FPA Blog

Sonoma County Lower Russian River MAC Vacation Rental Committee Report

Revised Version as of 8-22-20

In researching the effects of vacation rentals on the lower Russian River community it’s easy to see how multiple conflicting issues come into play. How land use policy comes up against the need for revenue. How property rights square up with neighbor’s rights. How a lucrative hospitality industry, when inserted deep into an established neighborhood, can potentially impact the quality of life for those who live there year-round.

The quality of life issues mentioned above seem to be primarily focused around noise and parking issues. Aside from the occasional households that just don’t like strangers in their neighborhoods, those are the top two complaints. What happens as a result of those complaints is pretty much nothing apart from a letter sent to the owners. Therein may lie one of the problems.

The other issue that looms large not just in our region, but across the globe, is how any increase in short-term rentals invariably removes housing stock from a community. That in turn can drive up housing prices and drive out working class people. Affordable housing is a big issue for Sonoma County, so we expect the dramatic 43% increase in vacation rental applications over a two-year time frame indicates a cause for concern.

It comes down to, what kind of a community do we want to be? Some popular tourist destinations have given over any expectation that real neighborhoods exist. Perhaps that is our destiny along some stretches of the river, perhaps not. However, the pressure is there and it’s understandable. Here is how we got to this place.

History of Vacation Rentals:

• It’s acknowledged by all that the lower Russian River area was developed around a hundred years ago as second homes and short-term rentals for Bay Area families. This effectively transitioned the area away from logging as the economic driver.
• Since then much has changed. River cottages suitable for summer living were transformed into year-round dwellings as Sonoma County grew in population. Those primarily small dwellings were well suited for those unable to afford the tract homes rapidly being built in Santa Rosa, Windsor and Healdsburg.
• With upgrades and insulation these houses became homes. Neighborhoods were established as permanent residents settled in with their young families. Community groups were formed, playgrounds and dog parks were built, civic pride grew despite the challenges of seasonal flooding and reported “drug houses” scattered in the hills. This area is now home to teachers and firemen, artists and entrepreneurs, construction workers and wait staff, basically the backbone of the middle class.
• Tourism was welcome as a way to fuel our businesses, boost our economy and show off the beauty of the river with those looking for a respite from city living. Available short-term rentals were most often booked by owners themselves or by local property managers. Often a personal relationship was formed. The most common method of advertising were flyers or 3×5 cards posted on bulletin boards.
• With the advent of on-line booking companies, things changed. At first the changes were incremental while folks were getting used to the idea of home-sharing. That trickle of bookings has since become a floodgate of opportunity for local homeowners to bring in extra income, for out of the area home owners to turn grandma’s summer cottage into a money-making enterprise and now for investors looking to diversify their portfolio by acquiring a number of houses for the specific purpose of short-term rentals.
• In 2009 the County recognized they were missing out on collecting taxes on these types of rentals, that they could significantly increase Transit Occupancy Tax (TOT) funding in the area if that source of income was tapped. They established ordinances and a permitting process at that time.
• A 2015 comprehensive Vacation Rental Impact study was prepared by the Economic & Planning Systems Inc. out of Sacramento commissioned by the Sonoma County Community Development Commission. The ensuing white paper suggestions included:

1. 1. The conversion of whole-house units to vacation rentals was substantially impacting the housing market and mind you, this was two years before many thousands of houses were taken off the market as the result of the 2017 Tubbs Fire.
   2. They suggested vacation rentals should be limited to “hosted only” rentals so the housing unit remains in long-term residential use.
   3. They advised the County to also consider limiting vacation rentals to “seasonal use” leaving long- term residency most of the year.
   4. They encouraged the County to allocate a portion of the TOT to provide incentives and subsidies for affordable and workforce housing.
   5. They recommended the County increase the supply of lodging units (not in residential neighborhoods) through a more friendly permitting process.
   6. Additionally, they encouraged the County to incentivize the building of affordable housing through waivers of development fees.

It doesn’t appear much has changed as a result of this study. Possibly some issues may have gotten worse, which begs the question, what are studies worth if there is no political will, money or manpower to make changes?

Regulations for Vacation Rentals:
Section 26-88-120 for the County of Sonoma outlines the purpose, the applicability, the permit required, the terms of the permit, the limit on the number of residences per parcel and parking requirements. You can also find in that code section a list of performance standards which include noise limits, pets being secured, trash and recycling expectations, standards around outdoor fire areas and septic and sewer connections.

Those standards include how a certified 24-hour property manager needs to be available to respond to complaints, where an emergency access is located and where these standards and expectations are posted within the rental itself. There are also requirements for all internet advertisements and listings to publish maximum occupancy, maximum number of vehicles allowed, notification of quiet hours (10 pm to 7 am), that no outside amplification is allowed, and that a Transit Occupancy Tax Certificate number needs to be listed in all advertising.

The Enforcement Process is also addressed in that code section. It outlines what happens with initial complaints which “may” trigger a ‘strike’ against the permit, talks of enhanced penalties for non-permitted rentals and it also takes account of the dreaded “three strikes penalty” which would revoke a permit completely. Apparently that penalty has never been used.

Is it because the “Administrative Citations” they mention in this code are at the sole discretion of the County? Would actually revoking a permit require a lot of effort and possible litigation? One has to wonder since we lack data on why no permit has ever been revoked according to our research. Certainly, some ill-managed properties have received plenty of complaints over time. We encourage interested readers to refer to that code section for more details.

Those are the regulations in a nutshell. So, what happens when renters violate “informal courtesies” of the neighborhood? When noise becomes intolerable or when there’s no place to park in front of your home when you have sacks of groceries to bring in. The prospect of calling the Sheriff may feel heavy-handed. A violation must be “in process” for them to respond. Going to confront the renters could be daunting. What’s a homeowner to do?

The actual process for making a complaint is straightforward enough:

• One calls the Violation Voicemail at 707-565-1992 to lodge a complaint.
• You give your name and phone number.
• You supply the address of the vacation rental.
• You provide a brief description of the violation.

The Code Enforcement Officer will:

• Use their “web-scraping” tool to check if the address is a permitted vacation rental.
• Write a letter to the owner notifying them a complaint has been registered.
• They may or may not contact you to verify, ask for more information, or to clarify the complaint.

If the complaint is verified:

• The complaint will be listed on-line.
• To check if it’s registered go to Permit Sonoma, then Permit History Lookup to find the complaint.
• Your complaint may or may not start a process whereby a “strike” is issued against the property. It could be up to the discretion of the Officer.

Some questions remain:

• From our research it looks like no “three strikes” penalty has even been issued in Sonoma County, what happens to repeat offenders?
• What exactly does the warning letter say? Is it considered a deterrent at all or just a slap on the wrist that means little to nothing? Is there any follow up?
• How cumbersome is the process to file a strike for overburdened County officials? For example, how much time does it take to register complaints? Is the paperwork a hindrance? Is it considered a low priority when more pressing items are in the works?
• Is there any particular reluctance to issue a strike?
• How difficult is it to enforce fines? Does the County Counsel have to be part of that process?

Observations on regulations:
Local property management companies, who charge a 25% booking and management fee, seem to do a better job of handling complaints rapidly. Often those companies are proactive, some doing drive-bys to ensure their bookings are compliant. Too often there are instances where the listed manager lives too far away to be effective or is not empowered to intervene in situations that require immediate response. If a property manager is really the “cleaning girl” put into the position of authority she clearly does not have, then problems can easily ensue. It would be good to know rates of complaints to do a comparison.

It’s no surprise complaints are generated at night or on weekends. County officials are not on the job at that time. What kind of a disconnect happens due to that simple fact? How are County officials empowered to do follow up? Is it simply a matter of time?

This committee recognizes there are many more vacation rental properties that create no problems within their neighborhoods than those that do. In fact, upgraded property may even have benefits to home values. It’s good to see the balance.

The current fee for obtaining a Vacation Rental Certificate is $638 as of July 2020. The fine for operating without a permit is 10 times that amount. What is the rate of collection on vacation rentals that are caught operating without a permit? What is the estimate of unreported rentals?

To apply for a permit:

• Register with the County for an owner operated or management operated permit.
• Fill out a planning application.
• Sign an indemnification agreement.
• Fill out a Vacation Rental application
• Complete a property report checklist.
• Take a certification exam.
• Pay the fee.

Presently new applications are on a temporary 45-day hold pending research into modifying the current ordinance. The County is tasked with doing the research necessary to provide guidance going forward. Would more robust enforcement cut back on the “bad actors” and party houses? What would that take? What would that cost? There are more questions than answers at this juncture. (BTY Santa Cruz County Board of Supervisors voted on June 19 for a 45-day moratorium as well to study the very same issues with which our County is dealing.)

Data
The industry leader, iproperty management (who prepares data to owners of short-term rentals) provides some interesting information.

• There are 150 million Airbnb users alone, and there are over 125 internet booking companies.
• 40% of users are between 25 and 34 years old, 23.9% are between 35 and 44.
• 43% of property owners are using their primary residence as the rental and manage all aspects of their rental.
• 38% of property owners rent out their secondary residence.
• 45% of owners purchased their rental(s) for investment purposes.
• 42% paid cash for their property.
• 71% who book are travelers with children.
• 64.5% book online.
• 16.9% use a Google search.

Local data has been compiled by committee members Vesta Copestakes and Nic Pereria through a Survey Monkey tool. That electronic survey was sent this past month through a variety of platforms including links on the County website, on the 95436.org website, through local community organizations and on personal Facebook pages.

Within a relatively short time frame the committee received just shy of 1,000 respondents. 713 completed surveys were from a resident survey with 14 questions and 271 were from short term rental owners themselves who answered 13 questions. The complete data from this survey is available to the public and attached to this document.

The Resident Survey Summary of questions 1 through 14:

1. There is/are ____ vacation homes in the lower Russian River.

• • 51.19% of respondents felt there were “too many” vacation rentals in the lower Russian River.
  • 17.25% felt there was room for more.
  • 31.56% felt there were enough.

2. Do you have any vacation rentals in your immediate neighborhood?

• • 83.45% stated they did have vacation rentals in their neighborhood.
  • 9.46% didn’t know.
  • 7.09% said there were none.

3. Of the vacation rentals in your neighborhood, are any:

• • 61.22% state their neighborhood rentals are managed by a property manager.
  • 44.35% are managed by a local agency.
  • 37.57% were hosted rentals.

4. What issues/problems have you experienced with vacation rentals in your neighborhood?

• • 62.60% of neighbors stated noise was a problem with rentals.
  • 56.42% said parking was an issue.
  • 34.55% felt garbage was a problem.
  • 22.35% checked trespassing was a concern.

5. Of the vacation rentals in your neighborhood, have you had any problems with guests that required you contact the property owner, manager or police?

• • 52.42% stated they have not called law enforcement over problems with guests.
  • 47.58% said they had.

6. If yes to above:

• • 50.75% of respondents did not contact the property manager when there was a problem.
  • 42.79% said they had.

7. Was it resolved easily and immediately?

• • 76.10% of neighbors stated problems were NOT resolved easily and immediately.
  • 23.90% said they were.

8. If not, why not? Written responses in the full report.

9. Did you have to call the Sheriff?

• • 56.86% of those who experienced problems did NOT call the Sheriff.
  • 43.14% did call the Sheriff.

10. Did the Sheriff respond?

• • 54.07% stated the Sheriff did NOT respond.
  • 45.93% said they did.

11. Is the County’s enforcement of the current regulations adequate?

• • 70.80% of survey takers stated the County’s enforcement of regulations were NOT adequate.
  • 29.20% felt they were.

12. What new regulations or programs would help create balance between neighborhoods and vacation
rentals?

• • 67.53% of people felt there should be a maximum number of rentals per neighborhood.
  • 61.07% felt there should be a limit on new permits allowed.
  • 51.37% felt local management should be a requirement.
  • 44.75% felt rental ownership should be limited to one housing unit.
  • 35.70% would approve of a parking permit program.
  • 38.61% liked the idea of exclusion zones.

13. Would you like an online reporting tool, similar to SoCo Report It for reporting infractions?

• • 70.16% of people would like an online reporting tool for infractions.
  • 10.79% said they wouldn’t
  • 19.05% said they didn’t know.

14. Which Sonoma County district do you live in?

• • 86.63% of respondents were from 5th District.
  • The rest were a tiny fraction from all others.

The Owner Survey summary of questions 1 through 13:

1. How many vacation rentals do you own on the lower Russian River?

• • 44.65% of owners had only one rental.
  • 2.21% had two
  • 1.85% had 5 or more.

2. There is/are _____ vacation rentals in the lower Russian River.

• • 55.91% felt there was room for more rentals.
  • 37.63% felt there were enough.
  • 6.45% felt there were too many.

3. Do you have any other vacation rentals in your immediate neighborhood?

• • 64.52% of respondents said there were rentals in their immediate neighborhood.
  • 29.03% said there were none.
  • 6.45% said they didn’t know.

4. How much Transit Occupancy Tax did you pay in 2019?

• • See full report for answers.

5. How many days in 2019 was your home rented?

• • See full report for answers.

6. Was your home a vacation rental before you purchased it?

• • 70.65% of owners stated the rental was NOT a vacation rental before they purchased it.
  • 29.35% stated it was.

7. Is your home managed by:

• • 46.67% say their property is managed by a property manager.
  • 25.56% say they have professional company manage theirs.
  • 4.44% have an on-site manager
  • 23.33% are hosted whereby the owner/manager is staying on site during the rental.

8. Does it help to have someone living on-site or a manager close by?

• • 87.36% say it helps to have a manager close by.
  • 12.64% say it’s not.

9. What issues/problems have you experienced with your vacation rentals?

• • 67.03% of owners say they have had no problems with their rentals.
  • 9.89% said noise had been an issue.
  • 6.59% stated garbage was an issue.
  • 5.49% had parking as an issue.
  • 7.69% felt trespassing was a problem.

10. Is the County’s enforcement of the current regulation adequate?

• • 77.78% felt the County’s enforcement of regulations was adequate.
  • 22.22% said it was not.

11. What new regulations or programs would help create balance between neighborhoods and vacation
rentals?

• • 44.05% believed local management of all rentals was a good idea.
  • 22.62% wanted a maximum number of rentals in any given neighborhood.
  • 11.90% thought a limit on new permits was in order.
  • 19.05% checked residential parking permit.
  • 19.05% said limit ownership to one.
  • 10.71% checked exclusion zones might create balance.

12. Would you like an online reporting tool similar to SoCo Report It for reporting infractions?

• • 24.18% liked the idea of a reporting tool to the County for infractions.
  • 31.87% said no.
  • 43.96% didn’t know.

13. Did the County contact you directly to inform you of the COVID19 Shelter in Place order and other measures that have been applied to vacation rentals during the pandemic?

• • 61.96% of owners were NOT contacted by the County about COVID issues.
  • 38.04% were contacted.

Ongoing concerns:

• The lack of data on problem rentals.
• The lack of data on saturation of rentals within specific neighborhoods.
• Not understanding the consequences of violations.
• Possibly having no consequences of violations.
• Lack of understanding on the housing situation for affordable housing.
• A patchwork of information from the County with different departments handling different components with no clear data.
• No resources have been allocated to study impact sufficiently.
• Perception that the County “isn’t doing anything to address the issues.”
• No action from the 2015 study.
• Housing being turned into vacation rentals in the river area doesn’t help the schools with lowering enrollments. Schools are mostly funded through attendance records.
• Perception that revenue trumps quality of life issues.
• Gray areas need to be black and white.
• What impacts do short term rentals have on the commercial hospitality industry?
• How do you verify home ownership?
• What percentage of our housing stock is in short term rentals?

Research:
Are there resources for overstretched governmental entities to assist with issues?
Using a business, like Host Compliance, for management of issues the County may not be able to handle is expensive, however they have a track record of collecting more fees and taxes. They regularly monitor the top 54 online booking companies out of the 125 that exist to better catch unlicensed rentals. Their proposal is as follows with their suggestions and pitch: Check out number 15, which is quite interesting.

1. If Sonoma County is interested in pursuing back taxes, Host Compliance can provide the rental activity data necessary with the Rental Activity Monitoring module (there is typically a statute of limitations on back taxes, which may add urgency to the matter.)
2. The county has a Voluntary Tax Agreement with Airbnb. Host Compliance learned Airbnb now allows hosts to opt-out of automatic tax remittance, which lowers the value of the Airbnb VTA and in fact, increases the amount of potential tax fraud: If you’re in a region or jurisdiction where we can collect and remit taxes on your behalf (default taxes), you may be able to opt out of the default tax collection and add custom taxes instead. When you add custom taxes, we still collect the tax on your nightly rate and fees but pass it to you to remit to the tax authorities. If we already collect and remit taxes for your listing, adding a custom tax replaces all default taxes. https://www.airbnb.ca/help/article/2523/how-do-i-add-custom-taxes-to-my-listings
3. The cities of Sebastopol, Petaluma, Sonoma and Healdsburg use the Host Compliance solution for their short-term rental monitoring and compliance needs along with Marin County.
4. In Placer County Host Compliance assisted in collecting $850,000 in back taxes from 464 registrants in less than 1-year from implementation and as of August 2019, they helped secure an additional $3 million in TOT revenue.
5. San Luis Obispo County recovered $72,000 in taxes from previously unlicensed STRs.
6. In El Dorado County H.C. identified ~90% of STRs within 2 weeks of contract execution.
7. The Town of Truckee’s TOT collection was 36% more than budgeted.
8. The City of Chula Vista collected more than $30,000 in 6 months from only 95 rentals.
9. Regarding proof points, they help over 100+ cities and counties in California for short-term rental monitoring and compliance.
10. Host Compliance can assist in covering their fees by applying for a CARES Act Grant. They can partner with the Grant’s Office to help coach Sonoma County through the application process (complimentary). Remember the grant money expires end of this year. They are happy to provide more information if interested. It appears the county has received 50K in grant funding already.
11. They find out who is in compliance and who is not and send a letter to property owners under the name of the County.
12. They find out who’s under reporting through their data scrubbing technology.
13. They collect registration payments online.
14. They have a 24/7 hotline and keep track of complaints and follow through until issue is resolved.
15. The data they pulled for this report shows 2,859 vacation rentals being listed in Sonoma County vs. the County’s number of 1,904 mentioned in their recent BOS meeting.

Research of other communities:
Regulations are really all over the map. Many large and small communities restrict short term rentals to hosted only to avoid some of the noise and parking problems and to maintain a neighborhood feel. Some communities only allow short term rentals in a very restricted area so that there is not neighborhood creep. Towns have been known to only allow professionally managed rentals for non-hosted rentals. More research could be done.

Recommendations:

1. Better tracking of problem rentals so they can be addressed. We can’t regulate what we can’t measure.
2. Require local registration/management for all vacation rentals.
3. Require local management companies to do “drive-bys to check on their rentals.
4. Create a “Guest brochure” to outline neighborhood expectations. Include a welcome letter and suggestions for tourist activities to make it “friendly.”
5. Have rentals include a history of the neighborhood to introduce guests to the “neighborhood expectations” and how sound carries.
6. Consider hosted only vacation rentals.
7. Consider adding restrictions on daytime guests to the ordinance.
8. Consider a residential parking permit program.
9. Limit the number of rentals in any given neighborhood. 5% is recommended in several communities.
10. Create online reporting of vacation rental infractions.
11. Consider enlisting Host Compliance business to manage portions of the vacation rental market.
12. Create significant fines for noncompliance and enforce them. See report “Senate OKs Glazer’s bill to raise fines on short-term rentals” so all California Counties can fine up to $5,000 for violations.
13. Require a 5-year permit review, with the first year being probationary.
14. Failure for a property owner or manager to respond to a complaint within 60 minutes will result in an automatic strike.
15. Invest in mapping software to catch under reporting.
16. Consider contracting with Host Compliance for a range of their services.
17. 125 nights a year is a reasonable limit on rentals.

In conclusion:
There is a lack of substantive data on which to inform best next steps. The 45-day cap on new permits will allow County personnel to dive deeper into this data gap, which has existed for some time.

There is frustration on the part of the Board, as well as residents, with the lack of progress in addressing vacation rental issues that are simply not going away, especially in what is becoming a boom in the vacation rental business. Creating solutions now will save time, money and headaches into the future. Change is hard but many towns and municipalities have tackled these problems. If we take on the challenges now we can avoid harder decisions in the future. Striking a balance between owner’s rights, neighborhood expectations, revenue generating activities and preserving our river community will be a challenge, but it’s not impossible.

Respectfully submitted:
Lucy Hardcastle, Chair of the Ad Hoc Vacation Rental Committee

MAC Committee members:
Lucy Hardcastle
Vesta Copestakes
Cynthia Strecker
Nic Pereria
And volunteer Neil Baker