TO: ADAM PIRRIE, CITY MANAGER
FROM: BRAD JOHNSON, COMMUNITY DEVELOPMENT DIRECTOR
DATE: MAY 28, 2024
Reviewed by:
City Manager: AP
SUBJECT:
Title
SHORT-TERM RENTAL REGULATIONS STUDY SESSION (FUNDING SOURCE: GENERAL FUND)
Body
SUMMARY
On April 9, 2019, the Future Financial Opportunities Committee (FFOC) presented its final report to the City Council, which included several recommendations for revenue strategies for City Council consideration. Among those, the Committee recommended that the City Council consider regulating short-term rentals in the City of Claremont. Regulating short-term rentals would provide transparency and accountability for the City’s current short-term rental market and may generate additional revenue from visitors to Claremont.
On October 8, 2019, staff provided the City Council with an overview of general information regarding short-term rentals, City of Claremont regulations and code enforcement data, a comparison of the practices in other Los Angeles County cities, best practices, compliance and revenue management services, and the potential City process moving forward. At that time, the City Council directed staff to move forward with regulating short-term rentals in the City of Claremont and to draft program guidelines and other necessary documents for consideration at a future date.
On March 10, 2020, staff presented proposed regulations based on previous City Council direction and provided alternative options to the City Council for consideration. During that meeting, the City Council provided direction to allow and regulate certain short-term rentals. Due to the COVID-19 pandemic, the ordinance development was put on hold.
Since the proposed regulations were presented to the City Council in 2020, there have been significant shifts in municipalities' approaches to regulating short-term rentals. Cities that were previously open to vacation rentals have taken a more restrictive approach. Additionally, the number of short-term rentals in Claremont has grown significantly. The City currently estimates that it has over eighty unique short-term rentals, a sixty percent increase since last year.
RECOMMENDATION
Recommended Action
Staff recommends the City Council:
A. Provide short-term rental policy direction to staff; and
B. Direct staff to prepare an ordinance to permit and regulate short-term rentals based on City Council policy recommendations.
Body
ALTERNATIVES TO RECOMMENDATION
In addition to the recommendation, there are the following alternatives:
A. Request additional information from staff.
B. Take no action.
FINANCIAL REVIEW
As the process to regulate short-term rentals moves forward, staff will solicit the services of a compliance company to assist with activity monitoring, address identification, development of program guidelines, permitting and registration, 24/7 hotline, and tax collection support. Staff has been in contact with a short-term rental compliance company to obtain preliminary cost estimates.
The cost of these services depends on the number of short-term rentals in the City. Staff estimates the services would be approximately $15,000 for the first year. Since compliance companies charge based on the number of listings, the price will vary yearly depending on the number of short-term rentals operated at the start of each contract term.
If permitted, short-term rental regulations would be subject to the collection of Business License taxes, permit and registration fees charged to the short-term rental host, and a Transient Occupancy Tax (TOT) charged to the renter. Permit and registration fees are intended to cover the cost of the short-term rental compliance services and staff time to process applications. The Transient Occupancy Tax in Claremont is currently levied at ten percent. The revenue generated will depend on the number of short-term rentals in the City, the number of nights they are rented out in a year, the rental prices, and the level of compliance with the TOT remittance.
The staff cost to prepare this report and administer this project is estimated at $750 and is included in the operating budget of the Community Development Department.
ANALYSIS
In 2019, the City Council directed staff to move forward with regulating short-term rentals in the City and to draft program guidelines and other necessary documents for future consideration. In 2020, staff presented proposed and alternative regulations for the City Council’s consideration. Below is a list of definitions that will provide clarification on the regulations.
Home-Sharing - An accessory use of a primary residence to provide temporary lodging, for compensation, for periods of thirty consecutive days or fewer.
Host - An occupier of a dwelling unit who rents their primary residence for home-sharing.
Primary Residence - A host’s permanent residence or usual place of return for housing as documented by at least two of the following in the host’s name: motor vehicle registration; driver’s license; voter registration; tax documents showing the residential unit as the host’s residence; or a utility or cellular phone bill. A person may only have one primary residence and must reside there for at least nine months per year.
Un-Hosted Stay - A home-sharing activity whereby the host remains off-site during the guest’s stay.
Hosted Stay - A home-sharing activity whereby the host remains on-site throughout the guest’s stay.
Vacation Rental - A dwelling unit that is not a primary residence and which is available for temporary lodging for compensation.
2020 City Council Regulatory Recommendations
The following table summarizes the regulatory recommendations made by the City Council during the March 10, 2020 meeting.
|
Regulation |
Proposed |
|
Proof of Ownership / Primary Residency |
Host must provide proof of ownership and primary residency; a person may only have one permanent residence and reside there for a minimum of nine months per year. |
|
Rental Limitation |
Hosted Stay - Limited to 180 days. Un-Hosted Stay - Limited to ninety days per year. |
|
Vacation Rentals |
Prohibited. |
|
Eligible Units |
Single bedrooms and whole homes including condos, townhomes, and apartments (as long as they meet ownership and residency requirements above). ADUs are not permitted. |
|
Occupancy |
Two guests per bedroom, plus two additional guests. |
|
Noise Restrictions |
Follow existing Municipal Code. |
|
Commercial Events |
Commercial events, commercial parties, or commercial group gatherings, including but not limited to weddings, banquets, and corporate events are prohibited. |
|
Parking |
Parking shall be provided on-site. Overnight parking restrictions shall be enforced. |
|
Safety Inspection |
City staff or contractors shall perform inspections. |
The regulations for short-term rentals in Claremont and other municipalities have led to significant changes in the rental market. There has been a rise in real estate and short-term rental investors in Claremont who purchase single-family homes, renovate them, and offer them as short-term rentals. Some cities and counties that previously allowed vacation rentals have now imposed more restrictions or even prohibited them altogether. This includes, but is not limited to, the cities of Oceanside, Dana Point, Palm Springs, Palm Desert, and the communities of Joshua Tree and Big Bear.
Despite the City's longstanding prohibition of short-term rentals, they have increased in recent years. Without a compliance monitoring service contract, staff cannot match listings with property addresses in the City, as many short-term renters have removed photos of the property's exterior from rental websites. The City's current approach is complaint-driven, and cases are typically initiated due to noise or neighbor complaints. After receiving a complaint, the Community Improvement Division will issue a notice of violation to the property owner. If the listing is not removed, the Division will issue a citation for $100, followed by additional $200 and $500 citations. Despite these penalties, some property owners continue to rent their units as vacation homes.
Since 2020, the City’s Community Improvement Division has processed thirty-eight code violation cases for short-term rentals involving twenty-three unique properties. Recent data on Claremont’s short-term rentals show that seventy-nine percent of the current eighty-one units are for entire homes, while twenty-one percent are for partial homes, such as a private room. Additionally, eighty-eight percent of listings are categorized as single-family homes, with twelve percent in multi-family homes (attached townhomes/condominiums/apartments). On average, rentals in the City have an occupancy rate of sixty to seventy percent, with an average daily rental rate of $200. Staff estimates that more than seventy percent of current listings would be considered vacation homes, which would still be prohibited under the 2020 City Council recommended regulations.
When considering allowing short-term rentals, the City must balance various priorities, including reducing noise, parking, traffic, trash problems, preserving neighborhood character, ensuring building safety, increasing permit and tax revenue, and minimizing the impact on affordable housing availability. The City Council will need to make key policy decisions based on its priorities and policy objectives.
Key Policy Decisions for Short-Term Rentals
Key Decision #1: Should Claremont permit and regulate short-term rentals?
Staff Recommendations: This is a policy decision for the City Council.
Pros:
• Short-term rentals can provide alternative accommodation for tourists and visitors to Claremont.
• City can collect revenue from Transient Occupancy Tax (TOT) collection and permit fees.
• May provide additional income for Claremont property owners.
Cons:
• Can take long-term rental units off the market, creating a scarcity of housing options, and increasing prices.
• Can create unfair competition with established hotels and inns.
• Potential negative impact on community cohesion due to a revolving circuit of occupants not connected to the community.
• Can disrupt neighborhoods with noise, increased traffic, and transient populations.
Key Decision #2: Should Claremont permit and regulate vacation homes?
Options for the City Council’s consideration:
Ø The City may limit the number of permits issued for vacation homes.
Ø The City may add further limits for specific neighborhoods or restrict them from certain zones.
Ø The City may charge higher permit fees for vacation homes than hosted stay rentals.
Pros:
• Provides alternative accommodation for tourists and visitors to Claremont.
• Allows existing vacation homeowners to operate a permitted short-term rental and can generate additional revenue for the City.
• City may regulate minimum safety requirements for existing vacation homes.
• May attract tourists to the City who prefer non-traditional accommodations.
Cons:
• Property owners may be difficult to contact if issues or complaints arise.
• Problem vacation homes can disrupt neighborhood stability and community cohesion.
• Can reduce housing supply, making it more challenging for potential residents to find affordable rental and for-sale housing.
Key Decision #3: Should Claremont allow Accessory Dwelling Units (ADUs) to be short-term rentals?
Staff estimates that fifteen to twenty-five percent of listings are for ADUs. During the ADU entitlement process, the City requires a covenant to be filed on the property title, prohibiting them from being rented for less than thirty consecutive days.
Options for the City Council’s consideration:
Ø If allowed, ADU short-term rentals should only be permitted if the home is the property owner's primary residence.
Pros:
• May provide additional income to Claremont residents while living in the primary residence.
• Property owners will have better oversight of the property, reducing problem visitors and have a higher interest in maintaining the property.
Cons:
• Can reduce affordable rental housing supply.
• Property owners may attempt to rent both the primary residence and ADU.
• May cause noise, parking, or safety concerns for the neighborhood.
Key Decision #4: Should Claremont implement rental term limits for hosted and un-hosted short-term rentals?
The City Council previously recommended that hosted stays be limited to 180 days per year, and un-hosted stays be limited to 90 days per year.
Options for the City Council’s consideration:
Ø If the City Council allows for vacation rentals, un-hosted stays of primary residences should be limited to 90 days per year.
Ø Hosted stays can either be limited to 180 days per year or allowed year-round with verification that the home is the host's primary residence.
Pros:
• Hosts can rent out unused bedrooms in their homes, providing extra income for residents.
• Allows Claremont residents to generate income from their homes while away for up to 90 days.
• Hosted Stay hosts can provide better supervision during stays, potentially reducing issues.
• Hosts are more interested in maintaining their property and relationships with neighbors.
Cons:
• Can reduce affordable rental housing supply since rooms could be rented long-term.
• While there is a lower risk than vacation homes, they may still lead to noise concerns or neighborhood safety issues.
RELATIONSHIP TO CITY PLANNING DOCUMENTS
Staff has evaluated the agenda item in relationship to the City’s strategic and visioning documents and finds that it applies to the following City Planning Documents: Council Priorities, Economic Sustainability Plan, and the 2022-24 Budget.
CEQA REVIEW
This item is purely a study session and, therefore, is not subject to environmental review under the California Environmental Quality Act (CEQA).
PUBLIC NOTICE PROCESS
The agenda and staff report for this item have been posted on the City website and distributed to interested parties. If you desire a copy, please contact the City Clerk’s Office.
Submitted by: Prepared by:
Brad Johnson Alex Cousins
Community Development Director Management Analyst