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HomeMy WebLinkAboutStaff Report 6.B 11/05/2018DATE: November 5, 2018 TO: Honorable Mayor and Members of the City Council through City Manager FROM: Ingrid Alverde, Economic Development Manager SUBJECT: Introduction (First Reading) Of An Ordinance Amending the Text of Section 7.110 (Short -Term Vacation Rentals) of the City's Implementing Zoning Ordinance, Ordinance 2300 N.C.S. RECOMMENDATION It is recommended that the City Council Introduce an Ordinance amending the Text of Section 7.110 (Short -Term Vacation Rentals) of the City's Implementing Zoning Ordinance, Ordinance 2300 N.C.S. BACKGROUND In September 2015, the City Council adopted a program to allow short term vacation rentals in Petaluma under regulations that require rental hosts to obtain a permit, follow specific operational/management rules, and pay Transient Occupancy Taxes (TOT). Prior to those regulations, City codes did not allow home owners to rent any portion of their home for stays less than 30 days. The specifics of the Short -Term Vacation Rental (STVR) program were memorialized in the Implementing Zoning Ordinance (IZO) and included a sunset clause to ensure that the Council could review the program after three years to ascertain the success of the program and decide whether to continue, repeal, or modify the applicable code section. On September 17, 2018, the City Council considered the status of the program and directed staff to move forward with an amendment to the IZO Section 7.110 to extend the sunset clause and address minor amendments to the program that would clarify the definition of a short-term vacation rental and address STVRs in residential planned unit developments. On October 9, 2018, the Planning Commission approved a resolution recommending that the City Council approve an Ordinance that would codify the proposed recommendations. DISCUSSION The staff report for the September City Council discussion (Attachment 2) outlined how the program has operated since its inception in 2015. In summary, the program has operated without reported neighborhood concerns. Initially, compliance was lacking as only 23 of the total 100 advertisements for short term listings had permits. Through a contract with a local technology company, the non-compliant hosts were identified and notified of the permit requirements. There are now 69 active permits. At the September 17, 2018 meeting, the City Council directed staff to survey current STVR permit holders to understand how they were using their vacation rental and what they would do with the property if the program were dissolved. Of concern was the possibility that short-term rentals would impact the local housing market by reducing available housing and contributing to a lack of affordable housing. Of the 69 permit holders who received the survey, 27 responded: • 67% of respondents have hosted rentals; 33% are non -hosted. (Hosted rentals are either a room in a house or an accessory dwelling unit on a property where the owner lives.) • 70% indicated they had not considered renting their unit on a long-term basis; 30% had considered a long-term rental. • When asked why short vs. long-term rental, 75% preferred the flexibility offered; 25% enjoyed increased income. • 50% said they would keep their unit off the market for friends and family if the program expired. Another 27% would do nothing, 11.5% would sell the property and 11.5% would rent out the property on a full-time basis. Zoning text amendments are governed by Chapter 25 of the IZO and by California Government Code Section 65853. Chapter 25 provides that the Planning Commission may recommend zoning text amendments for approval to the City Council based on their findings that the proposed amendments are in conformance with the City's General Plan and consistent with the public necessity, convenience, and general welfare. In addition to the modification of the sunset clause as discussed above, three modifications to the IZO Section 7.110 are recommended to address issues that have come up in administering the program over the past three years. The first change is a modification to the section that discusses Permit Numbers. Instead of only requiring a permit number on all advertisements, staff recommends adding language to clarify that it is a violation of the code to advertise any short- term vacation rental unit without a permit. Below is the suggested amendment, with the additions and changes highlighted: 7.110.C.5 Permit Number. Advertising Short -Term Rentals. In every advertisement for the Short -Term Vacation Rental, the Permittee shall include the City issued Permit Number. It is a violation of this code to advertise a unit that does not have a valid short-term vacation rental permit. The second change is a modification to Section 7.110.17 that references compliance with adopted Planned Unit Development (PUD) guidelines. In most cases, Petaluma's Residential PUDs predate the era of renting homes and rooms on a short-term basis and are silent on the issue. It is recommended that the language be amended to allow short-term vacation rental permits unless a PUD explicitly prohibits this use. Additionally, the proposed amendment as shown below provides reference to compliance with private CC&Rs that may affect a given property. 7.110.E Short -Term Vacation Rentals in Planned Unit Developments, A permit Issued for a Short -Term VaGatieR Rental in a Planned Unit Development must GOmpl!f with SeGt'OR 19.050 of the Implementing Zening . A permit shall be issued for a short-term vacation rental in a residential Planned Unit Development unless said PUD guidelines explicitly prohibit short-term vacation rentals. Consistency with CC&Rs or other private covenants shall be the responsibility of the permittee and are not regulated by the City as part of the permitting process. Finally, Section 7.110.M is proposed to be amended to extend the sunset date from December 31, 2018 to December 31, 2020, consistent with Council's direction. 7.110.M Sunset. Unless otherwise extended or modified and extended by action of the City Council, this Ordinance shall expire and its terms shall no longer remain in effect as of midnight, December 31, 2020. As part of their action, the Planning Commission made the necessary findings that the IZO text amendments conform to the Petaluma General Plan and are consistent with the public necessity, convenience, and general welfare in accordance with Section 25.050(B) of the IZO. FINANCIAL IMPACTS Permit fees of $27,014 provide full cost recovery to M -Group for administration of the program. TOT proceeds totaling $68,427 have been collected since the beginning of the program in 2015,and support a variety of uses. Host Compliance's annual fee of $6,500 is. also supported by these TOT collections. TOT collections should increase in the future, as program compliance is improved. ATTACHMENTS 1. Ordinance 2. Staff Report dated September 17, 2018 ATTACHMENT 1 ORDINANCE OF THE CITY COUNCIL OF THE CITY OF PETALUMA AMENDING THE TEXT OF SECTION 7.110 (SHORT TERM VACATION RENTALS) OF THE CITY'S IMPLEMENTING ZONING ORDINANCE, ORDINANCE 2300 N.C.S. WHEREAS, Section 25.010 of the City of Petaluma Implementing Zoning Ordinance ("IZO") provides in pertinent part that no amendment that regulates matters listed in Government Section 65850, which matters include the use and construction of buildings and structures, shall be made to the IZO unless the Planning Commission and City Council find the amendments to be in conformity with the General Plan and consistent with the public necessity, convenience, and general welfare in accordance with Section 25.050(B) of the IZO; and WHEREAS, on September 14, 2015 the City Council adopted Ordinance No. 2547 creating the Short -Term Vacation Rental Program ("Program") codified in Section 7.110 of the IZO; and WHEREAS, as adopted, Paragraph (M) of Section 7.110 established a sunset or expiration date of December 31, 2018 on which Section 7:110 would expire and no longer remain in effect unless extended or modified and extended by the City Council; and WHEREAS, on September 17, 2018 the City Council discussed the Program and provided feedback to staff to extend the sunset date in paragraph (M) of Section 7.110 to December 31, 2020 and to make other minor modifications to Section 7.110; and WHEREAS, the text amendments to Section 7.110 of the IZO that are contained in this Ordinance implement the City Council's direction to modify the Short -Term Vacation Rentals regulations in the City's IZO; and WHEREAS, on September 27, 2018, public notice of a public hearing at the October 9, 2018 Planning Commission meeting to consider the proposed amendments to Section 7.110 of the IZO as directed by the City Council was published in the Argus Courier as an eighth page ad; and WHEREAS, on October 9, 2018, the Planning Commission held a duly noticed public hearing in accordance with Chapter 25 of the IZO to consider the proposed amendments to Section 7.110 of the IZO; and WHEREAS, after the conclusion of the public hearing, the Planning Commission adopted Resolution No. 2018-30, recommending the City Council adopt the proposed amendments to Section 7.110 of the IZO; and WHEREAS, on October 18, 2018, public notice of a November 5, 2018 public hearing before the City Council to consider the proposed amendments to Section 7.110 of the IZO was published in the Argus Courier as an eighth page ad; and WHEREAS, on November 5, 2018, the City Council of the City of Petaluma held a duly noticed public hearing to consider proposed amendments to Section 7.110 of the IZO; ATTACHMENT 1 NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF PETALUMA AS FOLLOWS: Sectionl: Findings. The City Council of the City of Petaluma hereby finds: The text amendments contained in Section 2 of this Ordinance are exempt from the California Environmental Quality Act ("CEQA") pursuant to Sections 15061(b)(3) and 15183 of the CEQA Guidelines in that the proposed text amendments are minor modifications to existing regulations that will only apply to specific locations and uses as governed by the Implementing Zoning Ordinance ("IZO"), Ordinance No. 2300 N.C.S. 2. In accordance with Sections 25.010 and 25.050(B) of the IZO, the proposed amendments to the IZO contained in Section 2are in general conformity with the Petaluma General Plan 2025 in that the amendments do not change the general character or impacts of current zoning regulations and implement the General Plan as outlined in the October 9, 2018 Planning Commission staff report, which staff report is hereby made apart of this Ordinance by reference. 3. In accordance with Section 25.050(B) of the IZO, the proposed amendments to the IZO are consistent with the public necessity, convenience, and welfare in that they update and clarify existing regulations and remove identified obstacles to the implementation of the zoning code, which implements the policies of the General Plan. Section 2. Amendments to IZO Section 7.110. The following provisions of Section 7.110 of the IZO, Ordinance 2300 N.C.S., are hereby modified as specified below: Provision (C)(5) of Section 7.110 of the IZO is hereby amended to read as follows: C.5. Advertising Short -Term Rentals. In every advertisement for the Short - Term Vacation Rental, the Permittee shall include the City issued Permit Number. It is a violation of this code to advertise a unit that does not have a valid short-term vacation rental permit. Provision (F) of Section 7.110 of the IZO is hereby amended to read as follows: F. Short -Term Vacation Rentals in Planned Unit Developments. A permit shall be issued for a short-term vacation rental in a residential Planned Unit Development unless said PUD guidelines explicitly prohibit short-term vacation rentals. Consistency with CC&Rs or other private covenants shall be the responsibility of the permittee and are not regulated by the City as part of the permitting process. ATTACHMENT 1 Provision (M) of Section 7.110 of the IZO is hereby amended to read as follows: M. Sunset. Unless otherwise extended or modified and extended by action of the City Council, this Ordinance shall expire, and its terms shall no longer remain in effect as of midnight, December 31, 2020. Section 3 No Other Changes. Except as amended herein, the City of Petaluma Implementing Zoning Ordinance, Ordinance No. 2300 N.C.S. remains unchanged and in full force and effect. Section 4. Severability. If any section, subsection, sentence, clause, phrase or word of this ordinance is for any reason held to be unconstitutional, unlawful or otherwise invalid by a court of competent jurisdiction or preempted by state legislation, such decision or legislation shall not affect the validity of the remaining pol tions f this ordinance. The City Council of the City of Petaluma hereby declares that it would have passed and adopted this ordinance and each and all provisions thereof irrespective of the fact that any one or more of said provisions be declared unconstitutional, unlawful, or otherwise invalid. Section 5. Effective Date. This ordinance shall become effective thirty (30) days after the date of its adoption by the Petaluma City Council. Section 6. Posting/Publishing of Notice. The City Clerk is hereby directed to publish or post this ordinance or a synopsis for the period and in a manner provided by the City Charter and other applicable law. ATTACHMENT 2 _ DATE: September 17, 2018 TO: Honorable Mayor and Members of the City Council through City Manager FROM: Ingrid Alverde, Economic Development Manager SUBJECT: Short -Term Vacation Rental Program Review RECOMMENDATION It is recommended that the City Council receive this report and provide policy direction regarding continuation of the short-term vacation rental program. BACKGROUND In September 2015 the City Council approved a program to allow short term vacation rentals in Petaluma under new rules that would require rental hosts to obtain a permit, follow management rules, and pay Transient Occupancy Taxes (TOT). Section 7.110 of the Municipal Code (Attachment 1) was added to dictate these requirements. The adopted rules.included a clause sun setting the program on December 31, 2018. The Council directed a program review, sufficiently in advance of that date, to determine whether the program should continue, be repealed, or continue with modifications. Considerations at the time vacation rental regulations were approved included neighborhood impacts due to noise, traffic, parking, and the conversion to short term rentals of properties that might otherwise provide supply to the long-term rental market. DISCUSSION The program went into effect in January of 2016. The number of listings fluctuates, but there are typically about 100 listings for short-term vacation rentals in Petaluma at any given time. In the first two years of the program the City approved approximately 20 permits for short-term rental units. The program was set up to renew annually and thus the permits were renewed in 2017 and 2018. Since the program's inception, no documented, code -related complaints have been received, from neighbors or prospective renters. Informal complaints have been raised, however, regarding the unpermitted hosts and the unfair business advantage those hosts receive if they are not subject to enforcement regulation. The City contracted with Host Compliance in late 2017, to improve program compliance and to address these informal complaints. Host Compliance has expertise identifying short term vacation rentals by mining data from short-term vacation rental websites. This enables them to produce lists of addresses and owners of the units offered for rent in Petaluma. Under the terms of its agreement with the City, Host Compliance notices the identified, non -permitted hosts of the program requirements, and directs them to the City for appropriate resolution. Multiple notices have been necessary, but as a consequence compliance has increased this past year to as many as 64 active permits. Vacation rental hosts receive two warning notices. If they fail to respond, a notice of violation is issued. A total of 23 such notices were issued to non-responsive hosts this past year. All but one case was closed, once the hosts permitted their short-term rental properties or removed their listings. Enforcement is an ongoing requirement as hosts come and go or switch listing websites. If the Council wishes to continue the short-term vacation rental program, staff anticipates retaining the contract with Host Compliance to support the enforcement program. As of August 28, 2018, 103 properties with active listings were identified on short term listing websites. A map showing the status and location of the listings is attached (Attachment 2). Of the 103 properties, Host Compliance identified 74 of them as short-term vacation rentals with a verified address and owner. Of those 74, a total of 56 of them are permitted and 18 are not. Another 29 listings have not been identified due to lack of data. Host Compliance continues to work on ways to identify its listings to improve enforcement. As part of the program rules, a sunset was established so the City Council could review the program before determining whether to continue it, repeal it, or modify it. Unless the Municipal Code is'amended to remove the sunset provision, the program will end on December 31, 2018. Based on its review, staff recommends continuing the program, and removing the sunset provision. These changes, and any others that may be recommended, will need to be proposed to the Planning Commission, but it is desirable to have City Council guidance before approaching the Planning Commission. Subsequent to Planning Commission review, a recommendation will return to the Council for final action. FINANCIAL IMPACTS Permit fees of $27,014 provide full cost recovery to M -Group for administration of the program. TOT proceeds totaling $68,427 were collected in FY 2017/18; approximately $125,200 has been collected since program inception. Host Compliance's annual fee of $6,500 is supported by these TOT collections. Proceeds from TOT should surpass current year's collections, as program compliance increases. ATTACHMENTS 1. Petahnia Municipal Code Section 7.110 2. Short Term Vacation Rental Listing Map I Attaclunent 1 7. Food Service. Food service shall be limited to registered overnight guests only and shall not include an independent restaurant. Cooking facilities in individual guestrooms are prohibited (with the exception of microwaves and coffee makers). 8. Events. Amplified music, lawn parties, outdoor weddings, and other similar activities shall not occur on site unless specifically allowed through the approved Conditional Use Permit. All such ancillary uses shall comply with City Performance Standards, including but not limited to the Performance Standards in Chapter 21. 9. Signs. One on-site sign shall be allowed on each street frontage. If illuminated, signs shall be indirectly illuminated, and each sign shall not exceed, two square feet in area, consistent with Section 20.110(B)(4). 10. Parking. On-site parking shall be provided as required in Table 11.1 for Bed and Breakfast Inns. 11. Transient Occupancy Tax. Bed and breakfast rentals shall be subject to the City's transient occupancy tax. E. Public Notice. Noticing for bed and breakfast inn applications shall include mailed notice to properties within 1,000 feet of the proposed use. 7.110 — Short -Term Vacation Rentals This Section establishes requirements and conditions for the establishment and operation of short-term vacation rentals within residential, planned unit development, and mixed-use zoning districts. A. Purpose. The purpose of this section and the standards outlined below is to serve visitors of Petaluma, to ensure that short-term vacation rentals are compatible with residential and mixed use, and planned unit districts, and to preserve the character of the neighborhoods in which they are located. B. Permit Required. 1. Short-term vacation rentals. Short-term vacation rentals are a permitted use only in residential, planned unit development, and mixed use zoning districts and only pursuant to a valid Short -Term Vacation Rental Permit issued in accordance with this section by the Planning Director or designee of the Planning Director. 2. Notice to Neighbors. Upon approval of a Short -Term Vacation Rental Permit, all property owners within 100 feet of the permitted Short -Term Vacation Rental shall be noticed in writing. Such notice shall include the location of the short-term vacation rental, number of rooms available for short-term vacation rental, and contact information of the locally -available manager. C. Requirements Applicable to All Short -Term Vacation Rentals. 1. Guest Manual. The Host shall provide a written manual to guests providing the local manager's contact information, the Performance Standards set forth in Chapter 21 of the Implementing Zoning Ordinance, parking limitations, and other helpful information to minimize conflict within the neighborhood, 2. Signs. On-site signage is prohibited. 3. Business License. All short-term vacation rentals require a valid Business License issued in accordance with Chapter 6.01 of the Petaluma Municipal Code. Ordinance No. 2300 N.C.S. Attaclunent 1 4. Transient Occupancy Tax. Short-term vacation rentals are subject to and must satisfy all applicable requirements of the City's transient occupancy tax. S. Permit Number. In every advertisement for the Short -Term Vacation Rental, the Permittee shall include the City issued Permit Number. D. Requirements Applicable to Hosted Short -Term Vacation Rentals, A Short -Term Vacation Rental in which the permittee occupies the property with the guests and is subject to the following requirements: 1. Limit on Maximum Number of Occupants. No more than 2 overnight occupants per bedroom plus 2 additional occupants are permitted. a. No more than two bedrooms in the dwelling may be furnished for compensation. (See section 7.100 for Bed and Breakfast 'requirements.) b. If the entire dwelling is an accessorylsecondary unit, it may be furnished for compensation as a Hosted Short -Term Vacation Rental, provided that the guests constitute one party, which may be evidenced through a single rental agreement for the entire dwelling. 2. Manager. The permittee must be available at all times and be able to respond to complaints within 1 hour. E. Permit Requirements Applicable to Non -Hosted Short -Term Rentals. A Short -Term Vacation Rental in which the permittee does not occupy the property with the guests and is subject to the following requirements: 1. Limits on Occupants. a. The entire dwelling may be furnished for compensation, provided that the guests constitute one party, which may be evidenced through a single rental agreement for the entire dwelling. b. No more than 2 overnight occupants per bedroom plus 2 additional occupants are permitted. 2. Limitation on Days. The dwelling as a non -hosted vacation rental may be furnished for compensation for no more than 90 days during any calendar year. 3. Manager. A manager located within 45 miles of the City must be available at all times and be able to respond to complaints within 1 hour. F. Short -Term Vacation Rentals In Planned Unit Developments. A permit issued for a Short -Term Vacation Rental in a Planned Unit Development must comply with Section 19.050 of the Implementing Zoning Ordinance. G. Dispute Resolution. Upon receipt of three or, more complaints in a calendar year about a Short Term Vacation Rental, with the consent of the parties involved, the City may refer the parties to a third party mediator. The cost shall be shared equally by the parties involved, unless the parties agree otherwise in writing. H. Application Process. The application process for a Short -Term Vacation Rental Permit shall be as follows: 1. Application for Permit. Application for a Short -Term Vacation Rental Permit shall be made to the Director on a form provided by the City. Ordinance No. 2300 N.C.S. 4J Attachment 1 2. Fee. The fee that applies to process applications for Short -Term Vacation Rental Permits shall be set by the City Council resolution. 3. Parking. The application must show that the applicant can provide: a. Parking. On-site parking for the existing residential use shall be provided as required in Table 11.1 for Dwelling Single Family or Multiple Household, as applicable. The Planning Manager, in his or her sole discretion, may give credit for up to two uncovered spaces on the abutting public street if there is legal non -conforming parking on the site; or b. Parking Exception. Applicants that are unable to meet the parking requirements in Section H.3.a. due to existing legal non -conforming parking and/or site constraints, may obtain a Parking Exception upon approval of a Minor Conditional Use Permit as prescribed in Section 24.030. Applications for a Parking Exception must provide documentation demonstrating that adequate on -street parking is available to accommodate the proposed short term vacation rental and the other existing uses on the site. 4. Safety. All short-term vacation rentals must provide smoke detectors, CO2 detectors, be adequately heated, and otherwise satisfy all applicable requirements of the California Building Standards Code as in effect in the City. 5. Duration. Short -Term Vacation Rental Permits shall be valid through the end of the calendar in which they are issued. All Short -Term Vacation Rental Permits shall expire on December 31, unless a renewal application is approved. 6. Permit Approval. A Short -Term Vacation Rental Permit application shall be approved if all applicable requirements are satisfied; otherwise, the application shall be denied. I. Renewal of Permit. 1. Permittees may apply to renew Short -Term Vacation Rental Permits on forms provided by the City. 2. Permit renewal applications do not require notice in accordance with Section B. 3. The Director shall issue a renewal of a Short -Term Vacation Rental Permit if the permittee satisfies all applicable requirements pursuant to this Chapter; otherwise such renewal applications shall be denied. The Director may deny a renewal application if he or she determines that any of the following have occurred during the 12 months prior to the renewal application: a. Failure to timely remit Transient Occupancy Taxes; or b. More than three verified violations of this section; or c. The Director determines that permittee has provided false information in the application or previous renewal application; or d. An authorized official has given notification or health or safety violations or non-compliance on the property. Ordinance No. 2300 N.C.S. Attaclnncnt 1 J. Revocation of Permit. Upon confirmation of three or more verified violations of this section or other information alleging that a short -term vacation rental has violated or is in violation of any applicable laws, regulations, or other requirements, including, but not limited to, the requirements of this section, the Planning Director or a designee of the Planning Director may commence permit revocation proceedings in accordance with section 24.030(J). Once a Short -Term Vacation Rental Permit has been revoked, continued use of the Short —Term Vacation Rental at that location is prohibited and subsequent applications may not be filed within one (1) year from the date of revocation. K. Appeal. Appeal of decisions of the Planning Director pursuant to this section may be brought pursuant to Section 24.070. L. Enforcement. The City may seek remedies for any violations of this section pursuant to any applicable authorities, including, but not limited to, those contained in Chapter 26 and those contained in Title 1 of the Petaluma Municipal Code. M. Sunset. Unless otherwise extended, or modified and extended by action of the City Council, this Ordinance shall expire and its terms shall no longer remain in effect as of midnight, December 31, 2018. Ordinance No. 2300 N.C.S. 00 O roN 4-J to bA Q O C6 C2A . J .4-J L.L. /O V u E So Attachment /13