Local News

City Council Reverses Decision on Whole-House Short Term Rental Ban

Fullerton’s ban on so-called “whole-house” Short-Term Rentals (STRs) failed to gain enough City Council support during a required second reading that took place at their May 4 meeting. The Council once again was split over whether to restrict Short-Term Rental properties to only those with an owner present during the period of the rental. But the same ordinance amendment, which passed on a 3 to 2 vote in April, lost by the same margin the second time with 1st District Councilmember Fred Jung pivoting his vote to a “no.” Instead, a compromise amendment that would allow no more than 100 whole-house STRs is expected to be heard by the Council on May 18.

Vacation Rent By Owner (VRBO) website shows some of the Short Term Rental properties in Fullerton.

STRs have been a topic of controversy for several years in Fullerton and other cities, with some residents complaining that nearby homes have turned into hotels while other homeowners insisting that it is their right to profit from their property by renting to vacationers and others for as little as a few days at time. The practice has become popular and lucrative in the past decade as STR-listing websites like Airbnb and VRBO make it possible to maintain high occupancy rates year round in tourist destination regions like Southern California.

Fullerton’s City Council had debated options for governing STRs on and off for 5 years before finally adopting an ordinance last year that limited STR properties to no more than 325 throughout the City and required enough distance between them to keep streets from being transformed into hotel rows. The ordinance also required STR owners to apply for a three-year permit and pay a fee for it, as well as to contribute to the City’s Transient Occupancy Tax. Before the ordinance was set to take effect last October, however, the City was notified that Local 11 of the hotel and restaurant union UNITE HERE had threatened to sue, arguing that, as a change of property use, a decision to allow STRs in residential zones required the Council to review the effects of STRs under CEQA, the California Environmental Quality Act, which the Council had not considered in their decision.

Because of the legal challenge, no permits were issued while the City Council forged a compromise in Closed Session meetings that would satisfy UNITE HERE. The compromise called for an amendment that would require property owners to be present during the period of a rental, disallowing the renting out of an entire home with no owner present. STR owners would have a one-year amortization period to discontinue whole-house rentals in order to offset any expenses they might have incurred.

The compromise would effectively prevent a single owner from buying up multiple properties in Fullerton to use as STRs, as well as ensure that someone at the home would be there to respond to complaints of noise, trash, and other potential concerns of neighbors. On April 27, the City Council adopted the amendment over the objections of Mayor Bruce Whitaker and Mayor Pro Tem Nick Dunlap, who voted against it.

The amendment required a second reading at the next City Council meeting to become law however, and sometime between the two meetings it appears that pressure was brought to bear on Council members to reconsider the whole-house ban.

During the public hearing on May 4, a caller identifying himself as Fred Gaines of the Gaines & Stacey law firm, who represent STR owners, claimed that the Council’s adoption of the whole-house ban amendment was not legal and violated his clients’ Constitutional rights of Equal Protection under the law because they could not apply for an STR permit while those who intended to rent under the home-sharing model could do so. This claim was disputed both by another caller representing UNITE HERE and Councilmember Jung, who said use of such hyperbole could cause the public to overreact.

Gaines, who said he represented 40 STR owners in Fullerton, also pointed out that union members and their lawyers who urged the Council to adopt the whole-house ban during the meeting were citing their concerns about competition from STRs impacting their jobs in the hotel industry, and not addressing CEQA issues, even though CEQA was the basis of their threatened legal action. Several UNITE HERE members spoke during the meeting including one “lead organizer” who thanked the Council for the whole-house ban amendment on behalf of “hundreds” of the union’s members who reside in Fullerton. She said that she herself had trouble finding a home in the City, tying the scarcity of housing to the legality of STRs, which take permanent housing stock out of the market. “It does affect my workers,” who can’t find places to live, she said. “We are destroying the fabric of our neighborhoods.” Schools were also impacted by the lack of children living in homes, she contended.

Danielle Wilson thought it was “outrageous” of attorney Gaines to criticize UNITE HERE for citing CEQA in their threatened legal action. The whole-house ban amendment, she said, would protect 325 houses from becoming de facto hotels, a number representing over half the 600 affordable housing units the City was attempting to build. She also asserted that property owners did not have a vested right to engage in short-term whole-house rentals, which were unpermitted. Courts have made it clear, she said, that cities can amend their zoning laws to discontinue non-conforming uses when an adequate amortization period had been provided, a period as short as 6, or even 3 months.

Several STR homeowners present at the meeting, including Jimmy Hong, complained that the City had not contacted them about the whole-house rental amendment. He called those opposed to whole-house rentals a “vocal minority.”  Another STR owner also reported being surprised by the ban, saying that over 5 years he had rented his home to over 30 different carefully vetted families, and had never heard a complaint from neighbors. He suggested considering a possible limit to the total number of days a property could be rented to avoid corporations buying houses to rent out as STRs, a practice he did not support.

Ken Weeks, who owns an STR, went so far as to say that his rental home was actually more neighborhood-friendly being rented out as a short-term rental than it would be if it were rented to long-term tenants. He said that his STR is operated by a professional retail company that arranges corporate rentals, and had even furnished the home. The company installed sensors that would alert management to excessive sound levels inside the home. More than one STR owner spoke of having cameras installed on site so they could check on renter activity remotely.

One speaker was a housekeeper who cleaned STRs and didn’t want to lose work if the whole-house ban took effect, mirroring a concern expressed by UNITE HERE members who supported the ban so they would not lose work cleaning hotels and motels.

Once thrown back open, the question of whether or not to adopt the amendment banning whole-house short-term rentals saw Council members divided across familiar lines, with Mayor Whitaker and Pro Tem Dunlap voting to reject the amendment altogether and throw out the whole-house ban. Dunlap called the whole-house STR rental ban “government overreach and a total infringement of property rights from the get-go,” and praised property owners for showing up to defend their rights. Only Whitaker and Dunlap voted in the affirmative, however, leaving the question unresolved.

After that motion failed, 3rd District Councilmember Jesus Silva moved to adopt the amendment on second reading. As in the April vote, he was supported by the 5th District’s Ahmad Zahra, who had noted during the April meeting that many STRs are concentrated in his district. This time, however, Fred Jung voted against adopting the amendment, although he had supported the whole-house ban during the first vote in April. Instead, Jung, after noting that stakeholders all seemed to “share in a lack of outreach from City staff,” advocated for a compromise that would limit whole-house rentals to no more than 100 of the total 325 STRs allowed.

Jesus Silva countered that the 12-month amortization was the comprise agreed upon by the Council, and that anyone who had owned a house for more than 6 months would not be likely to lose money on their investment. Zahra agreed that a compromise had already been struck, recalling that 800 total STRs had previously been proposed. He said that the Council’s first instinct should be to protect the City’s housing stock. Mayor Whitaker objected to individuals other than the property owners themselves making decisions about their “housing stock,” and observed that a “Solomon-like” decision would need to be made that would “rile both sides.” Council member Jung ultimately prevailed, with the Council expected to consider a new amendment that would limit whole-house short-term rentals to 100 at the next meeting on May 18.

Contacted by The Observer days after the Council’s May 4 decision, Austin Lynch, Organizing Director for UNITE HERE Local 11, sent the following statement: “We will continue to fight to protect long-term housing from conversion into short-term tourist rentals. While we regret that Councilmember Jung reconsidered his initial support for a ban on whole-home rentals, we are confident that we can work together to find a solution that ensures that we can ultimately restore all the whole-home rentals to use for long-term renters and owners, consistent with the law. Our members are grateful to Councilmembers Zahra and Silva for their tireless advocacy on behalf of Fullerton residents.” Lynch also wrote that legal action was still an option.

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