Short-Term Rental Market Overview
The Monterey Herald printed an excellent overview of the short-term rental market in the Monterey area. Jim Johnson of the Herald interviewed two MCVRA directors, Jan Leasure and Dick Matthews, to gather information for the article. Unlike much we read, this one is not biased on the subject. Take the time to read it by clicking here.
Monterey County Planning Commission Summary - June 28, 2017
On June 28, 2017 the Monterey County Planning Commission held its third hearing on the preliminary draft short-term rental ordinance for the unincorporated areas of Monterey County. The hearing did not include Big Sur, since the County has previously agreed to leave Big Sur out of the discussion until the Big Sur residents can easily attend the meetings. This is probably a good thing, since much of the dissent over STRs comes from Big Sur.
The Commissioners know little about this subject, despite the endless testimony and written documentation we have given them. The hearing lasted from 10:00 a.m. to 3:00 p.m., and was quite distressing.
County staff began the hearing by carving up the discussion into specific parts of the ordinance to be discussed. This was a good thing, because when given the entire ordinance is open for discussion, the Commissioners are all over the board with their ideas and misconceptions.
The first area discussed had to do with licensing/permitting STRs. The consensus of the Commission seems to be that they would create a simple business licensing process for owners who want to rent out their personal residence at times or live on site during a rental, but that the process for a non-owner-occupied house would require a discretionary land use permit. Currently, discretional non-coastal STR land use permits cost $6,000. Unless this cost reduced and the discretionary granting process is eliminated, MCVRA will continue to argue for a simple, inexpensive licensing approach, for both owner-present and owner-not-present short-term rentals.
The Planning Commissioners seemed fixated on San Francisco’s STR ordinance, which only gives permits to permanent residents who occupy their properties for 275 days or more and only allow non-hosted rentals for up to 90 days per year. San Francisco will not grant a permit to a property that is not the permanent residence of the applicant. This is totally unacceptable in Monterey County where 60% of all STRs are second homes. We made the point that San Francisco estimates they only have 15% compliance with their ordinance. See SF Business Times. We also pointed out that a limit of 90 rental days per year is unreasonable. With no special permit whatsoever, an owner can already rent his home once, and only once, per month. This is considered long term. If an owner rented one week per month, then his home is rented 84 nights per year with no permit.
The Commissioners still have the mistaken idea that investors are going to snap up houses for vacation rental since it is so “financially lucrative” and that STRs impact employee housing. They do not accept the poll we took of our owners showing only 5.9% would offer their home as a long term rental if they were banned from short-term bookings. Furthermore, the Commission still has the idea that STRs impact affordable housing. They do not understand that Monterey County property values take our homes out of the “affordable” category.
There are proposals to test water quality and septic systems which we find overbearing. There are no such requirements for testing long term rentals where occupants live 365 days per year. Why is this testing so important for homes that serve guests for just a few days?
The most frustrating aspect of this meeting was at the end when County staff advised the Commissioners that they needed another three to four months to add enforcement to the ordinance. That is ridiculous but we will just have to live with it.
For coverage by the Monterey Herald, click here.
Email Your Letters to Monterey County
We strongly urge owners to write to Monterey County.
- Express why you rent your home to visitors.
- State why a fair ordinance is beneficial for everyone.
- Explain that your second home is not a source of income, and that, for most of you, your income does not meet the costs associated with the ownership of the house.
- Express that you would never offer your home as a long-term rental since you want to use it yourself.
- Tell them why you bought the home in the first place and why you are willing to keep it, even though you probably show a loss on it each year.
- Tell the Commissioners how much your home would rent for if it were offered as a long-term rental. They need to understand that it would hardly be “affordable housing.”
Click here for the names, positions, and email addresses for County decision makers. The file lets you simply copy and paste their email addresses into your email.
Pacific Grove City Council Summary - June 28, 2017
The City of Pacific Grove is continuing its deliberations on revision of their STR ordinance. This was a continuation of their last meeting, so they did not take public comment. City Manager, Ben Harvey, gave the staff report, which entertained two questions.
Q. Can the City legally allow STRs?
A. City Attorney Dave Laredo said he has opined twice, once in 2010 and again in 2016, that yes, the City Code allows. It is consistent with the General Plan for residential properties to be used for non-residential uses.
Q. Should the City allow STRs? Two options: Option 1. - Continue program with revision; Option 2 - Sunset the program. Each councilmember weighed in.
- Councilmember Huitt’s answer – the bedrock principle of the community is the preservation of residential neighborhoods; zoning is the way we do that. The home business provision allows people to conduct business from home within strict limits, protecting the neighborhood from traffic, noise, etc. The business is prohibited if is noticeable. Measure C, passed in 1986, prevents encroachment of motels in residential neighborhoods. Motel/hotel is for the R3M zone only. The original Transient Use ordinance of 1993 prohibited transient use. In 2010, language was added to say "except where permitted with a license." A new chapter was added to the muni code to permit STRs. The seven year experiment has proven to have negative impacts in the neighborhoods. The program should sunset. We welcome visitors; tourism is the basis of our economy. I support business and hospitality; that is not the issue. The issues is zoning. The hospitality industry is fragile. STRs would be fine in non-residential zones.
- Councilmember Cunio’s answer – Owners have rented their homes for AT&T and other events, is that not the same thing? Noise and traffic are more exacerbated by the events we hold compared to a few people with suitcases. There was a time when we knew everyone in our neighborhood, but now, PG has far more empty homes than STRs. Empty homes is what is causing hollowness in our neighborhoods. Many second home owners will move here eventually. A well-managed program can be compatible with our goals for the city. I like to welcome visitors. There are many day visitors who don't spend much money. STRs is a way to get people who stay overnight to help preserve our resources. Don't look in the rear-view mirror; look forward to new models of hospitality. Neighborhoods are being hurt more by vacant homes where no one comes and shops, etc.
- Councilmember Fischer’s answer - There have been some negative impacts. But the community's quiet enjoyment of their property cannot be guaranteed by the City. We are not going to ban all activities because they cause noise. STRs bring revenue into the City. It will be 6 -7% of the total budget next year. The museum, the library, and police are being paid for. The Coastal Commission wants STRs. People should have the right to use their property the way they want.
- Councilmember Peake’s answer – When the STR program started in 2010, it was for residents who rented out their homes during special events. Now the model is different. [Jan’s note: this is wrong information. The program has always been to license anyone who wanted to rent their homes.]
What is the effect on community? It puts holes in our housing inventory. It precludes having anyone in the house who contributes to the community. It takes away housing stock. We have done a good job of mitigating impacts on the community. This issue is not going away, so he would entertain sunset in 2019.
- Councilmember Garfield’s answer – The historic origins of Pacific Grove recognize people coming and going. Visitors in STRs are sharing the cost to the City of having people here. Our task is to balance the interests. How we use our houses - some people have to work somewhere else because we don't have many employers. But they want to be your neighbors. The vast majority of STR visitors are nice people. We must write an ordinance for those who are not. I like meeting new people and having people coming and going.
- Councilmember Smith’s answer - We have to do what is best for the city financially; this has been an infusion. Better to continue to regulate than have them go underground. Housing stock factors are beyond our control. 250 is a small number of homes.
- Mayor Kampe’s answer - If we really thought we could inhibit the noise, traffic, etc., and if we didn't need the money, we wouldn't have to talk about it. This economy is here to stay. The original inhabitants of PG probably didn't like the Methodists here. Things change in big ways. Where do we find the money? How do we ask the people who visit our town to pay to be here? What else do we do to have a financially healthy city? Let's make it work as well as we possibly can. We got the tree ordinance right enough that it has stopped bubbling up. I am optimistic that we will improve what we have today.
A straw vote was taken to continue the STR program. The result was 5 -2 in favor. Their overall mantra in going forward is simplicity. The City sees a need to make the program and its registration and enforcement as simple as possible.
Next, the City Council reviewed the current three types of licenses. It is proposed to establish only one type of STR license, because three are too complicated. Staff reported that Type B is too complicated and is being gamed by the applicants. Staff recommended keeping the home sharing licenses (Type C) in another code section to separate them out. Straw votes were taken in favor of retaining Type C (room rentals) licenses and in favor of combining Types A & B.
The next subject was density, which turned out to be a very complex subject. After much experimentation with all sorts of density limits, Staff came up with a proposed 55 foot radius, meaning that a 55 foot radius would be drawn from every part of the lot line of an STR (they have software to do this). There could not be another STR on any lot that is touched by that radius. Staff showed a map of current STRs how the 55 feet would affect them. Councilmember comments included the opinion that this process does a better job of dispersing STRs as opposed to block limits and requests to see the results of various radii. One councilmember queried whether the crowding and parking may not be the fault of STRs. She felt that they may be asking STRs to be the solution when there are other causes of the problems. The Council did agree that it is appropriate to only approve one STR per parcel.
On the potential timeline for implementation, Staff suggested an immediate moratorium on new Transient Use Licenses, with renewal in February of 2018 and a density review in March, 2018. The City would automatically renew the licenses for homes that do not have density issues. For STRs that have density issues, the City proposes a lottery that would give losers until March, 2019, to get out of the business, and lottery winners would be able to renew their licenses. The City plans to hire a professional firm to do the lottery, not city staff. The council members see a need for a plan of what to do in case of license abandonment.
The Council also discussed the license cap. The proposal is for a 250 cap, not limited by zoning. No conclusions were reached; there is some disagreement as to how many residences there are in the city. In dealing with the question of how to get to 250, since there are now more than 250 licenses in use, the possible remedies include attrition, limiting licenses to one per parcel (which would eliminate 20), and implementing a density lottery, which would affect 97 current licenses.
During recent budget discussions, the City entertained raising the Transient Occupancy Tax. In a discussion of TOT during the City Council meeting, it was noted that a change in TOT rates requires voter approval. November of 2018 will be the City’s next opportunity to put that on the ballot. It was also noted that they can differentiate STR TOT from hotel TOT. It was not mentioned during this meeting, but there are rumblings that the City will try to raise the hotel tax to 12% and the STR tax to 15%. In a related matter, Staff advised that the City is now working on an agreement with AirBnB to have AirBnB collect the TOT.
Other details that arose during the meeting include:
- A suggestion that where multiple residences are on one property, a pre-license inspection should be performed, in order to establish which door the license is being issued to. They are concerned with converted garages, etc.
- A suggestion that financial penalties be implemented for license violations.
- The Council is also looking for additional code enforcement.
- A suggestion that a good neighbor policy be in all properties.
The discussion of STRs will continue at a future meeting, date to be determined.
For coverage by the Monterey Herald, click here
Email Your Letters to the Pacific Grove
We strongly urge owners to write to the city. Express your opinion in support or in opposition to some of the changes proposed to the ordinance. Click here for the names, positions, and email addresses for Pacific Grove decision makers. The file lets you simply copy and paste their email addresses into your email. Make your voice known. Pacific Grove STR opponents are doing so. See their sign that is popping up.
Short-Term Rentals Do NOT Impact Affordable Housing
Short-term rental (STR) opponents claim that STRs impact affordable housing. A survey was taken in September 2016 to determine if this is factual. STR owners were surveyed throughout incorporated cities and unincorporated areas of Monterey County. Here are the facts.
The survey found that 75.8% of all STRs are either the owner’s primary residence or a second home used by the owner, his family, and friends at times.
STR opponents claim that banning STRs would result in more long-term housing. When asked what owners would do if STRs were completely banned, only 5.9% would offer their home as a long-term rental. The most stated reason that they would not rent long-term was the owners want continued use of the home for personal, family, and friends.
Then the question was asked, if the owner had no other option but to rent the home long-term, what would be the monthly rent? Only 9.1% would charge less than $2,000 per month. Combining these responses indicates only 9.1% of the 5.9% of STRs that would be offered as long term rentals might be considered affordable. This is just 0.54% of all STRs!
STRs will never become affordable housing. To appeal to visitors; STRs must be attractive residences in desirable neighborhoods. These properties are not "affordable." Click here for full survey report.
A separate, independent analysis was done by Mark Brodeur, Pacific Grove’s community and economic development director who reviewed the city's housing stock and came to the same conclusion. Mr. Brodeur states in his analysis, "I can't see how such a small percentage (3.2% are STRs) of all units in the City degrades the long term rental market. I think there are much larger forces in play that affect the housing stock and availability of long term rentals. Certainly "second homes" play a much larger impact than STR's." See Mr. Brodeur's memorandum.
Let’s analyze the unincorporated areas of Monterey County. The 2000 U.S. census determined that there were 37,579 dwelling units in the County. MCVRA estimates there are 500-700 short-term rentals in the County. Using the high end of the estimate, STRs represent just 1.9% of all County housing stock. So how can such a small percentage of all units in the County degrade the long term rental market? Furthermore, how many of the 1.9% would actually be “affordable?” As discussed above, only 9.1% would charge less than $2,000 per month. Combining these percentages shows that short-term rentals might add just 0.17% more affordable housing if converted to long-term rentals. The problem is local property values, not short-term rentals. Short-term rentals impacting affordable long term housing is a myth!
Further supporting the position that STRs do not impact affordable housing is a study done by ECONorthwest in the city of Portland, OR. Even if all Portland STRs were to be available for long-term rental, many of them would not rent at rates that are affordable. Long-term rental market rates are simply unaffordable to many households. See Housing Affordability Impacts of Airbnb in Portland
Conclusion: STRs have NO impact on affordable housing.
lodging availability and cost have been impacted by the California Coast Act
which created opposing goals: reigned in development, yet affordable coastal
lodging for the visiting public. This has led to insufficient lodging as demand
increased. The Carmel Pine Cone published an editorial on May 12, titled “First
create a problem, and then pretend to try to solve it.” Click here for the editorial and scroll down to page 24A.
Short-term vacation rentals are a solution.
Simply allow owners to offer their existing homes to coastal visitors. No development required! MCVRA director Chuck Stein’s letter to the Monterey Herald published on May 25, 2017 is right on the mark. See Chuck's letter. The California Coastal Commission charged with implementing the Coastal Act strongly agrees that short-term rentals must be permitted along the coastal zone. See the separate description on this website titled “California Coastal Commission Strongly Supports Short-Term Rentals.”
Lewis v. Monterey County Lawsuit Appealed
The Pebble Beach owners who sued Monterey County last January, challenging the county’s rules prohibiting them from using their oceanfront home for short-term rentals, may have lost their case in Monterey County Superior Court, but the judge’s decision was so critical of the County, the owners have appealed to the California 6th District. Click here for background. Click here for Pine Cone coverage.
PETITION FOR A FAIR COUNTY ORDINANCE
Show your support for short-term vacation rentals. Sign this petition to show the County Board of Supervisors that you want an effective short-term vacation rental ordinance. Please sign this petition and ask all your Monterey County friends, neighbors and colleagues to sign as well. To sign this petition, click on Petition for a Fair Ordinance.