Theo Kracke | Credit: Paul Wellman (file)

The City of Santa Barbara lost big in a Court of Appeal ruling that severely limits the city’s ability to regulate vacation rentals in its own coastal zone. The case pitted City Hall’s desire to preserve its housing stock against the state Coastal Commission’s interest in preserving affordable access to vacations along the coast. The Coastal Commission won, and City Hall came up empty. The appeal court concluded that City Hall’s 2015 decision to restrict and regulate vacation rentals in its coastal zone qualified as a “development,” and as such needed to apply for a Coastal Development Permit with the Coastal Commission.

In 2015, City Hall ​— ​in an effort to protect its limited housing stock ​— ​decreed that any vacation rental not permitted as a hotel was illegal and began cracking down on “illegal” operators. The number of vacation rentals in the city’s coastal zone plummeted from 114 in 2015 to just six in 2018. Fighting City Hall every step of the way was Theo Kracke, who owned and managed a number of vacation rental properties. Kracke won at the trial court level, and the City Council voted to appeal, arguing that it need not apply for a Coastal Commission permit to enforce its own rules and regulations.

Kracke noted that City Hall had long allowed and taxed vacation rental operators ​— ​349 citywide in 2010 ​— ​and could not abruptly change the rules without consequence. The Court of Appeal agreed. The city’s decision to change those rules, the judges concluded, qualified as a development for which a coastal permit was required. In the showdown between the state and city over their competing interests, the state won. 

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