Pooling money between friends to rent a swanky vineyard estate in Sonoma for a weekend is pretty close to a guaranteed good time – at least for visitors to the Sonoma Valley.
The quiet vacation rental business is suddenly drawing a lot more attention from the Sonoma County Board of Supervisors after a spike in neighbor complaints.
Recent debate has revolved around two separate issues.
One is the compatibility of the rentals with surrounding rural neighborhoods – particularly cases of mismanagement where renters are holding large events or raucous parties in rural areas.
The other is concern over the effect that vacation rentals have on affordable housing stock. The majority of individual homes that are rented out couldn’t be called “affordable housing” by any stretch. Most of the concerns at the county level stem from new proposals to develop short-term rentals on land parcels that were intended for affordable housing.
Both concerns will be further evaluated separately by the Sonoma County Board of Supervisors in February. The topic of vacation rentals is also tentatively on the agenda as a discussion item for the February Sonoma City Council meeting.
A hidden market
Vacation rentals are nothing new, but two factors have led to the growth of this cottage industry (pun intended) in the last several years: the downturn in the housing market and the rise of Web sites like Craigslist and VRBO where it is now easy and economical for people to offer their homes as vacation rentals.
There aren’t figures available going back several years to get a real sense of trends. Also, the cities individually manage their rentals and the county manages the unincorporated areas, so there aren’t county-wide figures. David Goodison, planning director for the city of Sonoma, said the Sonoma Planning Commission usually sees just a couple of requests a year for new vacation rental permits.
The rentals in unincorporated Sonoma County are concentrated in the Sonoma Valley (Glen Ellen, Kenwood, Boyes Hot Springs) and the Russian River areas. In 2007-2008, a total of 1,038 owners in unincorporated Sonoma County paid transient occupancy tax totaling $2.2 million. Of those, nearly 80 percent of the rentals were located near the Russian River, where there are few hotels and bed and breakfasts. The Sonoma Valley accounted for about 14 percent of rentals with 144 units.
There are currently some 100 rentals in the Sonoma area listed on VRBO, (Vacation Rental By Owner), one of the most popular sites, and a couple dozen on Craigslist. Owners pay $330 a year to post at VRBO and Craigslist is free. Owners charge from as little as $125 a night to thousands of dollars for high-end estates.
Vacation rentals are taxed like hotels with guests paying transient occupancy tax, the same tax they would pay if they stayed in a hotel room. It is not very difficult to obtain the necessary permits. Owners merely need a business license and a permit to collect TOT.
However, there are people who rent out their homes under the table.
“Come in from the cold – get that permit,” said Patrick Smith of Beautiful Places, which represents exclusive estates at the upper end of the market. He recently attended a meeting with other property managers, county officials and representatives from the visitors bureaus to discuss the future of the industry.
Property managers in the county have recently mobilized to police themselves and reach out to individual renters.
One suggestion aired at the meeting was that people who receive their permit to collect TOT also receive a packet with information on how to deal with tenant problems, how to write a contract and other issues. One property manager did an informal telephone survey before the meeting of owners who independently rent out their homes and found that almost half weren’t correctly collecting TOT.
Kristi Jeppesen, owner of the Glenelly Inn, a bed and breakfast in Glen Ellen, entered the vacation rental business about eight years ago, mainly to accommodate overflow from the inn. She now promotes about 30 properties on her Web site, with various owners, taking a percentage of the gross rental of the bookings generated through her site.
She said most individual owners who rent out their homes are very responsible and a lot of problems could be easily smoothed out with better information. She pointed out that long-term renters can be just as problematic.
Jeppesen said she avoids the rare investor-owners, preferring people who use the property as a second home, love it and invest the money necessary to keep it up to their own personal standards.
Vacation rentals don’t seem to compete directly with hotels for the most part. Jeppesen gets the most demand for large homes for groups of single friends, several couples or families.
“It’s a hidden market,” said Rhonee Allen who has successfully rented several homes for the past three years under the umbrella of Trinity Cove LLC.
She said many owners are able to cover the property taxes and maintenance with the income they generate from renting and, in fewer cases, the mortgage.
She said some real estate agents use the vacation rental hook to sell second homes, arguing that the owner can rent out the property to help cover the mortgage.
Despite county concern about absent invest-owners, several experienced property managers commented it is unlikely that a homeowner would make more money by renting the property as a vacation rental than getting a long-term tenant. Many who look at buying a wine country home purely as an investment don’t know the true maintenance costs, particularly upscale properties with add-ons like hot tubs, said Camille LeGrand, owner of Russian River Getaways and a Sonoma County Tourism Board member. There is also the upfront cost of furnishing the place.
Despite those costs, some owners have started renting homes they haven’t been able to sell in the cool housing market. For instance, the Chauvet apartments in Glen Ellen, which were built for sale, were recently advertised as vacation rentals online.
More renters has meant more competition.
“The vacation rental business is getting tough because there are so many people doing it,” said Rose Murphy, who has been renting out a cottage on her property in the city of Sonoma for about 30 years.
Rural vacation rentals disturbing the peace
District 1 Supervisor Valerie Brown, who represents the Sonoma Valley, Glen Ellen and Kenwood, said that she received an unprecedented number of complaints about vacation rentals this past summer. In some cases, people were using a vacation rental to hold a wedding and even running shuttles up and down narrow roads into the hills. Where they might easily pay $5,000 to $10,000 to rent out a wine country event facility, visitors can use a swanky estate for as little as $3,000, a relative bargain.
Even though doing so may violate current county zoning and event permit regulations, the county is rarely able to catch people and the current rules have done little to deter the large events that are the source of most complaints. If the event exceeds 35 people, the host must obtain an event permit.
Currently, zoning and event permitting issues are enforced by complaint. No one in the county offices has time to troll Craigslist to bust illegal renters.
Jennifer Barrett, deputy director for planning for the Sonoma County Permits and Resource Management Department, said that most events happen on weekends when county offices are closed. Furthermore if deputies go out to the scene, they may not be allowed onto the premises, so the county has little evidence to prove a huge event took place.
It’s not necessarily people who are renting under the table that are generating complaints. Several of the open code enforcement cases involve people who have permission to operate their homes as vacation rentals.
Barrett said that many resort communities require permits for vacation rentals and establish set standards such as how many people can stay in the home. Currently, different landlords and property management companies write differing standards into their contracts. Barrett said the county might consider more stringent standards like those that some cities in the county have in place.
Do vacation rentals compete with affordable housing?
Two weeks ago, the Sonoma County Board of Supervisors discussed vacation rentals as they relate to the housing element of the General Plan. The county is required by law to provide sufficient affordable housing.
Many property owners point out that vacation rentals don’t tend to be homes that anyone could describe as “affordable.” Someone looking for a wine country getaway will not likely be renting in the rough part of Santa Rosa and many of the homes rented out have long been second homes or were purposefully constructed as vacation homes.
County officials said that what sparked concern were a few recent development projects or inquiries that proposed the construction of vacation units on land reserve that could be used for affordable housing in the future.
For instance, a developer has proposed putting in time-share-type units at the old Sonoma golf course site, which does have some zoning for visitor-serving use, but the bulk of which is zoned residential. Barrett also mentioned a mobile home park that was converted into a high-end resort called Calistoga Ranch and the upscale Carneros Inn between Sonoma and Napa, which replaced a former mobile home park with rental cottages and vacation homes costing almost $1 million apiece.
The oversight already in place allows the supervisors to evaluate projects on an individual basis. The question would be whether they would want to insert language into the General Plan.
If too many conversions were approved, the county would not be able to meet its housing obligations, particularly affordable housing, said Barnett.
