TO: PLANNING COMMISSION
FROM: BRAD JOHNSON, COMMUNITY DEVELOPMENT DIRECTOR
DATE: SEPTEMBER 17, 2024
SUBJECT:
Title
SHORT-TERM RENTAL REGULATIONS STUDY SESSION (FUNDING SOURCE: GENERAL FUND)
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SUMMARY
A short-term rental (STR) is a residential property, dwelling unit, or portion of a dwelling rented to guests for temporary lodging for fewer than 30 consecutive days. This can include renting an entire home, an apartment, a condominium, or individual rooms within a dwelling. Short-term rentals are often facilitated through online platforms such as AirBNB and VRBO or directly by property owners and are typically used for vacation stays, business travel, visiting family, or other short-term accommodations
The City of Claremont has had a long-standing prohibition on short-term rentals. In April 2019, the Future Financial Opportunities Committee (FFOC) recommended the City Council consider regulating short-term rentals to provide transparency, accountability, and generate additional revenue. In October 2019, staff provided information to the City Council and proposed best practices. The City Council directed staff to prepare guidelines and regulations for future consideration. In March 2020, staff presented regulations to the City Council based on previous City Council direction and provided alternative options 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 process was put on hold. Since the previous ordinance development process, there have been significant shifts in municipalities’ approach to regulating short-term rentals. Additionally, the number of short-term rentals in Claremont has grown significantly. In May 2024, staff presented a STR study session to the City Council to receive direction on potential regulations. The City Council directed staff to conduct community outreach and prepare regulations that would include all STR types.
RECOMMENDATION
Recommended Action
Staff recommends the Planning Commission provide short-term rental policy direction to staff.
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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 utilize 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, which is included in the Community Development Department's operating budget.
ANALYSIS
Short-Term Rental Definitions
Home-Sharing: An accessory use of a primary residence to provide temporary lodging for compensation for 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 property is the host’s primary residence, and 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 is available for temporary lodging for compensation.
Short-term Rental Platform: An online service allowing hosts to rent their short-term rentals for thirty days or less. These platforms facilitate booking, payment, and communication between hosts and guests. Common examples include AirBNB and VRBO.
Short-Term Rentals History
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 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 and City regulations, and the potential City process moving forward. At that time, the City Council directed staff to prepare short-term rental regulations and 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 for consideration. During that meeting, the City Council provided direction to allow and regulate certain short-term rentals. However, due to the COVID-19 pandemic, the ordinance development was put on hold. The following table summarizes the regulation recommendations made by the City Council during the March 10, 2020 meeting.
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 other 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 use their properties as vacation rentals.
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 rentals, which would have been prohibited under the 2020 City Council recommended regulations.
Another new service that, while not considered a short-term rental, can have similar adverse effects on neighborhoods is the renting of pools and backyard spaces through platforms such as Swimply. These services allow homeowners to rent out private outdoor amenities, such as pools or gardens, for short-term recreational use. Although these rentals do not involve the entire property, they can still create issues such as noise, parking congestion, and increased foot traffic, similar to those concerns created by short-term vacation rentals. These rentals would not be subjected to the City’s transient occupancy tax. However, the city may create policies to regulate these services.
2024 City Council Direction
Staff presented a study session to the City Council in May 2024 due to changes in the short-term rental market following the regulatory recommendations made by the City Council during the March 20, 2020 meeting. During this study session, staff presented updates regarding short-term rentals and prepared four key decisions for the Council's consideration. These decisions would be used to update the prior regulatory recommendations made by the City Council in 2020. Those decisions are summarized below.
Council Key Decision #1: The City Council directed staff to move forward with permitting and regulating short-term rentals.
Council Key Decision #2: The City Council directed staff to move forward with permitting and regulating vacation rentals.
Council Key Decision #3: The City Council directed staff to allow Accessory Dwelling Units (ADUs) to be short-term rentals.
Council Key Decision #4: The City Council directed staff to not implement rental term limits for hosted, un-hosted, and vacation short-term rentals.
With these decisions, the City Council directed City staff to prepare an ordinance to permit and regulate all short-term rentals and conduct a community and commission input process.
Short-Term Rental Regulatory Options
Several key regulatory decisions must be made and incorporated into the final ordinance. The staff has prepared the options and recommendations below for the Planning Commission’s input.
1. Permitting and Licensing Process and Fees
Decision #1: Should hosted and vacation rentals be permitted with different fees and requirements based on the rental type? This would include creating a more rigorous and higher-cost permitting process for vacation rentals.
Options:
• Require the same permit fees and requirements for vacation and hosted rentals.
• Create a streamlined permit process for hosted rentals with lower fees and a more rigorous approval process for vacation rentals.
Staff Recommendation:
For the City to successfully regulate short-term rentals, a robust permitting process must be in place. This process would enable the City to monitor and regulate the growth of STRs while ensuring the hosts comply with Claremont’s regulations. When evaluating the risks associated with different types of short-term rentals, hosted rentals typically present lower risks than vacation rentals, where the operator does not reside on the property. Since they are on-site, they can address issues in real time to mitigate negative impacts on the community. These rentals typically receive fewer complaints and present lower enforcement needs.
Vacation rentals are typically an investment property, not the operator’s primary residence, which may pose greater risks. Due to the host not being on-site, there may be less oversight. These properties may attract larger groups or parties, leading to higher exterior noise levels, parking issues, and neighborhood disruption. Since vacation rentals are operated similarly to businesses, the City may require stricter regulations and a more rigorous permitting and monitoring process. Staff recommends offering two permit types: a home-share (hosted) permit and a vacation rental permit. The vacation rental permit would have a higher fee and more requirements than the home-share permit.
2. Occupancy Limits
Decision #2: What should the maximum occupancy limits be for short-term rentals?
Options:
• Use the formula “(number of bedrooms x 2) + 1” for all STRs, allowing flexibility based on the number of bedrooms. For example, the occupancy limit for a three-bedroom rental would be seven guests.
• Impose a stricter guest limit for vacation rentals, such as two guests per bedroom with no additional guests or a capped total number of guests.
• Allow for a higher daytime occupancy limit, such as double the overnight limit.
• Do not impose a limit and leave it to the host's discretion.
Staff Recommendation:
Occupancy limits are a common regulatory tool used by other cities. It is recommended that the City implement occupancy limits. The formula “(number of bedrooms x 2) + 1” provides the most flexibility since it adapts to rentals with more or fewer bedrooms. The host may set a more stringent occupancy limit for their rental if they wish to do so. Additionally, staff recommends allowing for a higher daytime occupancy limit since families or friends may utilize the communal space of a short-term rental but have other overnight accommodations.
3. Parking Requirements:
Decision #3: Should STRs be required to provide on-site parking?
Options:
• Require on-site parking for all STRs and implement a rule that renters may not use street parking.
• Allow for daytime street parking but no overnight street parking.
• Do not implement parking requirements, allowing guests to park on-site or use street parking.
• Limit the number of vehicles per STR by the number of bedrooms.
Staff Recommendation:
A primary concern of neighbors of short-term rentals is the impact of renters' vehicles on neighborhood congestion. Claremont’s overnight parking prohibition would limit guests to parking three nights per month by submitting an exemption. However, some units may have high guest turnover. Due to the exemption being applied to the vehicle license plate or VIN, each guest could submit an exemption, leading to a significant increase in overnight parking. To minimize neighbor complaints and retain community cohesion, staff recommends requiring on-site overnight parking for all STRs, but allow for daytime street parking.
4. Health and Safety Standards
Decision #4: Should health and safety inspections be required for STRs?
Options:
• Require initial health and safety inspections for vacation rentals to ensure compliance with building and fire codes, and annual inspections for STRs with repeated permit violations.
• Require annual inspections for all STRs.
• Require annual inspections for vacation rentals.
• Allow for self-certification for hosted STRs.
• Allow for self-certification for all STRs.
Staff Recommendation:
Staff recommends requiring staff or a consultant to perform an initial inspection of vacation rentals, with the option to perform annual inspections for rentals with permit violations or other health and safety concerns. Staff recommends allowing for self-certification for hosted STRs. This would allow for more oversight of vacation homes without placing an additional burden on lower-risk properties.
5. Nuisance and Noise Control
Decision #5: How should noise and nuisance regulations be enforced?
Options:
• Require exterior noise monitors for vacation rentals to monitor and enforce noise limits in real time.
• Set quiet hours for all STRs, with more lenient rules for hosted rentals but stricter enforcement for vacation rentals.
• Do not include additional noise requirements beyond the current Claremont Municipal Code.
• Prohibit commercial events and large gatherings at all STRs.
• Implement a 24/7 neighbor hotline program and require the host to have a local emergency contact.
Staff Recommendation:
Staff recommends requiring noise monitors for vacation rentals to minimize the impact of noise on neighbors. These monitors typically cost ten to twenty dollars a month and would be purchased and installed by the STR operator. The City should implement quiet hours for STRs, such as no use of loud instruments, amplified sound, or other sound-emitting devices outside between 10:00 PM and 10:00 AM. Staff recommends not allowing commercial events and large gatherings since these can generate significant noise for neighbors. Staff also recommends implementing a 24/7 neighbor hotline program that would be actively managed by the City’s selected short-term rental compliance service. The Claremont Police Department could respond to noise complaints, similar to current noise complaints.
6. Limits on Number of STR Permits
Decision #6: Should the City implement a cap on the total number of STRs in the City?
Options:
• Cap the number of vacation rental permits allowed in the city or specific neighborhoods while not imposing a cap on hosted.
• Set a Citywide limit on the total number of STR permits issued annually, regardless of the type.
• Impose no cap but monitor the number of STRs and adjust regulations as needed in the future.
• Set a limit on the number of permits per operator.
Staff Recommendation:
Staff recommends a Citywide cap on the number of vacation rentals while not imposing a cap on hosted or unhosted rentals. The City should take a flexible approach to monitor STR growth and occupancy and adjust the cap, if necessary, based on community feedback and enforcement challenges.
Short-Term Rental Compliance Service
Many municipalities utilize a STR compliance service to effectively manage and enforce STR regulations. These third-party services use technology and data analysis to monitor STR activity, identify non-compliant properties, and support enforcement efforts. Compliance services typically provide tools for tracking rental listings and bookings, monitoring online platforms for unregistered properties, and ensuring hosts adhere to local regulations. They also offer features such as a STR registration portal, 24/7 hotlines for community complaints, automated tax collection, and compliance reporting for permit renewals and violations. By utilizing these services, the City can more efficiently enforce the STR regulations and reduce the administrative burden on City staff.
Permit Costs and Taxation
All STRs will be required to pay permitting costs and transient occupancy taxes (TOT). The permit fees will be calculated to recover the costs of staff time, administration, and compliance services. These fees will ensure the permitting and enforcement process is self-sustaining.
TOT is commonly imposed on hotels, motels, and short-term rentals. The City’s TOT rate is currently ten percent of the rent charged by the operator. Due to the existing STRs being prohibited, the City has not collected TOT from the City’s hosted and vacation rentals. The City will apply TOT to all short-term rentals if permitted to offset short-term visitors' impact on the community. This will be collected directly through the booking website or remitted through a separate portal.
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 2022-24 Budget.
CEQA REVIEW
This item 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 Nhi Atienza at natienza@ci.claremont.ca.us.
Submitted by: Prepared by:
Brad Johnson Alex Cousins
Community Development Director Senior Management Analyst