Balancing Housing with Vacation Rentals and Property Rights

The fires that descended on Sonoma County last October destroyed thousands of homes and increased pressure on an already tight housing market, leading the board of supervisors to take a closer look at the role Vacation Rentals play in exacerbating those problems.

In order to have time to get a more complete picture of the state of housing, and to reduce the opportunity for housing speculation as the county maneuvers its way through an unprecedented crisis, at the end of October the supervisors adopted an interim 45-day moratorium on the issuance of new vacation rental permits.

As the initial emergency ordinance was set to expire, on Dec. 5 the moratorium was extended an additional 60 days, to give county staff an opportunity to study Transient Occupancy Tax (TOT) receipts that come in January to determine the extent to which vacation rentals are affecting the availability of housing for residents displaced by the fires.

“That will be the first objective data we’ll have on what vacation rentals are being used for,” County Planning Director, Tennis Wick, said at the Dec. 5 meeting.

Wick added that he would meet with Airbnb executives with the expectation they will share data with the county to further enhance the report he hopes to bring back to the supervisors before the Feb. 5 deadline to either let the moratorium expire or extend it once again for a maximum total of one year.

Airbnb is a San Francisco-based online marketplace that connects travelers with vacation rentals from apartments to castles throughout the world, and claims it is “the easiest way for people to monetize their extra space and showcase it to an audience of millions.” In Jan. 2017, Airbnb began collecting TOT on any unit rented in Sonoma County, through a Voluntary Collection Agreement (VCA) with the county.

Vacation Rentals growing problem in some areas

Potential problems with vacation rentals has been on the board’s radar for several years, as former First District Supervisor Valerie Brown sounded the alarm toward the end of her tenure on the board, according to Susan Gorin, who was elected to replace Brown in 2012.

“Valerie Brown alerted the board and started that process,” Gorin said in a mid-December interview. “Sonoma Valley (vacation rentals) exploded during the recession when investors came in and bought up housing stock.”

Workforce housing took a hit, as real estate prices escalated once the market bounced back. The First District—encompassing Sonoma Valley and east Santa Rosa—is heavily affected by vacation rentals and workers struggle to find affordable housing.

But the economic collapse was nothing like the damage left behind by the Sonoma Complex Fires.

Preexisting condition

Prior to the fires, Sonoma County was already in the grip of a housing crisis that only picked up steam in the past five years.

According to the 2017 Sonoma County Profile Report developed by the Economic Development Board, rental vacancy rates fell from 5.8 percent in 2011 to 1.8 percent in 2015. During that same period, homeowner vacancy rates fell from 2.2 percent to 1 percent. According to the report, a healthy rental market needs vacancy rates of at least 5 percent.

A report titled “The Impact of Vacation Rentals on Affordable and Workforce Housing in Sonoma County,” prepared by Economic and Planning Systems for the Sonoma County Community Development Commission in 2015, found that “There is a measurable shift in housing supply, otherwise available to the County’s working families, to vacation rentals and other nonresident serving uses.”

The fires wiped out 5,100 homes in Sonoma County, 2.5 percent of the total housing stock. Santa Rosa alone lost 5 percent of its homes. Thousands of people have been displaced for the foreseeable future and there is a possibility of an economy-crippling depopulation that will decimate the workforce needed for rebuilding efforts.

Gorin’s district was particularly hard hit.

“The first district is a stopping point on the way to Napa and a big part of the economy of the Sonoma Valley is agro-tourism and the wine industry,” she said. “It’s the people with lower wage jobs having difficulty: vineyard workers, landscapers, and hospitality staff.”

Vacation Rental Exclusion Zones (VREZ)

This is not Gorin’s first attempt to limit vacation rentals in parts of the county most affected by them, as she picked up the mantel of a process that began in April, 2009 when a previous board considered the long-term effects of vacation rentals on communities.

The Second and Third districts, Petaluma and central Santa Rosa, for the most part, have very few vacation rentals—Third District Supervisor Shirlee Zane joked about having doubled to two at the Dec. 5 meeting and the Second has a mere handful—so the First, Fourth and Fifth were the main targets of subsequent studies.

After forming an ad hoc committee to study policy options, in November 2010 the board adopted a vacation rental ordinance that went through an amendment process in 2014 that included “a robust public outreach program.”

As a result of those efforts, in 2016 the board created a number of “exclusion zones,” where applications for vacation rental permits were not allowed.

The lion’s share of those VREZ parcels—6,204 in 10 zones—are located in the First District from Boyes Hot Springs to Kenwood, while the Fourth District held just three: Fitch Mountain, Palomino Lakes and The Vineyards.

In the end, the First was the only district that adopted the changes meant to “preserve existing housing stock, reduce fire danger, and improve neighborhood compatibility.”

In James Gore’s Fourth District, two of the zones had homeowners’ associations with vacation rental policies in place and Fitch Mountain property owners were steadfastly against it, citing property rights.

“It’s (a) multi-faceted (issue) and a good example of something different in every district,” Gore said in an interview in 2017. “On Fitch, it came down to ownership rights.”

He said that about 19 percent of Fitch Mountain properties are vacation rentals, and many owners bought property there with the intention of using them as rentals. Some even incorporate it into business plans to get loans to purchase properties.

“Susan was interested in banning R1 (residential rentals) in all of Sonoma County,” Gore said. “I have not come to a final conclusion but I’m looking for a solution to satisfy (the community). Some issues are countywide, but this is something that is a district-specific issue.”

And while he was on favor of the VREZ on Fitch Mountain, he acceded to the desires of his constituents there.

Fifth District

But the Fifth District is a whole different animal, particularly in the Lower Russian River area. In fact, the recent moratorium excluded any discussion of the area at all, as it has traditionally been a vacation destination with a focus on transient housing and summer vacation rentals.

“(Former Fifth District Supervisor Efren) Carrillo was steadfast against it for the Lower River,” Gore recalls. “People showed up to stop it.”

The election of Lynda Hopkins to replace Carrillo in 2016 has done nothing to quell the ardor and independence of Russian River denizens, but Hopkins understands the impetus behind VREZ and the affect transient housing can have on neighborhoods.

“There are about a dozen towns and all have their own perspective,” she said. “It’s a neighborhood by neighborhood issue and the decision is hyper-local.”

At the Dec. 5 meeting, Hopkins noted with some surprise that, despite the terrible toll taken on residential properties in the aftermath of the fires, there are several rental properties in that part of her district.

She attributes that to the remoteness of a region nowhere near services, jobs or schools for Santa Rosa residents looking for a long-term temporary home while they go through what could be a multi-year rebuilding process.

“Someone who lived in Coffey Park doesn’t want to move to Cazadero and commute if they were working in Santa Rosa,” she said. “One of the challenges going forward is how we gather the data we need to gather. …How do we look at something that clearly has no ‘one size fits all’ solution?”

Moving forward

The extension on the moratorium adopted in December allows 21 vacation rental permit applications currently in the pipeline to move forward, halting any new applications while county staff analyzes data and creates a report to bring back to the board.

Additionally, it does not include hosted rentals, where the homeowner remains onsite, renting out extra space.

Gorin is adamant about finding a vacation rental balance in remaining housing stock, particularly if the county sees an exodus of people unable to deal with the long and arduous task of rebuilding. She is concerned that speculators will scoop up lots on the cheap to build investment properties instead of housing within the means of those left behind.

“My fear is the rebuilding process will take longer than people expect or hope,” Susan said. “A lot are not comfortable with the process and are putting their lots on the market. We need to rebuild the community for the workforce. I’m far less interested in vacation rentals or mansions on the hill. We’re looking to keep those communities intact.”

The Vacation Rental Ordinance can be found at sonomacounty.ca.gov/PRMD/.

Neighborhoods interested in becoming VREZ can contact the Sonoma County Permit and Resource Management Department at 707-565-1900.

Sonoma Valley’s VREZ Maps can be found on our online version of the report:vacation-rentals-combining-district-map-series.pdf

COMMENTS:

Yes, of course you can continue this conversation. I welcome the open format.

The County would do itself a favor if it would offer Limited Vacation Rental Permits - 60 or 90 days. People (including myself) who want to rent out second homes just enough to cover some expenses would have this need met AND the County could collect BID and TOT taxes. As it is now, I can (and do) legally rent out our second home for 30 days at a time; the county collects NO taxes on this and I'm unhappy with this arrangement. Makes no sense. Give me a part time permit, collect the taxes, and we'll all be happy. ~ Mary McClure Jackson