CITY OF POMONA
COUNCIL REPORT
January 23, 2023
To: Honorable Mayor and Members of the City Council
From: James Makshanoff, City Manager
Submitted By: Anita D. Gutierrez, AICP, Development Services Director SUBJECT: AN URGENCY ORDINANCE OF THE CITY COUNCIL OF THE CITY OF POMONA CALIFORNIA, ADDING DIVISION 4 TO CHAPTER 30, ARTICLE VIII (RENTAL UNITS) OF THE CITY OF POMONA MUNICIPAL CODE PERTAINING TO REGULATING SHORT-TERM RENTALS; AND FINDING THE ACTION TO BE EXEMPT FROM CEQA RECOMMENDATION:
It is recommended that the City Council introduce, waive further and give reading to the following urgency ordinance (Attachment No. 1):
ORDINANCE NO. 4327 – AN URGENCY ORDINANCE OF THE CITY COUNCIL OF THE CITY OF POMONA CALIFORNIA, ADDING DIVISION 4 TO CHAPTER 30, ARTICLE VIII (RENTAL UNITS) OF THE CITY OF POMONA MUNICIPAL CODE PERTAINING TO REGULATING SHORT-TERM RENTALS; AND FINDING THE ACTION TO BE EXEMPT FROM CEQA EXECUTIVE SUMMARY:
The proposed Urgency Ordinance will amend the City of Pomona Municipal Code to regulate short-term rentals to address unwanted negative, secondary effects of short-term rentals, such as excessive noise, parking problems and discarded trash on surrounding properties. In accordance with section 510(c) of the Pomona City Charter, an affirmative vote of five-sevenths (5/7) of the City Council is required for this urgency ordinance to be adopted.
FISCAL IMPACT:
On June 18, 2022, the City Council agreed to enter into a contract with HdL Companies to provide Short Term Rental Administration and Reporting Software Portal. The services provided by HdL for Short Term Rental Administration will be similar to the business license Discovery and Audit Services. HdL will identify, register, and collect taxes due from short term rentals. HdL will not be completing compliance or enforcement actions for short-term rentals.
The revenue captured through the discovery and audit process will offset the costs of the contract. While revenues received from this contract will not be realized until late spring or early summer of this year due to contract / software set up and initial discovery and outreach, it is anticipated that original projections would be reduced based upon the prohibition of un-hosted rentals in this urgency ordinance. Original projected Transient Occupancy Tax revenues were $500k annually. However, based on the prohibition of un-hosted rentals, the previous revenue estimate is anticipated to be reduced by approximately 25% -30%, putting new revenue projections between $375,000 and $350,000. Staff will continue to monitor the short-term rental activity in the City and will be providing new Transient Occupancy Tax revenue estimates in the FY 2023-24 Proposed Operating Budget.
Staff will be bringing back a separate fee resolution to adopt fees to cover cost recovery of any staff time needed to administer these regulations.
PREVIOUS RELATED ACTION:
At the October 3, 2022 City Council meeting, Councilmember Lustro with support from the Council requested staff bring forward an urgency ordinance to regulate short-term rentals within the City.
DISCUSSION:
A short-term rental refers to a residential dwelling unit, or portion thereof, that is offered or provided to a paying guest by a short-term rental operator for 30 or fewer consecutive nights. The term "short-term rental" does not include a hotel, motel, inn, or bed and breakfast inn. In California, the legality of short-term rentals (STRs) varies across different cities and even by neighborhood, with the terms of regulations varying widely as well.
Statewide STRs are a part of California’s tourism market, but unregulated can lead to unwanted negative, secondary effects caused by those uses, such as excessive noise, parking problems and discarded trash on surrounding properties. As such, many communities have recently adopted or proposed restrictions on STRs. Restrictions include capping the number of STR permits issued, establishing designated areas for STRs, limiting the number of days a year a property can be rented, or banning STRs entirely. The trend toward STR restrictions follows complaints that the increased volume of STR stays during the pandemic has resulted in community disturbances and growing unaffordability of housing by replacing housing supply with tourist accommodation.
The City of Pomona does not currently have an ordinance that expressly regulates STRs and has experienced the negative effects of excessive noise, parking problems and discarded trash on surrounding properties, resulting in numerous complaints, creating a threat to the public peace, health and safety of the community. In 2022, the Code Compliance Division issued citations to 45 properties that were either renting their properties without a business license (despite requests to obtain one) or were causing a nuisance. Almost all of the citations were for properties offering un-hosted short-term rentals. Based on this information, staff recommends prohibiting un-hosted stays, where the owner or “host” resides off-site during the guest's stay, allowing only a fee owner to hold an STR permit and operate an STR, eliminating sub-leasing opportunities and creating a registration program with clear requirements and enforcement mechanisms as presented in the attached Ordinance (Attachment No. 1).
Currently, STRs require only a business license and pay a fee based upon gross receipts. The rate is $137.50 for the first $10,000 in gross receipts in that reporting year and $1.00 for each $1,000 above the $10,000. (ex. An STR generates $12,000 in 2022. They will pay $139.50 ($137.50+2.00) in business license taxes. In addition, STR operators are required to pay the City’s Transient Occupancy Tax (TOT) which is 10% of rent charged by operator for each stay. Less than half of the STRs advertised for rent in the City have obtained a business license and have not paid their TOT fees. There are currently 44 locations with a business license for an STR in Pomona. To ensure compliance and capture of appropriate taxes, the City contracted with HdL Companies to track and capture any STRs not in compliance with City code. Common issues that staff encounters with STRs is out of state or country owners, no person to contact with issues, lessees with no consent from property owner to run an STR and little enforcement measures to revoke licenses from problem properties. The draft Ordinance presented for Council review addresses these concerns as well the immediate threat to the public peace, health and the safety of the community.
Summary of Short-Term Rental Urgency Ordinance Regulations Establishes a short-term rental (STR) license and registration process with eligibility requirements:
The permitee must have lived in that home for a minimum of 60 days prior to applying for a STR permit.
Owner-occupancy requirement: Meet Host definition requirements.
Received a Zoning Clearance Letter from the City verifying that the property is zoned for residential use.
Prohibits un-hosted stays.
Only a fee owner may hold an STR permit and operate an STR. Lessees (aka, tenants or renters) may not hold an STR permit or sublet their leased dwellings as STRs.
Establishes an application process with relevant contact information and verification of eligibility requirements.
Requires an STR owner to provide a 24-hour emergency contact that will respond, on-site if requested, within 30 minutes to complaints about the condition, operation, or conduct of STR renters or their guests.
The abutting property owners and occupants will be notified prior to the start of activity that the host's primary residence will be used for short-term rental.
STR renters and their guests shall only utilize the designated, legal on-site parking spaces; they shall not have more vehicles at the STR property than the number of designated, legal parking spaces.
Explicitly prohibits uses other than overnight lodging accommodations. At no time shall any portion of an STR property be used or advertised for activities in excess of the occupancy limits established and issued by Building and Safety or the Fire Department, e.g., for weddings, receptions, parties, commercial functions, advertised conferences, swimming-pool-only rentals, or other similar assemblies that are separate from the purpose of lodging.
Requires documentation that the STR being rented is legally permitted and habitable based on building permit history.
Establishes a process for denial of a STR permit.
Establishes an enforcement process and sets clear regulations on what constitutes a violation.
Authorizes Council to establish fees pursuant to a resolution for an administrative fine for violations and program administration.
Implementation
Upon adoption of Urgency Ordinance No. 4327, the regulations governing STRs will immediately take effect. As currently written, the ordinance does not provide for any exemptions for rentals with an existing business license. All current STRs with a City issued business license will be required to register and obtain an STR permit per Urgency Ordinance No. 4327. The City will send all current STRs with a City issued business license a letter notifying them of new regulations and giving them 60 days to comply or to face enforcement measures.
COUNCIL PRIORITIES & GOALS:
This item supports the 2021 City Council Priority 3 (Increased Opportunity and Housing Stability), Goal J, Encourage the development and maintenance of quality housing opportunities for all and City Council Priority 4, Goal L to Hold businesses and residents accountable for property maintenance and compliance with other City codes.
Prepared by:
_____________________________
Anita D. Gutierrez
Development Services Department
Attachment:
Attachment No. 1 – Ordinance No. 4327
Dubetz, A., Horton, M., & Kesteven, C. (2022). Staying Power: The effects of short-term rentals on California’s tourism economy and housing affordability. Milken Institute. https://milkeninstitute.org/sites/default/files/2022-05/Short_Term_Rentals_California.pdf Short -Term Rental Urgency Ordinance No. 4327