By pacbiztimes Friday, August 7th, 2015

As peer-to-peer rental services like Airbnb grow, cities throughout the tri-county region have struggled to adjust to the increasingly popular trend.

Just as Netflix revolutionized TV and Uber changed transportation, home-sharing sites like Airbnb are transforming the tourism industry.

Travelers can stay longer and spend more money because of cheaper lodging options. Businesses get more tourist dollars, cities collect additional taxes and homeowners have extra cash to spend.

The dilemma is that some homeowners don’t want vacationers, who can be noisy, staying in their neighbors’ houses.

As angry residents’ calls mounted, cities scrambled to find short-term rental owners and demand business licensing and taxes. But the thought of going through all the paperwork, paying taxes and coughing up possible fines for those overdue levies has driven many homeowners underground.

There are some who play by the rules, but tri-county officials estimate there are hundreds of rental units still off the books. The idea is to devise a plan that persuades violators to go legitimate. As of now, there isn’t much incentive, said Ventura County Treasurer-Tax Collector Steven Hintz.

“The disincentive, of course, is they get found out and get issued assessments or bills that have penalties that could go back several years,” he said.

While the cities of Ventura and San Luis Obispo have crafted ordinances to manage these properties, Santa Barbara has yet to adopt one.

Even though it’s illegal in Santa Barbara to operate a business and rent out rooms to vacationers in a residentially zoned household, the city has looked the other way so it could collect transient occupancy taxes, $2 per night fees for marketing brochures and business permitting fees, said George Buell, the city’s community development director. TOT from short-term vacation rentals totaled $1.19 million in the 2014-15 fiscal year, according to a city staff report.

“That’s in large part why council directed staff to take the issue up to reconcile that inconsistency,” he said.

Buell is drafting a report that he will present to the Santa Barbara City Council on Aug. 11 that attempts to rectify the contradiction. It will include zoning regulations allowing homeowners to charge visitors to stay in part of their house for less than 30 days.

The proposed ordinance would not allow any short-term vacation rentals, or ones where vacationers can rent the entire house, regardless of how it is zoned. His staff will also ask the city council for employees and money to seek out unpermitted rental units.

“Because the phenomenon is really new and there’s a different reaction in every community, we have to proactively approach the issue from a zoning enforcement perspective in order to be effective,” Buell said. “There are 361 vacation rental owners who have business licenses and are paying TOT. We know that there are over 1,000 vacation rental units on various online rental platforms in Santa Barbara. The total number is likely in the vicinity of 1,500.”

Santa Barbara has the benefit of learning from Ventura and San Luis Obispo. Ventura implemented its ordinance in 2009, which allows someone to stay in a house, with or without the owner, for less than 30 days. It requires a short-term vacation rental permit that designates a responsible person who must respond to a noise complaint within 45 minutes and a $1,500 bond that covers possible violations, similar to a deposit. But most homeowners choose to waive that fee by including a “quiet hours” stipulation from 10 p.m. to 7 a.m., Ventura treasury supervisor Janey Dunn said.

“Initially, we had a bond requirement of $15,000 and people had a heck of a time obtaining them,” said Dunn, adding that in the six years of the ordinance’s existence, the city hasn’t had to fine anyone.

On top of the rental permit, homeowners must obtain a business license and collect and remit a 10 percent TOT. The city also sends letters to the entire neighborhood when it grants a permit.

Ventura has 94 short-term vacation rentals listed that netted $151,299 of TOT during the 2014-15 fiscal year, according to City Manager Mark Watkins.

San Luis Obispo’s ordinance, approved in February, allows home sharing if it’s within an owner’s primary residence. They must get a business license that ranges from $350 to $850, have a responsible party that’s within a 15-minute drive, pay TOT and verify it’s a primary residence, said Greg Hermann, a San Luis Obispo project manager who worked on the ordinance. The city institutes a cap of four people and requires appropriate parking.

San Luis Obispo also provided an amnesty to people who reported their short-term rental units within the first 90 days of the ordinance’s implementation and forgave overdue fees and taxes, Hermann said.

“It’s important to hear both sides and have a strong public outreach process,” he said.

Santa Barbara will host another public meeting on Aug. 11 to hopefully ensure both sides are heard. Those against short-term rental units argue that they reduce the housing supply, inflate rents, aren’t always up to health and safety standards, and potentially threaten hospitality jobs and wages.

Paul Hoyle, manager of the Santa Barbara-based Simpson House Inn, said the flood of vacation rental and home-sharing options have had a significant impact on the hotel industry. The Simpson House has had fewer bookings in July, which is odd because summer is typically the busiest time of the year, Hoyle said.

On the other hand, Santa Barbara staff estimates that short-term rentals will bring in $1.27 million in TOT in the 2015-16 fiscal year and vacation rentals provide much-needed income for middle-class families.

“It is a difficult balancing act,” Buell said. “The residents are an essential part of the core of the community and reasonable people agree there are reasonable expectations for quiet enjoyment of their home.”