Transient Rental Issues: In May 1989, the City Council adopted Ordinance 89-17 prohibiting transient rentals in the R–1 District for the purpose of protecting the character and quality of life in residential neighborhoods. Prohibiting transient rentals in the Commercial and Multi-Family Zoning Districts is for a different reason; which is to preserve the City’s downtown housing supply. Allowing transient rentals reduces available long-term rental units, as it has been demonstrated to be more profitable to rent on a transient rather than long-term basis. Permitting transient rentals and the subsequent loss of housing conflicts with the following General Plan – Housing Element goals, programs and policies:
Goal G3-1: Preserve the existing housing stock.
Goal G3-2: Preserve existing residential units and encourage the development of new multi-family housing in the Commercial and R-4 Districts.
Program 3-2.1.b: Preserve and Increase Second Floor Residential Uses. To prevent the loss of existing residential units in mixed-use buildings, the City will continue to prohibit the conversion of existing second-floor residential floor space to commercial use.
Policy P3-3.1: Ensure adequate sites are available to meet the City’s projected housing growth needs.
Policy P3-5.3: Preserve and expand affordable and rental housing opportunities to enable local employees such as teachers, police, fire fighters and other City personnel to live in the community where they work.
Permitting transient rentals in place of long-term housing is also in conflict with a State mandate to increase housing supply. According to the California Department of Housing and Community Development (HCD), the State needs an additional 1.8 million housing units by 2025 in order to keep pace with population growth. In recent years, the State Legislature has passed a number of bills intended to promote the creation of new housing units. For example, in 2017 the State Legislature adopted the California Housing Package, which included 15 associated housing bills. According to the State HCD website, “the Housing Package offers an injection of new regulatory and financial resources, and, with it, an opportunity to increase supply and innovate delivery throughout the State. California has a very low supply of new homes compared to need. The State averaged less than 80,000 new homes annually over the last 10 years—less than half of the projected need.” In addition to the Housing Package, a number of housing bills were also recently adopted and went into effect in January 2019.
The City contains approximately 3,000 single-family residences and 650 multi-family units. The multi-family units in the downtown provide the best opportunity for affordable/workforce housing. Permitting transient rentals undermines local and state needs for additional housing units. The ordinance prepared for City Council will be supported by findings that acknowledge the local and statewide housing shortage as a reasonable justification for the City to exercise its police powers to prohibit transient rentals in the downtown.
Legal Nonconforming Permits: The City has approved a total of 33 transient rental units. In order to establish a transient rental, the property owner must apply for a business license, and depending on the number of units, may be required to make site modifications in order to comply with the associated change in building occupancy. Staff recommends that the approved units be “grandfathered” in as a legal nonconforming use and allowed in perpetuity. By allowing these permitted transient rentals to continue operation, the City would be honoring the permits already issued and recognizing and that in certain cases properties were purchased and improvements made with the understanding that transient rentals are a permissible use. Furthermore, allowing a certain number of units should aid the City with its Local Coastal Program amendment, as the California Coastal Commission has publicly supported transient rentals as a means of providing coastal access.
Under Municipal Code Chapter 17.36 (Nonconforming Uses and Buildings) a nonconforming use is considered abandoned if replaced by a conforming use, discontinued for 6 consecutive months or if the building housing such use is demolished. Once the nonconforming use has been abandoned it cannot be reestablished. Under the provisions of this Code section, if a permitted transient rental is converted to a non-transient residential use for 6 consecutive months, it can never go back to being used as a transient rental. Staff has drafted a provision that provides an exception to this rule for transient rentals, as it may have the unintended consequence of discouraging property owners that have transient rentals permits from renting on a long-term basis in an effort to maintain the legal nonconforming transient rental use.
Summary of Code Amendments: The following is summary of the proposed code amendments being considered by the Planning Commission:
- Amended Chapter 17.08 (Residential Zoning Districts) to explicitly prohibit transient rentals in the R-4 District. A code amendment has also been included that allows a transient rental to be reestablished if replaced by a non-transient residential use.
- Amended Chapter 17.14 (Commercial Zoning Districts) to prohibit transient rentals in all three commercial districts and to allow the reestablishment if replaced by a non-transient residential use.
- Amended Chapter 17.28 (General Site Regulations and Standards for Specific Uses) to prohibit advertising of transient rentals in all zoning districts. This is consistent with City’s prohibition on transient rentals and will serve as an additional enforcement tool. The subject code amendments are modeled after an ordinance that was adopted in the City of Monterey.
- Amended Chapter 17.70 (List of Terms and Definitions) to include a definition of transient rentals.