Voting with unusual unanimity, the Santa Barbara City Council made it emphatically clear Tuesday night it will not be legalizing the booming short-term vacation-rental market anytime soon. Instead, the council indicated it would initiate a wave of enforcement proceedings against home-hospitality entrepreneurs operating outside the confines of City Hall’s zoning codes.
Those hoping the council would yield to the popularity and seeming inevitability of the sharing economy — by choosing to regulate rather than to ban — left disappointed. So, too, did those hoping the council would mull the matter over in a year’s worth of deliberations.
In an accommodating gesture to what’s become a large and lucrative cottage industry, the council indicated it would explore zoning changes to allow “home sharing” operations. Those are short-term vacation-rentals in residential homes occupied by the owner, not to be confused with “vacation-rentals” in which the owner is not present.
This broad policy direction came at the end of an intense and grueling four-hour meeting that surpassed council attendance records in decades. At one point, the meeting was interrupted by order of the Fire Marshal; too many people were crammed into the council chambers, not to mention the adjoining room, the hallways outside the chambers, and even the City Hall balcony. Though not all spoke, no fewer than 90 people took out speaker slips to testify.
How many short-term vacation-rentals have sprung up throughout the South Coast remains a matter of conjecture. Community Development Director George Buell suggested the number may be as high as 1,000. But to date, only one has applied for and received all the necessary permits from City Hall. (Under existing law, short-term vacation-rentals may be permitted in neighborhoods zoned for apartments, motels, and hotels, but only after a host of other rigorous regulatory hurdles have been overcome.) About 350 have taken out business licenses and have been paying bed taxes to City Hall. Of those, 248 were doing business in neighborhoods specifically zoned to not allow such commercial activity.
Almost every councilmember expressed serious concern that City Hall had sent dangerously mixed messages by accepting taxes for business operations that were not legal. This year, for example, City Hall took in $1.2 million in transient occupancy taxes from vacation-rentals; the year before, it was $800,000. Next year, it is projected to be $1.6 million.
Industry enthusiasts told councilmembers vacation-rental bed-tax revenues could hit $3 million if and when City Hall figured out how to legalize — and regulate — such businesses. They showed up in force wearing green ribbons on their shirts. Many were younger professionals struggling to secure a toehold in Santa Barbara’s notoriously expensive home-ownership market; many spoke movingly of being laid off or laid low by serious illness, and how the vacation-rental market saved them from economic ruin. Many told the councilmembers that without the income generated by such rentals, they could not afford to stay in Santa Barbara.
While theirs was clearly the dominant message the council received, it was not the only one. Showing up, as well, were many vocal residents aggrieved by changes to their neighborhoods inflicted by steady streams of short-term strangers. There was much mention of bachelorette parties in particular, rowdy barbecues, and humming hot tubs. But advocates of vacation-rentals pointed out that only 10 complaints had been filed against such operations this year, and Buell noted that since 2004, only 67 have been shut down based on such complaints.
Numerically underrepresented in the room were many of Santa Barbara’s long-struggling tenants, but their plight was described by Rob Pearson and Geoff Green, both with the Housing Authority. With vacancy rates less than one percent and rents increasing 30 percent in the last four years, they testified, the burgeoning vacation-rental market has succeeded at the expense of the monthly rental market. With City Hall investing so heavily in affordable housing — with time, policy, and capital — did it make sense, they demanded, to allow an illegal business that only exacerbated the gap between supply and demand?
Champions of short-term vacation-rentals countered that most of their units would never revert to long-term rentals and that prohibition would not solve the city’s housing shortage. Many noted their properties were maintained better than some long-term rental properties nearby and that their guests — carefully screened, prepped, and warned to be on their best behavior — were better “neighbors” than some of the actual neighbors. Several warned the council that a ban would function only to chase the business underground, where oversight and accountability — not to mention tax revenues — would be beyond the grasp of regulators.
Joining the choir of critics for the short-term vacation industry were political and economic heavyweights Michael Towbes, Sarah Miller McCune, and Steve Amerikaner. If council liberals resonated most obviously to concerns about Santa Barbara’s tenants, the conservatives were equally moved by arguments about wholesale zoning violations and neighborhood character.
Councilmembers agreed that City Hall was partially responsible for encouraging an essentially illegal industry by accepting tax revenues from some in the business. Because of that, they argued, some amnesty period needed to be allowed for operators to either wind down their business ventures or try to get legal.
How long that will be remains to be seen. City planners will return to the council with a menu of more specific actions. But in the meantime, the handwriting is on the wall.