs, which allows the City to monitor the 182 rental-day limitation for each property. While the estimates are not exact due to a variety of factors, the data has been utilized successfully, including one case where the data helped lead to successful court proceedings brought by a previously licensed STR that was not operating within regulations.
Administrative Penalties
Violations of the STR regulations can be prosecuted criminally as a misdemeanor, but most are handled administratively through the imposition of fines. The fines start at $750 for the first violation, and $1,000 for each subsequent violation. Each separate day or rental night in which a violation exists is considered a separate violation, so the fines can mount quickly in cases where the property owner does not quickly come into compliance.
The City can also pursue civil remedies such as nuisance abatement under Chapter 8.20 of the Municipal Code.
The City has imposed nearly $30,000 in fines within the last two years for STR violations, including prevailing in the above-mentioned court case filed by a then-licensed STR operator who sought to overturn $16,750 in fines for illegal operation of their rental.
License Revocation
In some instances, complaints and administrative penalties are such that they become categorized as significant violations. Subsection 17.113.100.C of the Code defines a significant violation as “a situation where the property owner or responsible party is either unable or unwilling to rectify the situation within thirty minutes, and/or when public safety personnel must be called to assist in resolving the situation, and/or a situation that causes substantial disturbance to the neighbors or neighborhood.” Examples of significant violations involve complaints that are not addressed within thirty minutes of the City contacting the owner or responsible party, inability for City staff, including Police Dispatch, to reach the owner or responsible party, violations of the operating confines of the regulations, including number of visitors, overnight occupancy, annual limit of rental Council Agenda 6-21-2022 12.A-3
nights, etc., and failure to make applicable tax payments to the City. An STR license may be revoked if the owner is non-responsive to a complaint more than three times in a twenty-four-month period, if there are more than three significant violations in a twenty- four-month period, or if the property owner or responsible party is cited three or more times in a twenty-four-month period. Since implementation of the regulations, two STR licenses have been revoked.
Enforcement Approaches in other Cities
Staff has reviewed the approach to STR regulation used in a number of other cities. There are some novel regulatory structures in use elsewhere in California.
For example, in South Lake Tahoe, California, vacation home rentals (VHRs) are limited by citizen initiative to a specific set of non-residential areas within the city. The initiative, Measure T, required the phase-out of all VHR permits in residential areas and all multi- family properties over a three-year period ending in December 2021. Measure T now prohibits the issuance of new VHR permits in residential areas, and no new VHR permits have been issued by that city since the effective date of Measure T in 2018. Measure T also allows for properties within a residential zone, whose owner is a permanent resident of the City of South Lake Tahoe, to vacation-rent the entire dwelling for up to 30 (consecutive or non-consecutive) days total per one-year permit period upon filing of a permit application and proof of primary residence through a property tax exemption claim.
The City also has an online map available that shows the number of VHR citations that have been issued to a specific VHR. It should be noted for purposes of this discussion that in Pismo Beach, the term “vacation rental” is not used interchangeably with “short- term rental.” Vacation rentals, as defined in Pismo Beach’s regulations, are not a point of discussion of this report.
The City of San Diego imposed a tiered permitting process for short-term rentals. Under Tier 1, a home may be rented for 20 days or less per year, and the owner does not need to reside on site. Under Tier 2, the owner may rent a room or rooms in the home for more than 20 days per year, so long as the owner resides on site. The owner may be absent from the residence for up to 90 days per calendar year. Under Tier 3, which allows the whole home to be rented in areas outside Mission Beach, the number of rental licenses issued cannot exceed 1% of San Diego’s total housing units outside the Mission Beach planning area, and there is a two-night minimum stay requirement. Lastly, under Tier 4, which applies only to Mission Beach, the number of licenses cannot exceed 30% of the homes in the Mission Beach planning area, also with a two-night minimum stay requirement. There is also a lottery process for the permits, which have a two-year term.
Of note, San Diego’s regulatory structure is still in the process of being approved by the Coastal Commission.
On the other end of the spectrum, the City of Monterey simply bans all short-term rentals within that city. A recent search of AirBnB shows no listings in Monterey, and the City of Monterey’s website indicates that the City actively enforces fines against those who advertise short-term rentals.
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All three of these examples provide potential avenues for additional STR regulation in Pismo Beach. Additional research would be necessary depending on the preferred direction of regulation desired by the Council. For instance, limits on the total number of permitted STRs could be pursued based on a flat number or based as a percentage of the more than 5,800 residential units in the City (2020–2028 Housing Element). Similarly, prohibitions on future STRs would require discussion with Coastal Commission staff regarding feasibility for certification of a Local Coastal Program amendment.
Potential Ordinance Modifications & Moratorium
In addition to the potential regulation modifications identified above, the City Council has stated a desire to address penalties for those operating STRs outside the confines of the adopted regulations. One such penalty could be the prohibition of license approval for a specified period following citation. The challenge to this would be that the “bad actors” would be treated the same as those owners who did not know the rules existed. This could be seen as a drastic penalty against some, while being an appropriate penalty for others, but would need to be uniformly enforced to remain fair.
Should the City Council provide direction to begin modifying the existing STR regulations, staff recommends the adoption of an urgency ordinance establishing a moratorium on the issuance of new STR licenses consistent with the process identified in Chapter 5.22 and land use regulations in Chapters 17.113 and 17.09 in the 1983 and 1998 Codes (Attachment 1). This will provide a temporary pause while staff research and drafts new regulations to address Council concerns.
As an urgency ordinance adopted pursuant to Government Code Section 65858 that would temporarily suspend regulations including certain land use regulations, the ordinance would need to be adopted by at least a 4/5 vote and would be valid for an initial term of 45 days. At that time, the City could opt to hold a public hearing, and the City Council could act to extend the interim ordinance for a further 10 months and 15 days.
Thereafter, the City Council could extend the interim ordinance for one final year if additional time was needed to study potential regulations.
Conclusion and Recommendation
Staff recommends that the City Council provide direction on desired changes, if, any, to the City’s existing STR licensing and enforcement regulations. If the Council determines to modify the existing STR regulations, staff recommends that the Council adopt an urgency ordinance (Attachment 1) to establish a moratorium, effective immediately, on STR licenses while new regulations are further researched and drafted.
FISCAL IMPACT:
There is no fiscal impact associated with this report.
ALTERNATIVES:
1. Provide alternative direction to staff.
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ATTACHMENTS:
1. Draft Urgency Ordinance
2. Good Neighbor Policy
Prepared by: Meeting Date: June 21, 2022
Matthew Downing, Community Development Director
David M. Fleishman, City Attorney
Submitted by: Matthew Downing, Community Development Director City Manager Approval:
Council Agenda 6-21-2022 12.A-6
ORDINANCE NO. O-2022-XXX
AN INTERIM URGENCY ORDINANCE OF THE CITY COUNCIL OF THE CITY OF
PISMO BEACH, CALIFORNIA IMPOSING A MORATORIUM ON THE ISSUANCE OF
SHORT-TERM RENTAL LICENSES PURSUANT TO GOVERNMENT CODE
SECTION 65858
WHEREAS, Pismo Beach is a popular tourist destination, drawing visitors from around the world to enjoy the Pacific Ocean, the beach, and recreational opportunities available in and around Pismo Beach; and
WHEREAS, one of the City Council’s 2022 goals is to build on the strength of the City’s local community to preserve the City’s “Classic California” charm and ensure an exceptional quality of life for residents; and
WHEREAS, the City Council recognizes the need to balance the provision of transient lodging options other than traditional hotels and motels for visitors with the needs of residents working in and around Pismo Beach to have affordable housing options; and WHEREAS, like many cities on the Central Coast, the City of Pismo Beach has a shortage of rental and for-sale housing affordable to people working in Pismo Beach and surrounding communities; and
WHEREAS, Chapter 5.22 of the Pismo Beach Municipal Code currently requires operators of short-term rentals and homestays to obtain a short-term rental license prior to engaging in the short-term rental business and as a condition of engaging in such business; and
WHEREAS, the City of Pismo Beach currently does not limit the number of short-term rental or homestay licenses that may be issued, either City-wide or in any neighborhood where such short-term rentals are allowed; and
WHEREAS, anecdotal evidence suggests that the COVID-19 pandemic has exacerbated the housing shortage, as people have moved to Pismo Beach and the Central Coast from more urban communities, and some housing units previously used as long-term rentals were sold to buyers intending to occupy them on either a full-time or part-time basis; and WHEREAS, the City has received complaints from neighbors of properties used as short- term rentals concerning parking, noise, trash, crowding, and other issues; and WHEREAS, it is in the interest of the City and its residents that the City undertake a review to consider zoning, land use, and regulatory measures to limit or otherwise regulate the number, location, and/or other aspects of short-term rental properties in Pismo Beach; and
Attachment 1
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WHEREAS, Article XI, Section 7 of the California Constitution authorizes the City to make and enforce within its limits all local, police, sanitary, and other ordinances and regulations not in conflict with general laws; and
WHEREAS, the City Council finds that there is a current and immediate threat to the public health, safety, and welfare associated with the lack of long-term rental housing in Pismo Beach, that there is a link between the prevalence of short-term rental properties and the lack of long-term rental housing, and that the issuance of additional short-term rental and homestay permits while the City undertakes a review and consideration of measures to regulate short-term rentals would exacerbate the threat and diminish or postpone the effectiveness of such measures; and
WHEREAS, California Government Code Section 65858 expressly authorizes the City Council to adopt by four-fifths (4/5) vote, without following the procedures otherwise required for the adoption of a zoning ordinance, an urgency ordinance that would go into effect immediately following its passage, which is necessary for the immediate protection of the public health, safety, and welfare; and
WHEREAS, on June 21, 2022, the City Council considered the adoption of this urgency ordinance at a properly noticed public meeting; and
WHEREAS, the City Council finds that it is necessary to adopt this urgency ordinance establishing a moratorium on the issuance of new short-term rental licenses pursuant to the Pismo Beach Municipal Code, in order to provide time for the City to review means of more effectively regulating short-term rentals and possibly adopting revisions to existing ordinances governing the establishment and operation of short-term rentals; and WHEREAS, the City Council finds that this ordinance does not have “the effect of denying approvals needed for the development of projects with a significant component of multifamily housing” within the meaning of California Government Code Section 65858(c).
NOW, THEREFORE, the City Council of the City of Pismo Beach does ordain as follows:
SECTION 1.
The foregoing recitals are adopted as findings of fact in support of this ordinance.
SECTION 2.
The City Council hereby places a moratorium on the issuance of permits and directs that no permits issue for short-term rentals and homestays under Chapter 5.22 of the Pismo Beach Municipal Code, nor shall short-term rentals and homestays not in existence as of the date of this ordinance be an allowed use under either Chapter 17.09 or Chapter
17.113 of the Pismo Beach Municipal Code. Nothing herein shall affect the City’s authority to deny a permit application pending as of the date that is one week before the adoption of this ordinance, or to suspend or revoke a permit, pursuant to Section 5.22.160 of the Attachment 1
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Pismo Beach Municipal Code, or to take action for violations as set forth in Section
17.09.100 or Section 17.113.100. The City Council hereby enacts this interim urgency ordinance by not less than a four-fifths vote, and in light of the findings set forth herein, under the authority granted to it by Article XI, Section 7 of the California Constitution and Section 65858(a) of the California Government Code, which allows the City to adopt an interim urgency ordinance in order to protect the public safety, health, and welfare, prohibiting any uses that may be in conflict with a zoning proposal that the City Council, Planning Commission or the Planning Department is considering or studying or intends to study within a reasonable time.
SECTION 3.
Under the provisions of the California Environmental Quality Act (CEQA) Guidelines Section 15061(b)(3), this ordinance is covered by the general rule that CEQA applies only to projects which have the potential for causing a significant effect on the environment.
Where it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment, such as the adoption the regulations contained herein, the activity is not subject to CEQA.
SECTION 4.
This ordinance shall not be interpreted in any manner to conflict with controlling provisions of state or federal law, including, without limitation, the Constitution of the State of California. If any section, subsection, or clause of this ordinance shall be deemed to be unconstitutional or otherwise invalid, the validity of the remaining sections, subsections and clauses shall not be affected thereby. If this ordinance, or any section, subsection or clause of this ordinance shall be deemed unconstitutional or invalid as applied to a particular appeal, the validity of this ordinance and its sections, subsections, and clauses in regard to other contracts shall not be affected.
SECTION 5.
Based upon the findings set forth above, this is an interim urgency ordinance adopted pursuant to Government Code Section 65858. This ordinance shall therefore take effect immediately upon adoption. This ordinance shall remain in effect for forty-five (45) days from the date of adoption; that is, until August 5, 2022. The amendments to the City’s LCP and zoning ordinance created by this urgency ordinance do not require certification from the California Coastal Commission. The Coastal Act does not deprive local governments from exercising their statutory power to enforce urgency ordinances, nor require prior review and approval of such ordinances by the Coastal Commission, provided that the ordinances are not in conflict with the Coastal Act. Certification by the Coastal Commission is required only for amendments that authorize a use other than that designated as a permitted use in the LCP. Conway v. City of Imperial Beach (1997) 52 Cal.App.4th 78.
Attachment 1
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SECTION 6.
The City Clerk shall certify to the passage and adoption of this Ordinance, shall enter the same in the book of original ordinances of the City and shall make a minute of the passage and adoption thereof in the records of the meeting at which the same is passed and adopted.
Before the expiration of fifteen (15) days after the passage of this Ordinance, the City Clerk shall cause the same to be posted in three public places within the City of Pismo Beach, to wit: 1) City Hall, 760 Mattie Road, Pismo Beach, 2) U.S. Post Office, Shell Beach Road, Pismo Beach, 3) U.S. Post Office, Crest Drive, Pismo Beach.
ADOPTED at a regular meeting of the City Council held this 21st day of June, 2022, on motion of Council Member , seconded by Council Member , and on the following roll call vote, to wit:
AYES:
NOES:
ABSENT:
ABSTAIN:
RECUSED:
Approved: Attest:
________________________ ________________________
Ed Waage, Mayor Erica Inderlied, City Clerk
APPROVED AS TO FORM:
______________________________
David M. Fleishman, City Attorney
Attachment 1
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D.Pismo Beach Short-Term Rental/Homestay Good Neighbor Policy The City of Pismo Beach Short-Term Rental (STR) regula�ons are intended to minimize the impacts of STRs on residen�al neighborhoods. Consequently, the City requires that all occupants of STRs adhere to the Good Neighbor Policy as outlined below:
1.The owner, or responsible party (as defined by the Pismo Beach Municipal Code) shall be available 24-hours a day, seven days a week to respond to complaints concerning the condi�on, opera�on, or conduct of STR occupants.
2."Responsible party" shall mean a person, over the age of eighteen, who shall be legally responsible for compliance of all renters and visitors of the STR or homestay with all applicable provisions of the Pismo Beach municipal code. The responsible party shall sign the good neighbor policy and is designated as the point of contact for the short-term rental or homestay.
3.The responsible party shall assure the maintenance of the licensed property in compliance with this and other applicable regula�ons, and shall be responsible for the conduct and acts of said renters and visitors to the extent provided herein. The responsible party's contact informa�on shall be provided to all short- term renters and neighbors within three hundred feet of the STR or homestay in the manner prescribed in Chapter 5.22.
4.The owner/responsible party shall respond to a complaint within 30 minutes.
5.Parking – Parking shall be provided in a garage or on a driveway. STR occupants shall use the of-street parking that is provided for the rental.
6.Noise – The STR renters and visitors shall not generate noise to an extent that unreasonably interferes with the quiet use and enjoyment of neighboring proper�es. Any noise occurring a�er 10 p.m. and before 7:00 a.m. shall be contained within the STR/Homestay.
7.Trash – Trash shall not be le� stored within public view, except in proper containers for purposes of collec�on. There shall be no accumula�on of storage of trash and/or debris on the site or within the STR/Homestay.
8.Traffic – Vehicles used and traffic generated by the STR or homestay shall not exceed normal residen�al levels or unreasonably interfere with the quiet use and enjoyment of any other residences or businesses in the area. What is reasonable in terms of traffic generated shall be determined under exis�ng legal standards applicable to evalua�ng alleged nuisances.
9.Maximum Occupancy – Maximum overnight occupancy of an STR or homestay shall be limited to two people per bedroom, plus two addi�onal people. For example, a two-bedroom STR may have up to six occupants overnight. This calcula�on shall be inclusive of children.
10.Visitors – The number of visitors to an STR or homestay shall not exceed a number equal to the allowable occupancy of the STR or homestay at any �me. Visitors are not allowed in the STR or homestay between 11:00 p.m. and 7:00 a.m. and shall not stay overnight on the premises.
By ini�aling below, I am confirming that I understand and agree that it is the responsibility of the owner/responsible party contact to ensure that all STR/Homestay rules and regula�ons are acknowledged and adhered to by the STR renters and visitors.
Owner Ini�als _________ Responsible Party Ini�als _________ Attachment 2
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