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Current unlawful vacation rentals could be allowed under proposed city regulations

By Andrea Papagianis

A map of short term vacation rentals in Dana Point. Courtesy of the City of Dana Point
A map of short term vacation rentals in Dana Point. Courtesy of the City of Dana Point

Short-term vacation rentals in Dana Point may soon be permitted under regulations in a finalized ordinance scheduled for City Council review Tuesday night.

City code is silent on the subject, and as such, these rentals are prohibited, but proposed regulations would change this.

The ordinance, based on Planning Commission recommendations from 2009, would authorize short-term vacation rentals—of less than 30 days—through a city controlled permit program.

All rental permits would be subject to compliance with fire, building and safety codes, as well as an initial inspection administered by the city. The inspection would be generic to ensure the structure was safe and inhabitable, said City Manager Doug Chotkevys at a recent city council meeting.

Currently, an estimated 250 short-term rentals operate freely without being subject to the Transient Occupancy Tax (TOT) that hotels, inns and campsites are. This 10 percent bed tax is placed on revenue generated by short-term rentals of less than 30 days. According to a staff report, the city could collect roughly $400,000 annually from existing rentals.

A new part-time position would be established in order to implement and enforce the program. Start-up costs are estimated at more than $75,000 for the employee’s first year and $54,000 each year after.

At a City Council meeting in February, Assistant City Manager Mike Killebrew said the enforcement of the tax would offset the costs of implementing rental regulations. Associated annual permit and application fees, could also help pay for program administration costs.

Additional regulations include a minimum three-night stay, two off-street parking spaces, limits to the number of guests in each unit, a minimum renter age of 18, limits the use of space by prohibiting weddings or parties, an exterior advertisement ban and trash collection standards. A 24-hour emergency contact would also be required within a 25-mile radius of the rental property.

Owners of rental properties will be required to provide proof that such use is permitted by their homeowners’ association guidelines.

Penalties for violators of the rental permit conditions range from $250 for a first offence to $1,000 for a third within a 12-month period. Multiple violations could lead to the revocation of a permit.

To provide staff with time to implement the program and homeowners with time to get into compliance, enforcement would begin in January 2014.

The council could vote on the first-reading of the ordinance at Tuesday’s meeting. In order to finalize the ordinance a second reading will be required. City Council meetings begin at 6 p.m. at City Hall, 33282 Golden Lantern.

If City Council approves regulation measures, amendments would be required to the health and safety ordinances, municipal and zoning codes—to establish universal business guidelines, implement the taxation of rentals and alter zoning to permit rental use. The latter requiring both council and Planning Commission approval.

Because zoning modifications in the proposed ordinance include properties that fall within the coastal zone, approval from the California Coastal Commission would be necessary, according to City Attorney Patrick Munoz.


A look back at City actions on the short-term vacation rental issue

January 2007: City Council held an informal gathering to discuss short-term rentals.

July 2009: City Council discussed the possible regulation of short-term vacation rentals and directed the Planning Commission to examine the appropriateness of such rentals in residential areas.

September 2009: Planning Commission held a public forum.

October 2009: Planning Commission continued deliberation of short-term vacation rentals and developed a set of recommendations for council consideration.

April 2012: City Council received a status update on short-term vacation rentals, including the Planning Commission recommendations and directed staff to conduct a survey of residents and homeowners associations.

September 2012: City Council reviewed the residential survey and directed staff to compile examples of existing short-term rental programs.

November 2012: City Council looked over examples of rental programs, including costs of implementation and potential revenues, and directed staff to draft an ordinance.

February 2013: City Council reviewed a draft ordinance, but unanimously postponed a vote directing staff to add more “teeth” to the regulations and stricter penalties for violators.

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