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By Breeana Greenberg

The Dana Point Planning Commission voted on Monday, May 9, to approve a short-term rental program that will permit and regulate local vacation rentals through a coastal development permit.

In a 4-1 decision by the commission, the new program will, among other things, set caps on the number of permits issued to home and property owners, limit permits for certain STRs to 185, and place a maximum on rental periods.

A short-term rental (STR) is defined as an entire residential house or apartment, or rooms within, that is rented out to visitors for a fee between one and 29 consecutive days. It is often arranged on websites such as Airbnb, HomeAway or Vrbo.

During the public-hearing portion of Monday’s meeting, STR owners—many of whom rely on the supplemental income they receive from renting out their property—spoke in favor of the regulatory program, with many asking that their existing permit be grandfathered in.

Opponents, on the other hand, have raised concerns about the program’s impact on affordable housing stock and about neighborhoods without HOAs experiencing disproportionately higher densities of STRs than others.

The program establishes regulations for three types of short-term rentals: homestays, primary residence and non-primary residence.

Homestays are when the homeowner rents out a portion of their home for between one and 29 consecutive days and the homeowner continues to live there at all times while visitors are renting.

A primary residence STR is when a homeowner rents out their own primary residence to visitors for between one and 29 consecutive days while the homeowner is traveling or living elsewhere. And a non-primary residence STR is when a property owner rents out homes other than their primary residence to visitors for between one and 29 consecutive days.

Under the new program, the city can issue a maximum of 185 non-primary STR permits, and will revisit the cap every five years. Should the city change the non-primary STR cap, it must also amend its coastal development permit (CDP).

There are currently 131 existing STR permits in Dana Point. Per the program, those will be grandfathered in, meaning 54 additional property owners could apply for non-primary STR permits before the city reaches its cap.

The program institutes a cap of one STR permit per owner and requires all abutting neighbors to be notified of the permit issuance. Only one STR will be permitted per apartment building.

Commissioner John Gabbard asked how the city would be able to regulate the cap of one permit per owner when investment groups could create new limited liability companies (LLCs) to circumvent the regulation.

“It’s rare for investors, especially real estate investors, not to put something in an LLC,” Gabbard said. “So how are we going to manage multiple LLCs that could have managers of different names that are all controlled by the same investment group?”

Deputy City Attorney Jennifer Farrell acknowledged that staff was unsuccessful in finding a solution.

“But it is something that we’re planning on working with our consultants on to do our best to identify entities so that we don’t have a situation where one individual forms five different entities and somehow takes control of short-term rentals in the city,” Farrell explained.

Dana Point resident Barbara Wilson on Monday voiced her concern with the program, stating that other than the limit of one STR unit per apartment building, it does not have policies in place to prevent neighborhoods from experiencing higher densities of STRs than others.

“There are so many protections that are omitted from this ordinance,” Wilson said. “Clusters of STRs can be allowed, leaving residents to deal with more excessive noise, parking problems and other nuisances. There’s no cap on how many units can be at each city district, leaving three-fourths of the burden on (Capistrano) and Lantern District.”

Wilson added that as a real estate agent, she tells prospective buyers to check local vacation listings and ensure that there are no neighboring STRs before buying a property.

Staff explained that the STR Subcommittee had looked at different ways to prevent higher concentrations of short-term rentals. The subcommittee had looked into limiting permits by voting district, but decided against it since district lines may change every decade.

“The failure of the commission to address the housing impact shows a terrible disregard for ordinary citizens,” resident Toni Nelson wrote in a prepared statement. “When asked about the unfairness of ¾’s of the STRs residing in Capo Beach and Lantern Districts, commissioners said it was ‘too hard’ to change the regulations.”

“What’s so hard about saying 185 permits are to be issued equally to all five districts?” Nelson continued. “The same goes for the failure to address density and clustering. It was ‘too hard’ to come up with regulations to prevent a whole row of STRs on one street or block.”

All three STR types will be allowed in all residential and mixed-use zones. Accessory Dwelling Units (ADUs), Junior Accessory Dwelling Units, Single-Family Residential Duplexes created through SB9, and designated affordable housing will be prohibited from being rented as an STR.

Permits are subject to HOA approval, if applicable, and a waiting list will be established for new applications once the city’s 185-permit cap is met.

Some residents raised concerns that their HOA’s covenants, conditions and restrictions, or CC&Rs, which do not allow STRs, would be overruled by the new regulatory program.

Senior Planner Johnathan Ciampa explained that the more restrictive policy of the two would apply. So, if an HOA’s CC&R does not allow STRs, then that would be respected with the new program.

The program also establishes a maximum nighttime occupancy of two persons per bedroom plus two, and a maximum daytime occupancy of 2.5 times the overnight occupancy, not to exceed 20 people. It also requires that renters be at least 25 years old.

Primary STR permit owners shall be limited to renting their home a maximum of 60 days a year. For homestays, an owner must be on the property during the rental period between 10 p.m. and 7 a.m.

When Commissioner Eric Nelson asked staff how the city would oversee and enforce the 60-day rental limit, Community Development Manager Jeff Rosaler explained that the city uses rental sites and third-party websites to keep track of rentals.

The city uses a third-party website that collects transient occupancy taxes (TOT) from STRs, keeps track of when STRs reach the 60-day maximum, and scrubs the internet for illegal advertisements, Rosaler said.

According to the program, no outside noise will be allowed from 10 p.m. to 7 a.m., and operators of STRs must respond to a nuisance complaint within 30 minutes.

For nuisance violations, Dana Point City Council passed an ordinance in 2021 enhancing regulations. Under the ordinance, permit holders will have their permits revoked upon a third violation over the life of the permit.

With the new program, permit owners can be fined the maximum amount, as allowed per state law. Upon first violation, the owner will be fined $1,500; $3,000 upon a second violation; and $5,000 for a third violation over the life of the permit.

Voicing a concern over the fines, short-term rental owner Miriam Rupke asked what the city would do to ensure a complaint was legitimate. 

“My concern in terms of the violations is that, what if you have a neighbor that is opposed to short-term rentals?” Rupke asked. “What would constitute a true violation? What’s going to happen, what kind of research will be done to make sure that they’re not making stuff up?”

The city’s decision to pursue a CDP establishing regulations on STRs stems from three recent court decisions.

In the first case, Kracke v. City of Santa Barbara, the Court of Appeals overturned Santa Barbara’s ban on STRs in its May 2021 ruling. The ruling stated that the city required the California Coastal Commission’s (CCC) approval of a permit, local coastal plan amendment, or amendment waiver before implementing the ban.

In the second case, Keen v. City of Manhattan Beach, the appeals court similarly determined that Manhattan Beach’s ban on STRs was invalid for lack of CCC approval. The city’s local coastal plan allowed properties to be rented without placing a limit on the length of stay, so the court ruled that a restriction on the number of nights a residential property must be rented for would require CCC approval.

According to the City of Dana Point’s staff report, the local coastal plan does not include a restriction on the number of nights a residential property must be rented.

In the third case, Protect Our Neighborhoods v. City of Palm Springs, the Court of Appeals upheld a trial court’s ruling that STRs are “permissible use at residentially zoned properties.” The January 2022 ruling upheld Palm Springs’ STR ordinance after the group Protect Our Neighbors filed a suit claiming that the ordinance violated the city’s zoning code.

Former Dana Point Councilmember Paul Wyatt believed that the STR program needed to be passed through a zone text amendment and local coastal plan amendment (LCPA). Through passing the coastal development permit, rather than a zone text amendment or LCPA, Wyatt said the implication is that anyone can open a short-term rental in Dana Point and the city would require CCC approval to restrict them.

“In order to do a CDP, they have to start with the belief that now short-term rentals are a residential use, and they are permitted in all residential zones, and they’ve always been permitted in all residential zones,” Wyatt said.

Conversely, Wyatt said that if the city pursued a zone text amendment, the implication would be that the Dana Point zoning code is not silent on STRs and actually prohibits them.

“So, essentially, they’re 180 degrees from one another,” Wyatt said. “One says the older—and I think the correct—approach says that they’re illegal today, and we want to make them legal. And the current approach with the CDP says they are legal today, and I want to restrict​​.”

Wyatt argued that unlike the court cases, Dana Point’s municipal code is not silent on short-term rentals. He stated that the Dana Point municipal code and Orange County municipal code define a hotel as a structure or portion of a structure occupied or designed to be occupied by transients, staying for 30 consecutive days or less.

“Therefore, basically a non-primary house use for transients is by definition a hotel in our code and the county’s code that is established prior to 1989,” Wyatt said during the public hearing. “So, this is a long-standing documented zoning regulation that the county had before the city, and the city has had in our code, and I think we need to abide by those codes.”

The Planning Commission’s resolution approving the permit states that “relevant court decisions … provide the framework that any regulation and/or prohibition of short-term rentals in the Coastal Zone, requires compliance with the Coastal Act, such as with an amendment to the City’s Local Coastal Program (LCP), or issuance of a Coastal Development Permit (CDP), and the California Coastal Commission has made clear that it will not support a prohibition of short-term rentals based on its interpretation of the Coastal Act.”

Dana Point received a comment letter from the CCC on April 1, suggesting modifications to the then-draft STR program.

Though the letter outlines some suggestions, it stated that “in general, the City’s Draft STR Program is comprehensive and addresses any of the issues and points that the Commission has historically considered for STRs in other jurisdictions along the Coastal Zone.”

Some opponents of short-term rentals also argued that the rentals deplete affordable housing stock.

In a letter to the Planning Commission, resident Mark Zanides pointed out a lack of research conducted on what impact the short-term rental plan would have on lower-income housing.

“We are all aware that there is a housing shortage in California, and it is particularly acute in expensive coastal cities such as ours,” Zanides wrote. “The STR subcommittee and staff have been studying the STR issue for nearly four years now.”

“This proposed plan will add untold numbers of STRs to our City,” he continued. “I have seen no data whatsoever on the likely negative impact that the proposed STR program will have on housing, particularly lower-income housing, in our city.”

Commissioner Nelson stated that short-term rentals do not make up enough of the housing stock to affect affordable housing, adding that they make up 1.1% of all housing stock and 2.1% of single-family homes in Dana Point.

“We heard a lot tonight about our housing stock,” Nelson said. “As somebody who is in the housing business, I absolutely agree we have a huge problem in the city, as well as this county, as well as in this state, and tonight what we are doing will have no effect on that.”

Commissioner Mary Opel added that speakers during Monday’s meeting, as well as at previous meetings, have said that the only way they can afford to live in Dana Point is to operate a home share.

Dana Point resident Marilyn Gardner said she’s been running a local homestay STR for seven years with no complaints.

“We’re a retired couple, on a fixed income, and it does provide a meaningful outlet for us to get cash flow in our hands, and we’re very responsible about it,” Gardner said. “We think it adds to our life to greet people from different places, and we only see positives.”

Dohner and Eric Nelson, who were on the STR Subcommittee, added that the group worked to balance homeowners’ rights and maintain residents’ quality of life.

“There’s nothing that is going to please everybody,” Dohner said. “We did a tremendous amount of outreach. The people that were against it are still against it, the people who were for it are still for it. So, I think the issues we’ve discussed tonight, we probably haven’t changed anyone’s mind.”

Commissioner Gabbard, the lone vote against the program, explained that his vote against the program was based on his objection to the California Coastal Commission’s intervention.

“For me, this one comes down to one thing, and that is I don’t like being told what to do by the Coastal Commission,” Gabbard said. “The fact that the Coastal Commission is driving our approval process is not something that I want to be a part of, and I’m going to push back, and so for that reason alone, I’m going to have to vote no for the CDP.”

The permit will be up for approval by the California Coastal Commission if it is not first appealed to the City Council. The program could still face an appeal to the City Council and/or the California Coastal Commission before the state agency’s final approval.

Breeana Greenberg

Breeana Greenberg is the city reporter for the Dana Point Times. She graduated from Chapman University with a bachelor of arts degree in English. Before joining Picket Fence Media, she worked as a freelance reporter with the Laguna Beach Independent. Breeana can be reached by email at bgreenberg@picketfencemedia.com

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