The City of Dana Point officially has programs to regulate vacation rentals within and outside the city’s coastal zone following the Dana Point City Council’s meeting on Tuesday, Feb. 7.
The council voted, 4-1, with Councilmember Michael Villar opposed, to accept a short-term rental program approved by the California Coastal Commission in late November 2022. The program only permits and regulates vacation rentals within the city’s coastal zone.
The CCC approved a program with a cap of 115 non-primary, multi-family homestay, and mixed-use parcel non-primary short-term rentals within the coastal zone through a coastal development permit. There will be no cap on primary or homestay short-term rentals.
The cap of non-primary homestays will decrease by one with each homestay and primary permit that the city grants.
A condition of the CCC’s approval requires the city to study and track the STR program’s performance to assess whether permit caps need to be changed.
On Tuesday night, the City Council was faced with three options regarding the CCC-approved vacation rental program: accept the coastal development permit as written; accept the permit and ask for an amendment; or deny the permit, meaning there would be no regulations on short-term rentals in the coastal zone, according to City Attorney Patrick Muñoz.
Mayor Mike Frost added that the process of going back to the CCC for an amendment could take between nine and 12 months.
Councilmember Jamey Federico said that formal and informal surveys have shown demand for permitted short-term rentals.
“What happens if we don’t take any action on the CDP in the coastal zone tonight? We’ve heard the opponents of STRs many times say there are hundreds of illegal short-term rentals in this town,” Federico said.
“If we do not do this, we will not be restricting short-term rentals down to 115 in the coastal zone; they will be unlimited,” Federico added. “And tomorrow, those hundreds of people who have illegal short-term rentals and the hundreds more who want to have short-term rentals, if they’re smart, they walk into City Hall and say, ‘I want a permit,’ and we cannot say no.”
Federico said that without passing an ordinance that evening, those interested in operating a short-term rental could run it as a “legal nonconforming” use.
“And we’ve been, quite frankly, very lucky that no one’s done this in the last few months,” Federico said.
Federico said that at the end of the day, the program makes up 1.39% of the city’s housing stock.
“We’re spending a lot of time and energy arguing about maybe 40 of the 10,000-plus housing units in our city,” Federico said.
Former Councilmember Paul Wyatt voiced concern with the fact that an HOA must obtain a coastal development permit to establish a ban on vacation rentals unless its covenants, conditions and restrictions (CC&R) had a prohibition on STRs predating the Coastal Act of 1976.
Federico said he understood the risk to some HOAs, adding that he “will go with them to the Coastal Commission when they apply for their CDP to get their long-standing—very long-standing—restrictions on (vacation rentals) certified by the California Coastal Commission. I’ll go with them if they want me to.”
“I find it hard to believe that the Coastal Commission would not uphold (an HOA’s CC&R). One thing we’ve learned about this process, don’t assume what you think the Coastal Commission is going to do,” Federico said, encouraging HOAs to apply for coastal development permits.
During Tuesday’s meeting, Dana Point City Council also voted to approve new STR regulations for vacation rentals outside of the coastal zone, adopted through an urgency ordinance that requires a four-fifths vote.
The urgency ordinance also bypasses the need for a second reading of the ordinance to officially adopt the program.
In late July, Dana Point City Council failed to pass a short-term rental program that would have permitted the rentals outside of Dana Point’s coastal zone after it previously approved a vacation rental program for the coastal zone only.
Matching the CCC-approved program, staff proposed one regulating vacation rentals outside the coastal zone. The program includes a cap of 115 vacation rentals, making the combined cap on STRs within and outside of the coastal zone at 230 units.
The vacation rental program would be broken down into two phases. Phase one of the program would permit up to 25 new permits outside of the coastal zone, bringing the total to 85 permits. Based on citywide tracking measures, City Council would later evaluate the possibility of permitting an additional 30 permits outside of the coastal zone, bringing the total to 115.
According to the CCC’s staff report from its November meeting, the 115 cap in the coastal zone amounts to approximately 2% of the city’s housing units, higher than Laguna Beach’s STR program cap, which amounts to 1.5% of its housing stock, or San Diego’s cap that amounts to 1% of housing.
Councilmember Michael Villar proposed accepting the coastal development permit while requesting an amendment to bring the cap down to a number that would amount to 1% of the city’s housing units. However, the motion died without a second.
The cap of 230 total short-term rentals represents approximately 1.39% of the city’s roughly 16,500 housing units.
Dana Point resident Deborah Derloshon said, “The urgency is truly for those who are going to lose their rental housing as their landlords convert their long-term rentals to vacation rentals.”
With a lack of affordable housing in Dana Point, Derloshon argued that the program posed a risk to the long-term rental housing stock.
Senior planner Johnathan Ciampa explained that the percentage of STR units from the total housing stock tends to run between 1% and 2%, adding that the CCC landed on a cap that was in the mix of other cities’ STR programs.
“Housing units will go up in Dana Point,” Federico said, arguing that the increase in STR permits may roughly match new development in the city.
Federico argued in favor of including a cap of 75 total non-primary STR permits. He explained that adding such a cap would give the city more control if fewer multi-family, homestay, or primary resident STRs applied for a permit.
Making a substitute motion, Frost proposed a cap of 60 total non-primary STR permits.
Villar noted that whenever short-term rentals are on the agenda, the Council Chambers are packed with people wishing to speak on the item.
“It divides the city in half, and we don’t need to be the ones to decide this,” Villar said. “In this case, no matter what we come up with tonight, I would like it to get to the voters so that they can decide.”
Muñoz explained that if the ordinance went to a vote by the people, any amendments or changes to the short-term rental program would have to go back to a ballot measure vote.
The motion to bring the vacation rental program to a vote at the next November election failed to gain a second.
Ultimately, the City Council voted, 4-1, with Villar dissenting, to approve the program regulating STRs outside of the coastal zone with a cap of 60 non-primary STR permits and 115 total permits.
During public comments, Dana Point resident Shevy Atkinson said he wanted to “encourage people on both sides to try to be reasonable with each other.”
Atkinson said he liked to stay at STRs while traveling as a family of six, adding that it’s “much more affordable and much more comfortable for a family of six to rent a house.”
After his house got broken into while visiting family out of state, Atkinson said he was interested in renting his house as an STR while traveling.
To help cover costs related to the STR programs, including a 24/7 hotline and staff time, as well as associated legal fees, the City Council also approved a fee of $780 for new STR permits and an annual fee of $620 for renewals. The permit fees may provide the city $110,000 to $120,000 to offset the costs of the program, according to the staff report.
When the city initially established its STR program in 2013, it charged $150 for the permit application fee.
Capistrano Beach resident George Ray, a short-term rental operator, noted that he did not mind raising fees but asked for the city’s justification for such a high increase.
Director of Community Development Brenda Wisneski explained that the added fees will cover the costs of the city’s enhanced enforcement to ensure that STRs are not posing a nuisance to neighboring properties.
Federico said that for about the past year and a half, the city has “spent a lot of time making sure that the (STRs) that we have are not nuisances and making sure that they do not impact or negatively affect the neighborhoods that they’re in.”
Federico noted that while it was frustrating that a resident who spoke during public comments had an illegal vacation rental operating within her HOA for years, he credited the increase in enforcement for helping to shut down illegal short-term rentals like that one.
“We’ve got new business rules; we’ve got a lot of dedicated staff time now and very focused enforcement to make sure that people that are exercising their rights are also living up to the responsibility of being good neighbors,” Federico said.
“While I’m never a fan of big government fees, when you exercise your rights, you have responsibilities, and in this case, you have to pony up to help pay the fees to make sure all of your fellow permitted short-term rentals follow the law,” Federico continued.
STR permit applications will be prioritized based on compatibility with the neighborhood, the staff report explained.
Ciampa explained that once the city receives permit applications, primary and homestay STRs would get top priority, followed by multi-family homestays, followed by mixed-use parcels and lastly non-primary STRs.
The application would require a letter of authorization for STRs within an HOA
Properties with existing violations such as unpermitted improvements, expired building permits, and previously operating without a vacation rental permit would be ineligible for an STR permit.
Once the cap on STR permits is met, the city will establish a waiting list for completed applications.
According to the staff report, the city plans to hold a public Zoom meeting to share application, submittal and operating requirements on Feb. 27.
Applications will need to be submitted to firstname.lastname@example.org.