Short-term rentals have been, and continue to be, a polarizing topic among residents of many California neighborhoods. This is particularly true in the beach and vacation communities along the California coast. The proliferation of short-term rentals in these areas has led to short-term rental bans regularly springing up to curb the side effects of what many neighborhoods perceive to be mini-hotel communities. Other property owners, on the other hand, resist these bans to take advantage of the revenue stream that companies like Airbnb and VRBO have made possible. In fact, here in San Diego, a short-term rental ban that we discussed over three years ago only just recently reached an apparent conclusion via a compromise between the relevant factions.
While these debates will undoubtedly persist and create uncertainty in the short-term rental industry, a semblance of predictability can be expected from the not so invisible hand operating throughout these communities—the California Coastal Commission (the “Commission”) and its enforcement of the California Coastal Act (the “CCA”).
Now, you may be asking yourself the obvious follow up question: how does a state agency whose mission is to “protect” and “enhance” the California coast get involved in short term rental bans? The answer is simple: broad interpretation. The Commission inserts itself into these short-term rental bans under the theory that it has authority over such ordinances because the bans constitute a “development” within the coastal zone, as defined in the CCA. As a result, such ordinances must adhere to the requirements of the CCA as applicable to other developments. Namely, the acquisition of a coastal development permit from the Commission for any “development” (read: rental bans) in the coastal zone. For reference, a map of California’s Coastal Zone by county can be found here.
The term “development” may be misleading as it often connotes significant, non-minor changes to the land (i.e., building an apartment complex or hotel). In reality, for purposes of the CCA, the term “development” is defined to include any changes in the density or intensity of use of land and changes in the intensity of access to water, such as simple lot line adjustments, fireworks displays or even putting up a sign. Simply put, courts have interpreted the term broadly to encompass any impediments to access, not merely physical alterations, and the rise of short-term rental bans is another such impediment. In other words, the Commission maintains it has authority to interfere with short term rental ordinances because it is an extension of the Commission’s authority to protect affordable access to the California coast, which access is infringed upon by way of short-term rental ordinances because such ordinances impose monetary barriers to beach access.
As could be expected, the breadth of authority assumed by the Commission has been tested several times in the legal system. Most notably in Greenfield v. Mandalay Shores Community Assn. The Greenfield case was a 2018 case in which the Second District Court of Appeal held that an Oxnard homeowners’ association ban of short-term vacation rentals changed the intensity of use and access to single-family residences in the coastal zone and must be approved by the city and Coastal Commission. The court determined that a “development” does not necessarily need to be a physical barrier but can also include monetary barriers that change the intensity of use and access to single family residences in the coastal zone.
This line of reasoning was again tested—and expanded—last year in Kracke v. City of Santa Barbara and upheld. On May 4, 2021, the Second District Court of Appeal affirmed a trial court decision, in Kracke v. City of Santa Barbara (2021) 63 Cal.App.5th 1089, enjoining the City of Santa Barbara’s enforcement of a short-term vacation rental ban in the coastal zone, through proactive enforcement of existing zoning regulations, unless it obtains Coastal Commission approval or a waiver of such requirement. The underlying “ban” in Kracke stemmed from the Santa Barbara City Council’s direction to regulate short-term rentals as hotels under the city’s zoning code. Because the zoning code did not permit hotels in most residential districts, the city’s action was effectively a ban on short-term rentals in most residential areas. As a result, the number of short-term rentals in the coastal zone dropped drastically from 114 to 6. The owner of a company that managed short-term rentals filed a petition for writ of mandate challenging the city’s new policy. Relying on Greenfield, the Court in Kracke explained that although the City, rather than a private entity (the HOA in Greenfield), imposed the coastal short-term vacation rental ban, it was also accomplished without the Commission’s input or approval. The City cannot act unilaterally; rather, as in Greenfield, “[t]he decision whether to ban or regulate [short-term vacation rentals] in the coastal zone is a matter for the City and the Commission to decide” and the reduction in the number of short-term rentals in the coastal zone was inconsistent with the Coastal Act’s goal of improving the availability of lower cost accommodations along the coast.
The Court’s decision in Kracke hammers the fact that the Commission maintains broad authority and discretion over local policies that seek to impede access to the coastal zone, whether physically or monetarily and regardless of whether such policies are passed by private (HOAs) or public entities (cities and counties). In short, if a public or private entity wants to adopt such a policy, then it unavoidably must comply with the CCA and be approved by the Commission.
It would appear easy to say that the Commission has an unwavering desire to strike down any and all short-term rental ordinances. However, when one looks at the cases above, it becomes clear that the problem was not necessarily the ordinance, but rather the way in which the private entity (the HOA in Greenfield) or public municipality (the City in Kracke) imposed their bans. That is, without the Commission’s involvement.Communities and cities run into issues, when they side-step the Commission entirely, avoid the permit process mandated under the CCA and, instead, try to rush a short-term rental ban into action. The Commission even went so far as to issue a memo in 2016 to give guidance to the public and local legislatures about how the Commission views the short-term rental debate and how the interests of all affected can be balanced. For instance, while the Commission does not mince words in stating it does not support “blanket vacation rental bans” under the CCA, the Commission provided a list of provisions that could be included in a short-term rental ordinance that would likely allow the ordinance to pass muster under the Commission’s enforcement of the CCA. More importantly, the Commission approval process is an iterative process wherein the Commission and the municipality in question can confer and work together to develop an ordinance that is agreeable to all involved.
To that end, multiple California cities have successfully implemented short-term rental bans, within the coastal zone of California, after gaining the requisite approval and permit from the Commission. In October 2020, the Commission approved the short-term rental laws of Laguna Beach, California. This ban limited the geographic area in which short-term rentals could exist and required short-term rental operators to apply for and receive permit. Similarly, as of last year in September 2021, the Commission was in the process of reviewing short-term rental legislation from the City of Malibu wherein Malibu legislators were working with Commission staff to address any suggested modifications to ensure that the ordinance complies with the CCA. Finally, with the long-awaited passage of San Diego’s short-term rental ordinance last April, San Diego will now have its own showdown with the Commission to obtain Commission approval prior to the law taking effect this July.
While short-term rental bans may come and go, the broad powers of the Commission over the California coast are not going anywhere. Based on this sweeping authority, the Kracke case and the treatment of neighboring cities, one truth remains irrefutable: if a California city or neighborhood want to pass a short-term rental ordinance with any legal effect, such entities should aim to collaborate and work with the Commission, not against it.