Santa Barbara to Throw the Book at Illegal Vacation Rentals?
Short-Term Rental Operators in the City Could Soon Face Criminal Prosecution
While it appears all but certain that illegal vacation rentals within the City of Santa Barbara will soon be the target of aggressive criminal prosecution, it’s not clear just how aggressive members of the Santa Barbara City Council think that prosecution should be. For example, Councilmember Meagan Harmon was uncomfortable about hitting first-time offenders with criminal charges rather than civil or administrative sanctions. Councilmember Eric Friedman expressed queasiness about prosecuting ad hoc operators who rent out their homes for only two weeks of the year to cover the costs of their own vacations. And Councilmember Alejandra Gutierrez doubted that many owners of vacation rentals — otherwise known “short-term rentals” or STRs — would open their doors to long-term renters if short-term rentals were denied them. Despite their reservations, these three members of the City Council’s Finance Committee voted to forward to the full council the proposal to spend as much as $1.4 million to pursue illegal short-term rental operators.
The first challenge, it turns out, is to determine just how many illegal STRs are operating in the city, where they are located, and what rents are charged. That alone could cost as much as $450,000. Although there’s estimated to be around 1,000 illegal rentals, no one knows for sure. City Attorney Sarah Knecht, whose office is leading the charge for the new program, explained that these units are compounding the city’s already dire housing crisis. About 90 vacation rentals located in the city’s coastal zone — on the ocean side of the freeway — are estimated to be operating without proper permits; in addition, they are paying no transient occupancy taxes. It’s also estimated that 800 units are operating on the mountain side of the freeway, where all STRs are banned outright under city law. Those rentals, Knecht said, would be shut down. In all instances, unpaid taxes need to be collected from the offending parties — an estimated $300,000 to $700,000.
Knecht, working in conjunction with the City Finance Department, argued the existing rules and regulations — adopted in 2015 — are too slow, burdensome, and ineffective. Right now, the City Attorney’s office prosecutes about 20 vacation rental offenders a year; currently, there are seven such cases on the court dockets. The maximum fine for first-time offenders is $100; for third-time offenders, it’s $500. Either way, it’s not much of a deterrent. By pursuing criminal prosecution, Knecht argued, her department could make a dent in a market that’s reportedly growing by leaps and bounds. The key ingredient, the committee members were told, is the investigative spadework necessary to make a case stick. In an ideal world, this can be obtained at a rate of $55 to $75 an hour by hiring retired police investigators. Should they not be available, City Hall would have to hire private detective agencies at considerably higher cost.
Two short-term rental operators testified against specifics of the proposal under review, though not
necessarily against enforcement of vacation rental laws per se. Both argued it was way too expensive and asked what existing programs the council would have to cut. One suggested it would be much cheaper for City Hall simply to put Airbnb or Vrbo on notice as to which operators were operating illegally; these platforms would drop the listings like a hot potato. One argued that the current application process for short term rentals in the city’s coastal zone were so onerous and prohibitive that it was all but impossible for operators to comply. A less difficult application process, she argued, would do more to improve compliance than criminal prosecution. The other strongly disputed City Hall’s premise that the city’s rental housing market would be somehow enlarged by limiting the vacation rental market. But Kathy Janega-Dykes of Visit Santa Barbara, an organization that markets Santa Barbara as a tourist destination, supported the proposal, saying that it would, in fact, protect the diminishing housing stock needed by hospitality industry workers. The City Council as a whole will be considering the proposal soon. There, such arguments will be made all over again but probably much more vociferously and with many more players involved.