The Sun report: Vacation rentals
As with other aspects of tourism, vacation rentals are an issue in Sonoma and the Valley and there is no shortage of opinions about them. Facts, on the other hand, are not as prevalent, so the Sun set out to find some. For this issue, we contacted Carol Giovanatto, Sonoma City Manager, and David Goodison, City Planner, to understand the City’s vacation rental landscape. Rules are quite different in the unincorporated parts of the County; we’ll look at that in a future report.
What are they?
Vacation rentals are private homes whose owners have a use permit (cost: $450) to rent them to guests for periods of 30 days or less at a time, effectively converting them to commercial lodging establishments. Property owners in the City’s commercial and mixed use zones are eligible to apply for a permit, which can be granted after a hearing before the Planning Commission.
In residential zones, however, the ability to apply for a permit is severely restricted:
“The house must be within the Historic Overlay District of the City; the house must be listed on the State Registry of Historically Significant Homes or otherwise meet the requirements for such a listing; and The City Planning Commission must determine that the structure has “fallen into such a level of disrepair that the economic benefits of adaptive reuse are necessary to stem further deterioration, correct deficient conditions, or avoid demolition as implemented in the conditions of project approval.” Those thinking of operating a vacation rental should contact the City Planning Dept. (707-938-3681) to be certain the house qualifies to apply for a permit.
Nineteen properties throughout the City were being used as vacation rentals before the first vacation rental ordinance was enacted in 1999. These residences were ‘grandfathered’ when the ordinance took effect even if they did not meet the above criteria. If their ownership changes hands, the allowance for the vacation rental use continues. However, if the use lapses for more than one year, the allowance automatically terminates.
Permit applications are reviewed by the Planning Commission in noticed public hearings, where objections from residents are considered in deciding whether the permit will be granted and, if so, with what conditions. That decision may be appealed to the City Council.
Where are they?
How many others are unpermitted is anyone’s guess. One can check AirBnB or similar websites for Sonoma vacation rentals, but finding exact addresses usually requires more digging.
Who cares, and why?
The City and its residents want to know about vacation rentals because, like hotels and B & B’s, vacation rentals are supposed to collect Transient Occupancy Tax (TOT) and Tourism Improvement District Tax (TID) from their guests, totaling 12 percent of the total room rate, and remit it to the City. It’s a major source of revenue for the City. The collection of TOT supports the City’s General Fund, which pays for all the major public services (Police, Fire, Public Works, Parks, Administration, Development Services) that citizens of Sonoma enjoy.
Licensed hotels, B & B’s and permitted vacation rentals suffer a competitive disadvantage when unpermitted vacation rental scofflaws evade these taxes.
For residents, however, reasons to oppose illegal rentals are usually very personal: e.g., loud parties and other disturbances caused by strangers renting a neighborhood vacation rental. Resident testiness is compounded when vacation rentals, often owned by out-of-town investors, effectively commercialize residential neighborhoods, negatively impact property values, remove scarce housing stock from the market and/or erode the character of their residential neighborhoods.
Reporting vacation rental scofflaws
Because the City currently has no dedicated Code Enforcement Officer and because it’s hard to detect a vacation rental from outward appearances, catching the un-permitted depends on complaints filed by those who suspect a house is being used as a vacation rental, or find a link on a vacation rental website.
Complaints can be filed directly with the City Manager at 707.933.2213, or by using the City website’s “Suggestion Box” page, which goes directly to the City Manager’s email in-box (http://www.sonomacity.org/form_suggestion.aspx). Complaints can be made anonymously. All are investigated and the complainant notified of the outcome if a return email is provided.
Immediate complaints about noise and other vacation rental disturbances should be made to the police dept. (707.996.3601).
Potential penalties for scofflaws.
When an unpermitted vacation rental is discovered, the City pursues its owner for all unpaid taxes (plus late fees) and orders the vacation rental use to cease. If owners ignore compliance requests, the matter is turned over to the City Prosecutor for further legal enforcement.
Typically, the City seeks voluntary compliance, in which case there is no penalty. However, a property owner who repeatedly fails to cease the activity may be subject to an administrative abatement process that could lead to fines of up to $500 for each day of violation.
However, scofflaws may apply for and be granted a vacation rental permit by the Planning Commission if the residence is otherwise eligible to be used as a vacation rental.
Can a vacation rental permit be revoked?
If a vacation rental repeatedly fails to comply with conditions of permit approval or otherwise becomes a nuisance with respect to its neighbors, the City may propose to the Planning Commission that the use permit be revoked.
The Planning Commission would then need to determine that the vacation rental presents public health, safety or welfare issues or that the conditions (if any) of the permit have been violated.
Because revocation is a lengthy and uncertain process, the City tries to achieve compliance and resolve nuisance issues by other means. Over the last 15 years, the Planning Commission has held only two hearings on the revocation of use permits, neither of which involved vacation rentals, and only one of which resulted in revocation.
Are there financial rewards for reporting scofflaws?
In 2013, MuniServices, Inc., was retained by the City to ferret out unpaid TOT from vacation rentals, legal and otherwise, and received a payment of 45 percent ($16,250) of all unpaid TOT collected ($36,073). Legal vacation rentals are now registered and paying full TOT to the City.
MuniServices was utilized due to its vast data resources for scouring various lodging property websites, in addition to State Franchise Tax Board records to find establishments reporting site-specific business income. This was very helpful in locating scofflaws who had been in business for more than one year because, due to the confidential nature of certain file information, these were resources and data points the City would not otherwise have had access to had City staff been tracking down the vacation rentals.
However, as yet there is no system whereby City residents, or even permitted TOT-paying vacation rental owners, can profit by helping to out scofflaws.
How can the negative impacts be controlled?
Short answer: Get involved. Residents can attend Planning Commission hearings and City Council meetings to oppose particular permit requests. When a home is for sale they might also let the selling realtor know (preferably in writing) that neighbors will oppose a home’s use as a vacation rental and ask the agent to notify prospective buyers.
Beyond that, residents can ask Council to further restrict vacation rentals, to the point of phasing them out or even a total ban.
Once a vacation rental has been permitted, it is up to neighbors to report to the police, City Manager, the property owner and/or property manager any problematic guest behavior or other disruptive impacts, and they can ask the Planning Commission to revoke a problematic permit.
What can vacation rental owners do?
At a minimum they should appreciate that surrounding property owners are also ‘investors.’ For many, the home they (or their tenants) live in is their biggest asset, whose value could be important to their retirement or their kids’ college education. In Sonoma, it can be worth millions, providing a strong incentive to oppose vacation rentals.
As with any investment, investors should do their “risk assessment” homework, including determining the level of neighborhood opposition, which can increase once a permit application is filed. Vacation rental ownership can be a headache if neighborhood tranquility, health or safety are impacted by vacation rental guests. With reviews and rants, social media can – often anonymously – trash the reputation of a vacation rental, lowering its income potential and increasing management headaches.
Vacation rental owners should also scrupulously observe permit conditions. This may require they or a property manager respond in real time to complaints from neighbors.
Finally, vacation rental owners should have insurance sufficient to cover the home’s use as a vacation rental. In the event of an incident or injury involving the property, underinsured vacation rental owners could discover that unpaid TOT is the least of their worries.
