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Planning Commission Rejects Ban on Whole House Short Term Rentals

Fullerton’s Planning Commission has rejected a proposed amendment to the Fullerton Municipal Code that would have restricted Short Term Rental (STR) properties in residential zones to homes where the homeowner is present during the rental period. STRs are defined as rentals of less than 30 days, and are often used for short vacation stays in Southern California for families visiting nearby tourist attractions. They are an attractive alternative to hotels for many people, and have become more financially lucrative for owners who advertise their properties on well-known internet sites. Some OC cities allow the practice, while others do not.

So-called “whole house” STRs, which don’t require an owner to be on the premises during the rental period, are currently allowed in the city. Following a 2015 declaration of intention to address the use of STRs, the City Council finally voted to regulate their use in October, 2020. The Council decided to allow them, but capped their overall number and required enough distance between them to ensure that STRs would not takeover entire neighborhood streets. 

The STR ordinance went into effect in early December, but soon after the Hotel and Restaurants union UNITE HERE Local 11, some of whose members had spoken out against allowing STRs during various council meetings in the past, threatened a legal challenge, claiming that the City did not follow the California Environmental Quality Act (CEQA) when adopting the new ordinance. Many of UNITE HERE’s members are hotel and restaurant workers in the Disneyland resort area, and view STRs as competition, particularly since the City of Anaheim, which once allowed STRs, banned them outright in 2016.

According to Community and Economic Development Director Matt Foulkes, who presented the staff report on the item to the Planning Commission during its March 31 meeting, the City Council voted to settle UNITE HERE’s threatened lawsuit by approving an amendment to the ordinance allowing STRs that would restrict the practice to properties where an owner is on site. Such an amendment would have the practical effect of preventing multiple properties from being purchased by single owners for use as STRs, as well as ensuring that property owners would be present to monitor the behavior of renters and respond to any neighborhood complaints.

The City Council’s 2020 ordinance requires owners to register STR properties and pay a permit fee to the City, as well as a Transient Occupancy Tax. Permits are issued for a period of three years, and can be revoked for rules violations. Outright commercial uses like weddings, large parties, and filming are not supposed to be permitted at the sites (Fullerton has a separate process for commercial filming in the city).

The  Planning Commission declined to approve the amendment, but it will still be heard by the City Council, who may choose to follow the Planning Commission’s recommendation not to approve the proposed ordinance or approve it despite the Commission’s rejection. Many Fullerton residents have expressed concerns about STRs, arguing that, unlike long-term rentals, they represent an improper commercial use of neighborhood residences.

According to Foulkes, there are 333 unique properties listed on sites like Airbnb and VRBO, just over half of which are in single family homes. (The staff report shows 482 total listings in Fullerton—a result of the same properties listed on different websites). Nearly 80% are whole house rentals, where an owner is not present during the period of the rental. The median rent in city STRs is $115 per night. The highest is $350 per night, while the lowest is just $35.

Several members of the public called in to the virtual meeting to comment, including Fullerton resident Susan Patrella, who described the current situation “morally reprehensible,” citing the effect of STRs to displace much needed residential housing, as well as bring more noise and  traffic to stable neighborhoods. She said she didn’t think it was the job of the city to provide this benefit for a relative few property owners.

Hotel worker Irena Estrada asked that the Commission help them to keep their jobs. “This will really hit us, as far as the hotel industry,” she said. Another hotel worker thanked the City for not allowing housing to become hotel rooms. A caller from LAANES (Los Angeles Alliance for a New Economy) supported the proposed amendment, saying it had worked in other L.A. and Orange County cities.

Commissioner Chris Thompson led off the discussion saying that he was “Adamantly opposed to the recommendation.” He said it was “unbelievable” to him that a union could cause the City to change “common sense” rules, and that the City’s STRs could operate with a finite number of licenses. He cited the City’s financial crisis, suggesting that STRs could provide up to 3 times the amount of funds for the City that a long-term rental would generate. Thompson argued that residents were entitled to the highest and best use of their properties and suggested that families on the edge of financial stability shouldn’t be denied the opportunity to realize income from whole house rentals.

Fellow Commissioner Douglas Cox said he stood firmly with Thompson, saying that similar concerns had been published in The Daily Breeze, a SoCal coast newspaper, in 2018, but that STRs did not turn out to affect housing. He also objected to a union beaming a “de facto” member of a city committee or commission and didn’t think the hotels around Disneyland would be affected by STRs.

Commissioner Wayne Carvalho said he could see both sides of the issue and inquired about the CEQA challenge. Director Foulkes said that the City had cited a “common sense” exemption from CEQA because they didn’t think STRs would have the requisite impact that requires a CEQA consideration. The City Council could have directed the staff to conduct an “initial study” of the impact STRs could have, but instead recommended the municipal code amendment to settle the threatened lawsuit. Chair Elizabeth Hansburg noted that CEQA challenges are a common mechanism for objecting to city land-use decisions.

Commissioner Jose Trinidad Castaneda III said he recalled an e-comment from a local Homeowners Association complaining of quality of life issues caused by STRs. Foulkes responded that HOAs are allowed to require approval of STRs. A map included in the staff presentation revealed that most STRs are concentrated in the southern half of the City where housing stock is older, mostly pre-dating HOAs. Castaneda argued that HOA resistance to STRs in District 1 had the effect of keeping housing prices higher by concentrating STRs in District 4.

The Commission eventually voted to not approve the amendment, with only Commissioner Castaneda dissenting. The proposed amendment is scheduled to go before the City Council as a public hearing during its regular April 20 meeting.

Note: This story has been amended for clarity.

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