The City Council last week discussed options to encourage long-term rentals in Avalon. They also discussed long-term and short-term rental policies. A resident who owns rental properties brought the matter to staff’s attention.
The council did not take any action.
One idea suggested in the city manager’s staff report was to provide grants to encourage property owners to rent out units long-term.
City Manager David Maistros suggested that a Municipal Code prohibition on renting long-term for two years might prevent properties from being offered to renters. A property owner expressed concern that long-term rental revenue does not keep up with costs such as property tax and insurance.
Discussion
The following is not a transcript, but highlights from the meeting.
City Attorney Scott Campbell said there are three cities like Avalon: Truckee, Mammoth Lakes, and South Lake Tahoe. They have a lot of short-term rentals taking up long-term rental space.
“What those cities have done is they have said that if you have a unit a home that is not occupied or a residence that is used for a short-term rental, the city will pay you a certain amount for a long-term rental,” Campbell said.
“The city then gives the landlord a stipend and that landlord then provides long-term housing for residents in the city. Each one of these three cities, limits that to low or moderate income people who live in the city,” Campbell said.
He said other cities just provide direct payments to tenants out of their housing funds.
“The other request was to look at whether we could dedicate some form of our taxes or percentage,” Campbell said.
He said taxes passed by the voters couldn’t be touched. He said the city could use money from the General Fund.
Campbell said the city may want to look at whether the cap on short-term rentals creates an incentive to keep a house empty. The cap is 413 short-term units.
“The council could consider modifying that prohibition to allow people to rent properties and still qualify for um the lottery for a short-term rental. That way that unit is not sitting vacant for the two years right now that the ordinance provides,” Campbell said.
Marina Belsito, who brought the issue to the city staff’s attention, said she owned four units and her family had rented to Avalon residents for 50 years. However, she said she was advocating for the other side of the issue. She said when you rent to someone for 20, 30, 40 years, the rent is not very high. She said she lost a property because a family had been there for 30 years. She would never kick them out, but the property wasn’t making the mortgages from the rent.
“We’re kind of getting squished in the middle of these programs,” she said.
“You can give money to the tenants, which is great, but then that’s not helping people have a long-term rental,” she said.
“Between property taxes, insurance, maintenance, um it’s very difficult and some people are losing their properties because of it and that makes less long-term rentals,” she said.
She said she had tenants who have been in her properties for 20 years. She wanted them to stay at current rates.
“I don’t want short-term rentals,” she said.
She seemed to like lowering water, sewer, and saltwater rates for year-round tenants. She said property taxes were the “biggest chunk of money”, which she said was charged per unit.
She said in Europe, visitors paid a visitor tax.
“I can’t ask anyone to leave unless I say I have a family member coming, I need it myself. If I sell a property, it’s going to three families are going to be out,” she said.
“You can raise the rent when you buy a new property. You can raise the rent. I cannot,” she said.
She also said that if you sell a property without a CUP, you sell it for 30 to 40% less.
“It’s an issue and it’s getting worse,” she said.
Councilmember Mary Schickling said full-time, year-round rental properties in town were dwindling.
Speaking to Marina Belsito, the council member said she was legally entitled to raise rent 5% plus CPI to a maximum of 10% every year.
Mayor Anni Marshall asked the city attorney what kind of money the three cities his office looked at talking about.
Campbell said: “Mammoth goes between $2,000 and $18,000 grant to the landlord.”
He said South Lake Tahoe spent around $3,500 to $4,500. He said it was paid annually.
Councilmember Lisa Lavelle asked how were those cities providing that money.
“Is that general fund money or is it a grant or is it something a special tax?” Lavelle asked.
“General Fund,” Campbell said.
“It’s got to be a unit that is that is currently unoccupied or occupied by short-term rentals. It’s got to be done for a low for a low income person. I don’t see anything on the program if they if they state how many of them,” Campbell said.
Marshall said under those guidelines, Avalon wouldn’t be able to do that for Belsito.
Campbell said the city of Los Angeles allows a property owner to enter into a full-year lease, but if the house is vacant during the summer you can use it for a short-term rental.
In response to a comment from the city attorney, Councilmember Schickling asked if the city didn’t have housing money.
That money, however, has apparently been earmarked.
“There’s no cushion there?” Schickling asked.
The answer was no.
Schickling asked if the city could redirect some of the TOT money that goes to the Chamber of Commerce.
“The voters would have to do that,” Campbell said.
Lavelle said the wharfage fees would have to be used within the harbor because of how the law was written.
Schickling asked if the city could increase the permit fees for the short-term rentals.
“The permit fee it has to cover the cost of processing a permit only. You can’t charge more than the cost of charging a of processing the permit and administering the transient occupancy program,” Campbell said.
“Unless we put that on the ballot,” said City Manager David Maistros.
Campbell said that was correct.
“I do think one of the things is to change our current code, prohibiting them from renting long-term for two years. I think that is preventing some of these properties from being offered,” Maistros said.
Lavelle said one of the things she had asked about was a code requirement that an applicant for a short-term license rent for the long-term for two to five years, to show that they could have a tenant and respond.
Maistros said one of the requests the city had received from short term rental owners was for the city to consider requiring them to bring online a long-term rental.
Marina Belsito about the people who already have multiple properties.
“I was basically saying that instead of having the house sit empty for 2 years before having it not sit empty but not be a rental unit property before they can get the application to that,” Lavelle said.
Allesia, Belsito’s daughter, said landlords were providing an essential service and they are the ones struggling with increasing rates, increased insurance, and increased costs.
She said if landlords currently housing tenants year-round can no longer afford to house them and sell the properties, more people will be struggling to find housing.
Maistros said this wasn’t a one-situation fix.
“I think we’re all on board,” Schickling said.
In response to questions from the council, Marina Belsito said she pays for her tenants’ sewer, water, and saltwater. They pay for electricity.
Background
“Compounding Avalon’s geographical and practical constraints to developing new housing, it is also a popular destination for tourists who appreciate Avalon’s unique character and natural beauty. The demand for short-term rentals in the City can make converting housing stock to transient rental a lucrative opportunity,” wrote City Manager David Maistros in his April 7 staff report.
“The City has enacted regulations on short-term rentals intended to help preserve long-term housing stock. However, long-term rental incentives may also cause property owners to consider making their properties available for long-term rent. Many community members have submitted public comment expressing an increasing inability to afford living on the island. Workforce housing projects can contribute to reducing housing costs for workers that are essential to supporting Avalon’s vibrant commercial businesses, schools, and other critical services,” Maistros wrote.
“Residents express a desire for additional long-term housing availability. Residents also express a desire to use their primary residences for short term rental as a means of increased financial security. Balancing these objectives requires a nuanced regulatory approach. Staff has evaluated the suggestions made by the public and used by other cities, in light of California constitutional constraints, landlord-tenant law, and programs used in comparable resort and coastal jurisdictions,” Maistros wrote.
“Other jurisdictions, like the cities of San Francisco and Pasadena, have sustainable short term rental policies,” Maistros wrote.
“These cities provide local property owners with the ability to supplement their income sources with short-term rentals, but limit this opportunity to those who reside in the cities for a given length of time. Property owners must live in the property where a unit is rented for at least nine months out of the year. The maximum number of days a property owner can rent out a unit for short term rental is 90 days out of the year. Similarly, Los Angeles caps unhosted stays at 120 days of the calendar year. These limitations on short term rentals can accomplish the goal of allowing residents to supplement their income with their properties while not completely eliminating those rentals from the housing market for the entirety of the year,” Maistros wrote.
“The City’s current Transient Rental License Ordinance may unintentionally discourage the retention and re-establishment of long-term rentals. The code provides that a property owner is ineligible for a transient rental license if the unit has been rented for a consecutive 30 day period at any point in the two years preceding the application. Specifically, the code directs that a Transient Rental License application ‘should be denied’ in this circumstance,” Maistros wrote.
“The rule was adopted before the current cap on short term rentals to prevent the conversion of long-term rentals to short-term rentals, but some have raised concerns regarding the outcomes of the rule. As reflected in public comment, property owners who maintain tenants at stays of 30 consecutive days or more are effectively incentivized to keep their units off the market for two years. This incentive may be possible for owners who can afford this loss of rental income for two years, but may be economically infeasible for other owners who rely on the rental income. As a result, owners who continue to rent to local residents may foreclose their future eligibility for a transient rental license, while owners who remove tenants or leave units vacant may preserve that option,” Maistros wrote.
“Public comment indicates this creates a perverse incentive structure in which long-term tenants are displaced and units are taken offline in anticipation of future transient rental eligibility, rather than encouraging the continued provision of year-round housing. One mechanism could be giving property owners that provide long-term rentals a kind of short-term rental credit (e.g. an allotted number of days where short term rental is permitted) or this provision could be eliminated,” Maistros wrote.
“Public comment received by staff has suggested other novel options not yet pursued in other jurisdictions. One suggestion was to reduce utility fees for year-round rentals. Under the California Constitution, a fee may not exceed the estimated reasonable cost of the service. As a result, there would need to be a basis in cost-of-service to suggest those fees could be validly reduced and one class of users should be treated differently than others. Due to the legal limitations on how fees may be imposed on property owners, this approach would require legal evaluation and may be unworkable. Similarly, property taxes are imposed by the County tax assessor and the City does not control those tax rates, meaning the City lacks authority to regulate in that area. This is why cities have instead opted for incentives provided through their general funds,” Maistros wrote.
The California Constitution doesn’t allow the use of public funds without a public benefit, according to Maistros’ report.
“A well-designed housing incentive program can satisfy that standard if payments are tied to public objectives such as increased workforce housing supply and improved availability of affordable housing. Like the programs used in the jurisdictions above, any incentive payment should require a written agreement supporting that the housing unit will be used for long-term rental prior to payment,” Maistros wrote.
“Incentivizing long-term rentals has primarily relied on a grant-based mechanism in a majority of cities. The effectiveness of these grants will depend on the relative economic benefits of short erm renting. Meanwhile, the City has recently regulated in the area of short term rentals, particularly imposing more stringent requirements on operators and a cap on licenses. The effects of those changes are at the beginning stages, though staff continues to monitor, particularly once the transient rental license cap is met,” Maistros wrote.
