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How Does the Short Term Rental Ordinance Affect Me?

What started with a discussion of regulations for Santa Cruz granny flats in 2015 has become a regulatory nightmare for homeowners that rent out property to short-term renters. Billed by the city as an attempt to preserve a nuisance-free and healthy community, many residents are calling the City of Santa Cruz’s new Short Term Rental Ordinance excessive regulation.

The new ordinance faces a review by the California Coastal Commission, but will likely stand. Here are some current realities and possible future outcomes the Short Term Rental Ordinance.

Rental Permit and Occupancy Tax

A short-term rental permit is required for owners that rent out a residential property for 30 days or less at a time. To acquire this permit, you must be compliant with the Transient Occupancy Tax and pay any applicable rental taxes.

The application for the rental permit needs to include:

  • A scale drawing of the home with identification of all rooms, including which rooms will be rented
  • A picture of the front of the residential property
  • A residential rental housing inspection

Moratorium Nowin Effect

Complicating matters is the moratorium now in effect for Transient Occupancy Tax applications. The moratorium applies to new registration of residential properties that do not have the owner living on site. The moratorium is set to expire on May 31, 2018, or when the Coastal Commission approves the Short Term Rental Ordinance.

All existing short-term rentals registered for the Transient Occupancy Tax that are sold can still qualify to register as short-term rentals if the new owner wishes to rent all or part of the property.The moratorium creates the possibility of fewer vacation rentals in the future and no further growth of the long-term housing market.

Possible Loss of Tax Revenue

According to Marisa Moret of Airbnb, the international short-term rental platform started collecting and paying hotel tax on all of its member properties in Santa Cruz County. At present, the county has received well over one and a half million dollars from Airbnb. If restrictions and unreasonable requirements are allowed to continue, the short-term rental market will shrink due to some owners being forced out of the enterprise and valuable tax revenue will be lost.

Some regulations have not been finalized, such as whether property owners will be able to have more than two short-term rental units. Uncertainty regarding this and interpretations of code details will likely lead to real estate resolution in the future.

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