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Encinitas City Council proposes 3% cap on short-term rentals

ENCINITAS — The Encinitas City Council recently voted in favor of capping the number of city-issued permits for non-hosted, short-term rental properties and requiring a minimum of 200 feet between existing vacation rentals, among other proposed regulations.

In a 4-0 vote at a meeting last Wednesday — Councilmember Kellie Hinze recused herself from the vote because her family owns a vacation rental — city leaders endorsed a 3% citywide cap of short-term rentals and a 5% limit for qualifying units located west of Interstate 5.

Among other changes, the council also voted to mandate that new short-term rentals be a minimum of 200 feet from existing short-term rentals (also called STRs or STVRs) in order to prevent an overconcentration in the community. Additionally, property owners would be required to renew their rental permits every three years instead of annually.

The vote marks an important step in terms of policies that the city can use to balance the rights of property owners with the need to mitigate the negative effects of short-term rentals on surrounding neighborhoods, said Councilman Tony Kranz.

“Our meetings over the last year have pretty clearly indicated that there are some problems with the STR properties in this community, so we took a look at what surrounding jurisdictions were doing and borrowed them and decided to update our ordinance, which hadn’t been updated in 15 years,” Kranz said.

“I think we did a good job keeping in mind the conflicting interests at play here, one of which is to make money and allow people to have accommodations for their visits to our coastlines, and the other is to have neighborhoods for people who want to have neighbors that don’t come and go every three days.”

Kranz said the council has heard a lot of feedback from community members who are concerned both about the impacts of short-term rentals on community character and rising property values.

“Ultimately, single-family residential zoning is intended to be for permanent residents,” Kranz said. “As a city, we want less speculative acquisitions of properties for the purchases of turning these homes into STRs. It’s reasonable to establish a cap to say, ‘Hey, we recognize that there’s some merit to having single-family homes as STRs but too many create impacts in neighborhoods that are detrimental to families in the vicinity.”

Councilmember Joy Lyndes agreed, saying it was high time the city take control of the exploding vacation rental market and properly balance the interests of short-term rental owners and residents concerned about the effects of vacation rentals on their neighborhoods.

“We want to protect our neighborhoods,” said Lyndes. “Our neighbors have told us that they have concerns and we want to improve the quality of life in the neighborhoods while providing people with opportunities to make a living. We want the right balance in providing fair opportunities for people whose business is STRs but to also make sure that we preserve the quality of life in neighborhoods.”

The restrictions voted on Wednesday would likely not take effect until the middle of next year, and still have to undergo a lengthy regulatory process before final approval is secured.

The City of San Diego passed a similar ordinance that will cap short-term vacation rentals in the city at 1% (with the exception of Mission Beach), removing thousands of homes from the short-term rental market. courtesy photo

The Planning Commission will have to review and vote on the proposed changes this fall before heading back to the City Council for another vote. The approved proposal must then go to the California Coastal Commission for authorization, likely sometime in early 2023.

The only community exempt from the new proposed regulations is the Sea Bluffs community, which was historically developed specifically to accommodate vacation-style units.

“We identified [Sea Bluffs] as a unique situation, its own category,” Lyndes said. “Sea Bluffs was…developed as a condo-like situation where it was specifically designed to be a beach and tennis club type of area, so its defined land use is different from other land uses, and we want to look into what we can do to deal with unique situations like that.”

At Wednesday’s meeting, the council also addressed questions brought up by residents confused over some aspects of the city’s proposal.

Some residents asked would the 200-ft. distance requirement between vacation rentals apply to existing property owners or only to new short-term rentals? And upon a homeowner’s death, is the next property owner eligible to inherit the permit?

Council clarified that existing homeowners would be grandfathered into the new proposal, meaning that they would be exempted from the spacing requirement. Addressing the second issue, the council ultimately decided that vacation rental permits would be non-inheritable and nontransferable.

A large number of vacation rental owners spoke up at Wednesday’s meeting against the proposed changes, arguing that the ordinances would infringe upon their personal property rights, curtail rental profits, and hurt home equities.

John Wayne, a longtime Del Mar resident, said that he’s in the middle of purchasing a home in Cardiff-by-the-Sea. He’s worried that with the new restrictions, he’ll be unable to use his home as a vacation rental as he had planned to do with the property.

“I’m about to become a property owner here in Cardiff, and I’m buying this property with the understanding that for years it’s been a short-term rental,” Wayne said. “I’m hoping that I will have that opportunity because if I’m not able to have that opportunity it’s a financial loss for us.”

Wayne also warned that any curtailing of the short-term rental market would invariably have adverse effects on not only homeowners but tourism and local businesses as well.

“Please take all these things into consideration, understanding that families love coming to this town,” Wayne said. “It’s a beautiful place to come have a beach day, bring your kids, don’t worry about the noise or the expense, and to be able to bring additional dollars into our community.”

Mithu Sherin, a five-year Cardiff resident who recently moved to Florida, expressed similar concerns, as she and her husband are worried they’ll now be unable to rent their property for short durations of time. Sherin also argued the council’s proposal constituted government overreach into decisions reserved solely for property owners.

“The City of Encinitas seems hell-bent on restricting property owners’ rights to rent out their property,” Sherin wrote in a public comment. “I am opposed to a cap on short-term rental applications. Short-term rental permits would allow us this opportunity to keep our home and use it when not rented. A long-term rental situation, such as we had, does not enable us to easily visit family and friends. As we put a lot of money into purchasing our home, I feel it is our right to use it as we see fit.”

Earlier this year, the City of San Diego recently passed a similar ordinance capping non-hosted, whole-home units citywide at 1% of San Diego’s homes, which will limit nearly the entire city to about 5,364 short-term vacation rentals.

As previously reported in The Coast News, there are currently an estimated 12,300 short-term rentals currently in the city of San Diego, but roughly half of those units will lose their permits as a result of a lottery system.

But unlike San Diego, Kranz said the city of Encinitas is currently well below its targeted 3% cap rate and likely won’t affect newcomers to the city’s short-term rental market.

Some residents spoke up Wednesday in support of more vacation rental restrictions. Gary Greenwald said that six of the homes neighboring his own residence de él are short-term rental units that tend to foster a significant amount of noise and disruption in the surrounding area.

“Because some of these homes are large, they draw large groups,” Greenwald said. “The noise, music, traffic and number of people associated with these large groups significantly affect the quality of life in our neighborhood, especially with the overconcentration of STRs in our small immediate area.”

Greenwald said he’s also concerned about investors acquiring vacation rentals and driving up local property prices.

“Placing limits on the overall number of STRs will help preserve our community character and charm and help improve home affordability and availability for permanent residents and long-term renters,” Greenwald said. “With current home availability a serious problem, this is an important step.”

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