On March 5, 2019, the City Council first reviewed the City’s regulations on transient rentals in the Commercial and Multi-Family Zoning Districts and directed staff to continue studying the issue and report back with additional information. The Council considered the issue at the June, July and September 2019 meetings. At the September 2019 meeting, the Council directed staff to return with specific Zoning Code amendments. The following direction was provided:
1. All of the existing permitted units are to be classified as legal nonconforming. The use runs with the land and is subject to the provisions of CMC 17.36 (Nonconforming Uses and Buildings). As set forth in this Code section, 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.
2. Establish a program to allow new transient rentals as an incentive for the creation of new rental housing units, with a certain number of these to be classified as affordable. The City Council did not recommend a specific ratio.
Staff has prepared an Ordinance (2019-003) and associated Zoning Code amendments that are compliant with the Council’s program recommendations. The Council may either conduct a first reading of the Ordinance at this meeting or can continue the item with direction for additional modifications. Once the Council moves forward with adopting the Ordinance, the Zoning Code amendments must be certified by the California Coastal Commission as an amendment to the City’s Local Coastal Program.
STAFF ANALYSIS
Draft Zoning Code Amendments: The draft Zoning Code amendments create the following definition for transient rental units: Any residential unit that is occupied for the purposes of sleeping, lodging, or similar reasons for a period of less than 30 consecutive days in exchange for a fee or similar consideration. These units are required to pay transient occupancy tax and are classified as a Group R-1 occupancy if the site contains more than one transient rental unit (CMC 15.04.020 (16)).
The draft Zoning Code amendments also create two classes of transient rental unit as described below.
Legal Nonconforming Units: The City has issued permits for 37 transient rental units, which would be defined as: Transient Rental, Legal Nonconforming. These units are defined as being permitted prior to the adoption of Ordinance 2019-003 and are subject to the provisions set forth in CMC 17.36 (Nonconforming Uses and Buildings).
Housing Incentive Units: The draft Zoning Code amendments allow for new transient rental units as an incentive for the creation of new rental housing units, and are defined as: Transient Rental, Housing Incentive. Under this program, one transient rental unit is permitted in exchange for the creation of three new rental units; two of the new units on the site will be used as housing for “low-income" households as defined by the Association of Monterey Bay Area Governments (AMBAG). The transient rental requires the issuance of a conditional use permit and may be located at the same site as the three new rental units, or elsewhere within the CC, SC, RC or R-4 Districts. These units are not classified as legal nonconforming, however, the City retains the authority to condition and potentially revoke the use permit if necessary. Additionally, the use permit is abandoned if replaced by another use.
Advertising Prohibition: The draft Code amendments prohibit advertising of unpermitted transient rentals in all Zoning Districts. This advertising prohibition would not apply to transient rentals that have been permitted. This will serve as an additional enforcement tool for regulating transient rentals in the downtown as well as the Single-Family Residential District. The subject Zoning Code amendments are modeled after an ordinance that was adopted in the City of Monterey.
Program Enforcement: The City will initially utilize transient occupancy tax (TOT) reports to track and monitor transient rentals. This will be particularly useful for monitoring the legal nonconforming units, which abandon their permits if the use is discontinued for a period of 6 consecutive months. The City will evaluate other means of tracking legal nonconforming transient rentals, including special reporting forms and software packages, such as Host Compliance, which the City currently uses to enforce the transient rental prohibition in the R-1 District.
Planning Commission Review: The City’s Zoning Code (CMC 17.62.030) requires that amendments to Title 17 first be reviewed by the Planning Commission for recommendations. The Planning Commission reviewed the matter on April 10, 2019, and unanimously recommended that the City Council adopt an Ordinance prohibiting transient rentals in the Commercial and Multi-Family districts. The Commission also recommended that the transient rentals that have been issued permit be amortized out over a set time to be determined by staff and the City Council. This City Council has reviewed this recommendation, but opted not to amortize out the permitted units over time.
Zoning Code/General Plan: The Zoning Code is required to be consistent with the General Plan. Staff finds that the proposed Code amendments are consistent with the following General Plan 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.
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 reduces available housing stock and undermines local housing needs. The proposed Ordinance, which restricts new transient rentals and establishes a program to promote the creation of new rental and affordable housing units, is supported by the aforementioned General Plan Policies.
ALTERNATIVES:
Staff recommends that the City Council adopt the Ordinance 2019-003 (Attachment 1). The City Council may make minor modifications to the Code amendments at this meeting. However, as an alternative, the City Council may continue this item to make more substantial modifications.
ENVIRONMENTAL REVIEW:
The proposed Ordinance is not subject to the California Environmental Quality Act (CEQA) pursuant to the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, sections: 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment); 15060(c)(3) (the activity is not a project as defined in Section 15378); and 15061(b)(3), because the activity is covered by the general rule that CEQA applies only to projects which have the potential for causing a significant effect on the environment. Because there is no possibility that this ordinance may have a significant adverse effect on the environment, the adoption of this ordinance is exempt from CEQA.