Vacation Rentals and the City of Santa Barbara
It’s been a couple years since I’ve added to this blog and for numerous reasons. For starters, there is active litigation that many of my clients are currently involved in…they are suing the City of Santa Barbara for attempting to take away their property rights in both the coastal zone and city. When I say “take away” I refer to the “ban” instituted by now requiring them to convert their property to hotels, therefore restricting their ability to rent for less than 30 days in property “properly” zoned for this “use”.
You might ask, what is this “use”? Simply put, in my opinion, it should be better termed “rental flexibility”.
Many homeowners in Santa Barbara own as “second homeowners”. The natural progression in these higher end properties goes a little something like this…I digress…
Second homeowners reside in other parts of the country and world. They decide of course, Santa Barbara is where they would like to retire. When they go to purchase, they educate themselves. Some decide to specifically purchase homes in neighborhoods zoned as mixed use areas with great walkability, most either close to downtown or in the coastal zone. Some of these numerous zoning designations include R-4, C-1 and other Coastal related zoning designations located in the City of Santa Barbara. However, with the New Zoning Ordinance (NZO) that is in effect in all areas of the city EXCEPT the coastal zone, some of the zoning designation names have changed to further complicate things.
These homebuyers did the smart and responsible thing yet the Santa Barbara City Attorney decided (without any sort of ordinance change) to overnight, change “the interpretation” of this definition of “use” and call this use, “hotel use” even though vacation rental or short term rental is not defined anywhere in the Santa Barbara Municipal Code.
So back to my “use” as “flexibility” correlation. For example, R-4 in the coastal zone states that stays less than 30 days are allowed. So if a renter would like to stay less than 30 days, it’s permissible. Let’s give an example…
Buyer Bob is getting close to retirement and lives in Burbank, CA. He loves sailing his boat in the harbor on the weekends. He decides he wants to retire in Santa Barbara while also having the periodic use of a furnished second home until such time his residency in Santa Barbara becomes more permanent. He does his research and purchases an R-4 home in the City of Santa Barbara in the coastal zone (close to his boat in the harbor) in Jan 2015. He is told everything is great. It’s allowed and actually a permitted use in this zoning designation (Eagle Inn and many other hotels have same zoning), and he pays $60 for a business license and a TOT certificate is remitted to him. He hires a local property management company to rent the property when he’s not using it himself and figures it will not only help him offset his property taxes but help others save money coming to our town. Hotels stays by families and those on fixed incomes in the coastal zone average $600/night in the summer. His management company begins remitting TOT taxes to the City of Santa Barbara and his periodic tenancy of home by himself and guests is fabulous. His $30,000 in yearly County of Santa Barbara property taxes are 1/2 covered! Yah!
Everything is going along great until one day, 6 months later the Santa Barbara City Council meets and decides that our Santa Barbara city attorney will now call vacation rentals “hotels” in an effort to shut down those in residential neighborhoods.
Wow! The unintended or actually, we are finding “intended” consequences of those zoned for less than 30 day stays happened as a result of this horrible, what we believe was illegal, decision.
Something not even defined in the Santa Barbara municipal code is now defined as something else, with no change in ordinance, no coastal commission certification, no coastal development permit…it was a “home” yesterday and today it’s a “hotel” and will need to go through what is called a “hotel conversion”. I’m not an attorney nor do I practice or pretend to be one. I have been told technically this is not “taking” but from my mouth to God’s ears…this is my opinion of a property rights “taking” as it relates to property values, something I do know about.
I blogged about the process and aftermath for years trying to get a property through this hotel conversion. It’s a ban, plain and simple. It’s impossible and the only way out was court and an army of others going through a similar nightmare. And so there you have it. For anyone that follows the Theo Kracke STR case, he just had a huge victory and he’s fighting for ALL zoning designations including residential zones, not just the ones “properly zone” for this “use”. His lawsuit focuses on the coastal zone in the City of Santa Barbara only.
So what does this mean for the future of those in Santa Barbara that wish to vacation rent?
Without going into areas I cannot disclose due to pending litigation, let me ask you a few questions regarding “HOTELS” to help you understand a small snippet of what bad decisions cause…
Are HOTELS open 24 hours a day?
Do HOTELS allow anyone to stay for any number of days?
Do HOTELS allow anyone to book without the need of a signed rental agreement with the HOTEL owner?
Do HOTEL stays include housekeeping?
Do HOTELS have a front desk?
Do HOTEL owners offer their HOTELS 365 days per year without the closure of the HOTEL by the owner for the personal use of the HOTEL owner?
Now, let me ask you, change the word “HOTEL/S” to “VACATION RENTAL/S” and tell me how your answers reflect this change.
That is what happens when you attempt to unilaterally reinterpret a definition of a property’s “use” without the facts or knowledge of what the “use” actually looks like in real life.
The city attorney of Santa Barbara will need to prove how he came to this conclusion that a stay of 29 days is monumentally different than a stay of 30 days in the same home the owner uses and keeps his personal items in. He did not erect a front desk, change how he rents it or his own personal use of the property. The city attorney will also need to prove to the California Coastal Commission that standard hotel room stays of $600/night on average are somehow cheaper than some of our 1800 square foot homes for $300/night. Facts don’t lie… and well, we know how that ends. The California Coastal Commission is not too fond of lower cost visitor serving accomodations in the coastal zone being stripped in Santa Barbara due to a political campaign that was instructed to ban these rentals at all costs in Santa Barbara.
Remember, just because something has 4 legs, it’s not always an elephant…