Morro Bay Planning Commission took its first crack at the short-term vacation rentals ordinance on Aug. 18, and Commissioners want to reduce the number of permits by some 40%.

The so-called “Short Term Vacation Rental Ordinance,” has been in the works for several years, as residents and City officials have been alarmed at the seeming explosion of vacation rentals (VRs) across the City and deep into residential neighborhoods.

It’s the same phenomenon that’s played out in other San Luis Obispo County cities and coastal towns, due mainly to a shift in the trend of what vacationers want — expensive motel rooms with limited capacity versus renting a whole house and sharing expenses with multiple families.

The knock is that turning single-family homes and condos into VRs takes them out of the rental housing market and further exacerbates the shortage of housing in SLO County.

It also brings commercial lodging operations into the midst of residential neighborhoods, in essence extending the tourism industry into where homeowners and residents try to escape them.

The City’s involvement started in June 2016, when the City Council passed an emergency ordinance limiting the VRs in residential areas to 250.

The ordinance was renewed in May 2018, and the city promised to get to work on a permanent ordinance after the general plan update was completed, according to a summary issued Aug. 7 by City Manager Scott Collins.

“The Council formed a sub-committee at that time for community outreach and engagement on this important issue,” Collins said. “Several town hall meetings were held and the Planning Commission reviewed different options for a new STR ordinance in May 2018.”

Work on the general plan update hit some snags and last fall the City Council ordered the VR ordinance moved to the front of the line. The City formed another committee with citizens from the business community and local residents.

Collins said the goal was to strike “a balance between several important considerations including neighborhood character, economics, and community safety.”

Starting in October 2019 through February 2020, the committee met 12 times, Collins said, and a council subcommittee of Mayor John Headding and Councilwoman Marlys McPherson joined them. Collins and Community Development Director Scot Graham served as committee staff.

The committee did extensive outreach and study of VR ordinances in other cities, as well as ordinances that have already been approved by the Coastal Commission, which will also ultimately have jurisdiction over Morro Bay’s law.

What was proposed to the planning commission last week included:
• Limiting the number of VR licenses in residential zones to 250, with no new applications being accepted until the number drops below 250;
• Permits are first-come, first-served and dependent on the density of VRs in that neighborhood;
• Applicants that don’t qualify because of density get put onto a waiting list;
• No more than 12.5% (one-eighth of the total) of the units in an apartment or condo complex can be VRs and apartment complexes of less than eight units can’t have more than one VR;
• VRs in residential zones must be separated by no fewer than three lots, and none of those lots can be VRs; and they can’t sit back-to-back with other VRs;
• Accessory dwelling units (ADUs or granny units) cannot be used as VRs and no VRs allowed in mobile home parks;
• VRs must collect the City’s transient occupancy taxes (10% of a night’s stay) and the tourism business improvement district charges (3% in M.B. and 1% for the countywide Tourism Marketing District), paying a minimum of $500 a year in TOT to the City.

The detailed ordinance goes into other areas such as security, responsibility and regular inspections, among others.

The Planning Commission, which continued its discussions until the second meeting in September or possibly October, did reach consensus on reducing the cap from 250 to 150, Community Development Director Graham told Estero Bay News.

“They also reached consensus on removing hosted vacation rentals from the cap entirely, which is part of their justification for reducing the cap number,” Graham said.

When the item comes back, Graham said they would have additional information “in the form of the number of existing hosted vacation rentals and related to buffers, requesting that we show examples of what 150-feet and 175-foot buffers look like. We gave them examples of 50’, 100’, 200’ and 250’.”

Public comments were mixed, with residents complaining about everything from excessive noise and parties to unattended dogs howling for their owners, and too many cars.

VR owners and management companies defended the practice as making second homes affordable until they can be turned into full time retirement homes, and touting the VR industry as a new and vital part of a town’s tourism offerings.

Amongst all this has been a lingering issue of illegal, bootlegged VRs, those that are not licensed and usually rented outside of the area through Internet sites. This raises a fundamental question, just how many VRs are operating in Morro Bay?

Seeking to figure that out and to optimize the collection of taxes, the City hired a consultant last year. “We signed on with ‘Host Compliance’ late in 2019,” said Collins. “They do online auditing of hosting platforms like AirBnB.

“Based upon their initial report for Morro Bay, we have been able to stop illegal operators [those without vacation rental permits] through the issuance of written warnings and potentially a few citations.”

The City has been scrambling to keep public services up to par during the response to the coronavirus pandemic with much of the economy either shut down or severely limited; the City treasury has been bleeding red for several months. That’s forced layoffs at City Hall and affected most all of the City departments.

“Our enforcement efforts,” Collins said, “are in somewhat of a flux with all the other COVID-19 related compliance issues. But we continue to work with Host Compliance to address illegal operations at this time.”