SLO County city may change its vacation rental rules. Here’s how

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A San Luis Obispo County city near one of the region’s most popular tourist attractions is considering making changes to the way it regulates short-term rentals like Airbnbs.

At Tuesday’s Grover Beach Planning Commission meeting, the commission voted 3-0 to recommend the City Council adopt an update to the city’s so-called STR ordinance, with commissioners Maia Hoffman and Anne Holden absent.

Plans to update the ordinance have been in the works since August 2023, when a discussion of the city’s current iteration of the ordinance led the City Council to request several changes that bring the city’s rules in line with newer state regulations.

No changes were made to the number of units permitted to operate in the city — which will remain capped at 100 permits for STRs not occupied by an owner and an unlimited number of permits for owner-occupied STRs — but the Planning Commission recommended several changes to occupancy requirements for non-owner-occupied and owner-occupied STRs.

“It seems like a lot of what we put into this ordinance is driven by state requirements and Coastal Commission requirements,” commissioner David Halvorsen said. “It’s hard to parse that out sometimes — is it the City Council’s idea that we limit or extend time, or is it really the state law that keeps us from using (accessory dwelling units) as short-term rentals? It’s a little confusing when we try to incorporate all of these other players into our requirements.”

Here’s how the new rules could change how owners of STRs do business in Grover Beach.

How do short-term rentals work in Grover Beach?

Grover Beach has regulated the number of STRs permitted within the city since June 2019, when the City Council adopted an ordinance that capped the number of non-owner-occupied STR permits in the coastal zone at 40 and the number of permits in the inland area at 60.

Conversely, under the current ordinance, there is no number of permits issued for owner-occupied STRs, which can be rented out for a maximum of 30 days at a time for no more than four total stays a year.

In September 2021, the City Council made changes to the ordinance, limiting multi-family developments to one STR permit per building and creating a wait list for non-owner-occupied permits, Martin said.

Martin said under those rules, the city currently manages 112 STR permits in Grover Beach, of which 20 are owner-occupied.

An additional 60 units are currently on the city’s wait list, Martin said, and the city is currently processing eight permits.

Permits are first-come, first-served, running from Aug. 1 to July 31 each year and don’t transfer with the sale of the property unlike other STR permits in San Luis Obispo County, Martin said.

Last year, the city spent around $23,000 enforcing and administrating the STR permits, while making around $1.77 million since 2019 from the 12% monthly transient occupancy tax charged to each permit holder, Martin said.

To date, the city has processed 65 enforcement cases related to unpermitted STRs and 10 enforcement cases related noise or trash issues at permitted units, Martin said.

Halvorsen said Grover Beach has likely reached the “happy medium” number of STRs at its current cap, and said he supported keeping it in place for non-owner-occupied units.

“When I first read all of this, it seemed very limited, but I do understand that we’re trying to minimize the impact,” Halvorsen said. “We’re trying to preserve a lot of this real estate for long-term rentals, given our housing crisis.”

Update brings city in line with state regulations

In August 2023, the City Council directed the city staff to explore making changes to the ordinance, with the intent of determining whether increasing the minimum number of days an STR owner is required to host guests would result in additional transient occupancy tax revenue, as well as alleviating the waiting period some some people on the wait list have endured, Martin said.

Though the City Council directed staff to consider increasing the current 12-day minimum stay requirement for non-owner-occupied permits, staff ultimately recommended not changing the minimum stay requirement, Martin said.

The ordinance requires a minimum number of stay days to make sure permitted STRs are making enough use of their permit to be worthwhile.

According to the city staff’s analysis, raising the minimum stay requirement to 24 nights a year in non-owner-occupied units would add an additional $6,000 in transient occupancy tax revenue, Martin said.

The update would also extend the geographic range in which the “local contact” — the individual responsible for being on call to attend to the property during a stay — can be from the unit from 30 minutes to 45 minutes in order to cover all of San Luis Obispo County, Martin said.

Martin said the city provided the California Coastal Commission with the updated ordinance and received two comments, asking that the city maintain the current cap on non-owner-occupied permits in the coastal zone and prohibiting STRs within ADUs to be consistent with state law.

The city staff included updated language to match state rules that require STRs to be compliant with all guidelines upon renewal of a permit, Martin said.

According to agenda documentation, city staff also implemented a new system for the permit wait list designed to streamline the process as a response to a high number of applicants choosing to “pass” on their permits, causing delays in issuance.

Under the new rules, applicants on the wait list could only decide to pass on getting a permit once before being removed from the list.

What’s next?

Martin said with the commission’s approval, the draft ordinance will now proceed to a first reading at the Feb. 13 City Council meeting, followed by a hearing at the Feb. 25 City Council meeting.

The City Council’s amendments will then be forwarded as a Local Coastal Program amendment that the coastal staff will present to the Coastal Commission, which has to sign off on any changes to STRs in the coastal zone, Martin said.