Petaluma marks progress in regulation of short-term rentals
After a more than two-year battle to regulate short-term rental operators shirking Petaluma's rules and skipping out on taxes and fees, city officials say an outside agency is bringing bad actors into line.
Last year, the city retained San Francisco-based Host Compliance to identify and send notices to hosts operating unlawfully, a task that had previously proved difficult for the city's limited staff, with little compliance to show for their efforts.
While 130 active vacation rental listings were found in mid-November, only 25 permits were on file at the end of the year, according to Host Compliance CEO Ulrick Binzer and city records.
Since then, letters have been sent to 118 non-permitted property owners, Binzer said. And since Jan. 1 the number of authorized short term rentals has jumped 136 percent, to 59, including 17 operators who've sought renewed permits. Overall, the number of known operators now stands at 91, according to Binzer.
“At this point, (enforcement) has been very successful,” said Ingrid Alverde, Petaluma's economic development manager. The focus remains on creating an even playing field, she said, not so much on calling out bad actors. “I can't imagine any other way to enforce the vacation rental program.”
The results are coming to light as other cities and Sonoma County wrestle with how to govern short-term rentals that have increasingly been monetized by property owners through websites such as Airbnb and VRBO. As with Petaluma, their dilemma is identifying and enforcing rules, in some cases outright bans, on short-term rentals.
Petaluma's rules took effect on Jan. 1 2016. They require vacation rental operators to obtain business and short-term rental permits and remit 10 percent of their revenues to the city in the form of lodging taxes.
In their first two years, however, the requirements were largely ignored, depriving the city of much-needed funds and creating an uneven playing field between the few in compliance and most shirking the rules. Enforcement was handled on a complaint-driven basis, with few reports each year.
In October, the city inked a year-long $6,885 contract with Host Compliance to identify and send notices to renegade operators.
As part of that work, Host Compliance scans 50 vacation rental websites each week, identifying addresses using listings and property data. It compiles that information to provide in a weekly report to Petaluma, and sends out a pair of letters to each non-compliant property owner.
Those notified who ignore or chose not to follow the rules can be issued citations by the city, starting at $500.
Tracking down outlaw operators, however, has proved difficult for many local governments. Host Compliance has been hired by 125 other municipalities, including Napa County and Healdsburg, Binzer said.
Already, under the new enforcement regime, the level of permitted operations in Petaluma has increased more than four-fold over the previous peak year since the program's inception.
Those for new rentals cost $348.80, while renewals cost $124.26. A $49 business permit also is required.
The city has no estimate of how much money it has lost as a result of rental operators skipping out on their fees or lodging tax payments. Previous city calculations showed that 100 hosts renting for an average of 90 days at $150 a night would bring in $162,000 annually.
Since the program's inception, Petaluma has collected a total of $95,675 in lodging taxes and $26,547 in permit fees. The meager return reflects a city finding from December 2016 that showed that 80 percent of operators were not complying with the city's rules.
The city hired Host Compliance nine months later. For Joe Garcia, the lone employee in the city's code enforcement division, the company's work has been a welcome addition.
“Host Compliance has taken a huge load of work off our shoulders,” Garcia said. “They have all the tools to find these people.”
His notices to non-compliant property owners have resulted in four upheld citations. Some hosts, when contacted by the city, have told him they were unaware their listings were still active and acted immediately to remove them.
A balancing act
Binzer, a Marin County resident who founded Host Compliance in 2015, said the short-term rental market has continued to expand while the North Bay's housing stock constricts.
(Short-term rentals) are definitely on fire - overall the industry continues to grow leaps and bounds,” he said. “Two things happen – one is that people are starting to hear from their neighbors about how they made a bunch of money, and they get in on the action. In addition, investors are coming in and finding out they can buy out properties and turn them into short-term rentals.”
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