On February 9, 2000, the City Planning Commission issued a Use Permit for the subject property in which Condition of Approval #7 of UP 99-31 states (Attachment 1):
“No commercial use shall be operated from any second story unit within this project. No unit shall be partitioned, divided, or subdivided to create more than the 2 units authorized by this permit. No unit shall be leased, subleased, occupied, rented, or let for, or in connection with, any time-sharing or time interval ownership agreement. No unit may be rented, leased, subleased, or otherwise made available for remuneration to any person or persons for any period of time of 30 consecutive calendar days or less.”
On March 11, 2019, a Business License application was submitted to the Community Planning and Building Department to operate one transient rental unit on the second floor of a two-unit condominium building. On March 20, 2019, staff issued an approval of the business license application subject to:
1) Completion of the 5-day appeal period;
2) Acceptance of the Business License Conditions of Approval; and,
3) Completion of the required Business License site inspection.
The 5-day appeal period ended on March 25, 2019 and no appeals of the Business License approval were filed. The signed Conditions of Approval were returned to City Hall on March 25, 2019. The Business License site inspection was completed on May 24, 2019.
After the Business License was approved by the Planning Division, but prior to the license being issued, staff discovered that the subject property has an associated Use Permit (UP 99-31) which prohibits the use of both condominium units as transient rentals. On June 12, 2019, staff contacted the property owner to inform him of the existing Use Permit and that the Business License approval was approved in error and would instead be denied.
On June 18, 2019, the property owner appealed staff's denial of the Business License application and requested that the condominium unit be permitted as a transient rental (Attachment 2). The appeal was scheduled to be heard at the August 14, 2019 Planning Commission hearing, however, the item was continued at the property owner’s request.
On October 1, 2019, the property owner submitted an application for a Use Permit Amendment (Attachment 3) to remove the condition prohibiting transient rental units. The appeal of the Business License denial and the Use Permit Amendment were heard at the November 13, 2019 Planning Commission hearing (Attachment 4). The Planning Commission denied the appeal and the Use Permit Amendment and adopted findings for denial (refer to staff analysis below). On November 22, 2019, the property owner filed an appeal of the Planning Commission’s decision (Attachment 5). The appeal was scheduled to be heard at the February 4, 2020 City Council Meeting but was continued at the property owner’s request.
STAFF ANALYSIS:
Transient Rentals: Prior to adoption of the current Local Coastal Plan (LCP), the Carmel Municipal Code prohibited transient rentals in the commercial districts. In 1989, the City Council adopted Ordinance 89-17 also prohibiting transient rentals in the Single-Family Residential (R-1) District. In 1999, when Use Permit (UP 99-31) was approved, transient rentals were a prohibited use (refer to Attachment 6). Following certification of the current LCP, the prohibition on transient rentals in the R-1 District remained but the Municipal Code fell silent on transient rentals in the commercial districts.
Since January 2018, the City has received 38 business license applications for 54 transient rentals. Of the 38 applications received, 5 (including the subject application) have been denied due to existing Use Permits which prohibit transient rentals. To date, there have been 44 transient rentals approved in the commercial districts.
On January 7, 2020, the City Council adopted Ordinance 2019-003 which established regulations for transient rentals in the commercial and multifamily zoning districts. The Ordinance was certified by the California Coastal Commission on July 9, 2020. Pursuant to the Ordinance, the 44 transient rentals that were approved prior to adoption of the Ordinance are allowed to remain in perpetuity. New transient rental units may be established when combined with 3 new long-term rental units, two of which are required to be provided at below market rate.
Use Permit 99-31: While the Planning Division initially approved the Business License application to establish a transient rental at the subject property, the subsequent discovery of the Use Permit restriction required that the approval be withdrawn. Condition of Approval #7 of UP 99-31 states:
No commercial use shall be operated from any second story unit within this project. No unit shall be partitioned, divided, or subdivided to create more than the 2 units authorized by this permit. No unit shall be leased, subleased, occupied, rented, or let for, or in connection with, any time-sharing or time interval ownership agreement. No unit may be rented, leased, subleased, or otherwise made available for remuneration to any person or persons for any period of time of 30 consecutive calendar days or less.
Use Permit Amendment: CMC 17.64.010 states that: "In its review of applications for use permits, the Planning Commission shall evaluate each proposed use in order to consider its impact on the City. No use permit shall be granted unless all of these general findings (see below) can be made." In rendering their decision, the Planning Commission could not make Finding’s #1 and #3 in the affirmative (Attachment 7).
1. That the proposed use will not be in conflict with the City's General Plan.
2. That the proposed use will comply with all zoning standards applicable to the use and zoning district.
3. That granting the use permit will not set a precedent for the approval of similar uses whose incremental effect will be detrimental to the City, or will be in conflict with the General Plan.
4. That the proposed use will not make excessive demands on the provision of public services, including water supply, sewer capacity, energy supply, communication facilities, police protection, and fire protection.
5. That the proposed use will not be injurious to public health, safety or welfare.
6. That the proposed use will be compatible with surrounding land uses and will not conflict with the purpose established for the district within which it will be located.
7. That the proposed use will not generate adverse impacts affecting health, safety, or welfare of neighboring properties or uses.
Staff Analysis: Findings #1 and #3 require that the use not be in conflict with the City's General Plan and that the use not set a precedent for the approval of similar uses whose incremental effect will be detrimental to the City. The following General Plan Housing Element goal, program and policy is applicable to these findings:
General Plan - Housing Element goals, programs, and policies:
Goal G3-1: Preserve the existing housing stock.
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 P3-5.3: Preserve and expand affordable and rental housing opportunities to enable local employees such as teachers, police, firefighters and other City personnel to live in the community where they work.
Permitting transient rentals in the commercial districts reduces the available long-term housing supply. 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. The proposed transient rental is in conflict with General Plan policies intended to preserve the existing housing stock; increase the rental housing stock; and create affordable/workforce housing opportunities, and will have a detrimental effect over time.
On January 7, 2020, the City Council found transient rentals to be in conflict with the City’s General Plan policies and eliminated some of the most affordable housing in the City and thereby adopted Ordinance 2019-003 to regulate (not prohibit) the establishment of transient rentals in the Multi-Family and Commercial Zoning Districts. The regulations strike a balance between allowing transient rentals and increasing the long-term rental housing stock.
Review of Grounds for Appeal:
A copy of the Appeal and supporting documentation is attached to this Staff Report (refer to Attachment 5). Also attached is copy of the Deed recorded February 8, 2019 by which the applicant acquired title to the property (Attachment 8).
The following are the grounds for the appeal and the City responses:
Point I of the Appeal is a statement of the Applicant’s version of the Facts. The grounds for the appeal are stated in Points II to VI of the appeal.
Point II of the Appeal contends that the Coastal Commission’s approval did not incorporate Condition of Approval No. 7 and thus the condominium unit is not subject to Condition No. 7.
Response: The City had the authority to issue the Use Permit and the Coastal Commission had the authority to issue the Coastal Development Permit (CDP). Thus, there were two approvals, one by the City and another by the Coastal Commission. There is nothing in the CDP which, in any way, provides that the Use Permit was somehow superseded by the CDP.
Point III of the Appeal contends that the Planning Commission decision was not based on substantial law, the Planning Commission did not proceed in a manner required by law in that the Planning Commission prejudicially focused on housing when the Project is located in the core commercial district.
Response: The City’s General Plan do not support Applicant’s contention. For example, in regard to the Core Commercial, the appeal underlines the text “visitor commercial uses are appropriate in this area,” but this excerpt does not mean that a property owner who is subject to a Condition of Approval in a Use Permit prohibiting a short-term rental is excused from compliance with the Condition of Approval. The Appeal references objective 01-3 and policy P-1-11 about commercial uses to serve the local community and visitors. However, this policy does not mean that a property owner who is subject to a Condition of Approval in a Use Permit prohibiting a short-term rental is excused from compliance with the Condition of Approval.
The Staff Report to the Planning Commission dated November 13, 2019 addresses the General Plan policies including the Housing Element goals, programs, and policies:
General Plan – Housing Element goals, programs, and policies:
Goal G3-1: Preserve the existing housing stock.
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 P3-5.3: 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 Findings by the Planning Commission list the seven findings that must be made under CMC Section 17.64.010 and the Commission found, based on the Evidence cited, that the proposed transient rental use does not comply with Finding #1 (That the proposed use will not be in conflict with the City’s General Plan) or with Finding #3 (That granting the use permit will not set a precedent for the approval of similar uses whose incremental effect will be detrimental to the City, or will be in conflict with the General Plan).
Point IV of the Appeal contends that removal of Condition of Approval No. 7 is consistent with the City’s current code.
Response: This Point does not change the fact that the property is subject to Condition of Approval No. 7 which has been in place for the last 20 years.
Point V of the Appeal contends that the Applicant has a vested right based upon reliance on representations of City staff.
Response: Vested rights are not based on representations of City staff and there is no legal authority to suggest otherwise.
Point VI of the Appeal contends that the City’s negligent misrepresentation is not protected under Governmental Immunities.
Response: On January 3, 2019, there was an exchange of emails between Earl Meyers and Marc Wiener in which Mr. Meyers asked Mr. Wiener to provide detail for rentals in the Commercial District and the process for short term vacation rentals and Mr. Wiener accurately responded to that inquiry.
On February 8, 2019, the Deed was recorded transferring title of the subject property to the Applicant.
On March 20, 2019, Evan Kort sent an email and letter to the Applicant stating that the Business License application was approved by the Carmel Planning Division.
On March 27, 2019, there was an exchange of emails between the Applicant (Alex Cadoux) and Marc Wiener in which Mr. Wiener correctly stated that if the Applicant had the business license approval/permit, that he could operate a short term rental.
On June 12, 2019, Evan Kort sent a letter to the Applicant in which he said that since March 20, 2019 that it came to staff’s attention that Condition of Approval No. 7 of the City’s Use Permit did not allow for a short term rental so the business license approval has been revoked.
Thus, the City did not make any misrepresentations to the Applicant.
Options:
1. Staff recommends that the City Council deny the appeal and uphold the Planning Commission’s decision to deny the Business License and Use Permit Amendment applications subject to the Findings for Denial in Attachment 9. The transient rental use is prohibited by the current Use Permit conditions, and the required findings to amend the Use Permit cannot be made in the affirmative.
2. The City Council may grant the appeal and approve an amendment to the Use Permit to allow the Applicant to operate a short term rental with the adoption of specific findings that the use would not be in conflict with the General Plan and would not set a precedent for the approval of similar uses whose incremental effect will be detrimental to the City.
3. The City Council may grant the appeal and approve an amendment to the Use Permit to allow the Applicant to operate a short term rental for a specified period of time following the amendment which could be five years or ten years or some other period of time as determined by the City Council to be proper.
Environmental Review: Staff recommends that the City Council find the project categorically exempt from the California Environmental Quality Act (CEQA), State CEQA guidelines and local environmental regulations, pursuant to Section 15270 (Projects Which Are Disapproved) of the California Environmental Quality Act (CEQA), CEQA does not apply to projects which a public agency rejects or disapproves.