Planning Commission discusses limits on vacation rentals

||| BY MATTHEW GILBERT, theORCASONIAN REPORTER |||

As part of the Comprehensive Plan Update, the Department of Community Development (DCD) was directed by the County Council and the Planning Commission to “evaluate vacation rental saturation and answer the question, ‘How many vacation rentals is too many?’” The first step in that process took place at the PC’s Sept. 18 monthly meeting. Driving the discussion was a 17-page DCD memo that summarized the current state of the VR environment and focused on two issues:

• Should the number of vacation rentals be capped or limited to prevent over‐tourism?
• Should vacation rentals be limited in UGAs to avoid overconcentration of vacation rentals and promote availability of long‐term rentals?

Although the memo essentially simplifies the issue as pro-tourism v. anti-tourism, its summary of policy and regulatory options, along with their anticipated benefits and costs, provides an informative perspective on the background of vacation rentals, the regulatory challenges facing policy makers, and the entangled nature of the issue.

In presenting the memo, Planner Adam Zack and DCD director Erika Shook first updated the commissioners on where the county stands on compliance – the program put in place in 2018 that brought performance standards and enforcement to the regulation of existing vacation rentals. In short:

• As of April 30, 2020, there are 963 permitted vacation rentals. 632 permits are compliant, meaning they submitted a certificate of compliance in 2019. Of those, 430 are active and 202 are inactive.
• On Orcas, there are 318 compliant rental permits: 224 are active; 94 are inactive.
• The 300+ permits (countywide) that are non-compliant need code enforcement and could be revoked. The 130 that filed in 2018 will receive a reminder letter; the 170 that didn’t file in either 2018 or 2019 will receive a “warning” letter asking if they wish to “abandon their permit.” A nonresponse leads to a $500 fine and a public hearing on revoking the permit – a process, says Shook, that “will take two people one year for one permit. It’s expensive.”
• $100k in fines have been assessed.
• “We now have good data on current enforcement efforts,” said Shook, “[but] we didn’t realize we’d be looking at 170 non-compliant permits. Appeals can also be a problem. There are lots of ways for owners with grievances with the county to be heard. We need an efficient way to enforce, otherwise staff time piles up.”

Commissioner Dale Roundy noted that his request for legal advice on setting new enforcement standards was never answered. “Is the current enforcement process effective? Non-compliant permit holders seem pretty safe.”

To Cap or Not to Cap

As summarized in the memo, the current Comp Plan does not limit the number of vacation rentals countywide. It has one general policy statement on VRs:

“Vacation rental (short‐term, i.e., of less than thirty days) of a principal, single‐family residential unit or an ADU should be subject to standards similar to those for hospitality commercial establishments but should be classified as a residential use for purposes of land use regulation.”

Vacation rentals, by the way, are prohibited on Shaw Island and Waldron Island.

From 2003 to 2013, the number of new vacation rental permits per year ranged from 30 – 40. They jumped to 49 in 2014, and since then have averaged 66 per year – although 2020 has seen only 17 new permits. [For updated reports on VR permits issued, go here.]

The rest of the memo addressed the case for and against a series of actions addressing both a cap on limits and their location in UGAs (Urban Growth Areas).

As for caps, five options were presented:

1. Lottery Limit new permits for vacation rental of residences to no more than X annually.
2. Limit the total number of vacation rental permits allowed county‐wide to the total number permitted as of a specific date.
3. Limit the number of permits allowed by island to no more than the number permitted as of a specific date.
4. Limit vacation rentals to parcels with a minimum lot size of X acres.
5. No change. Do not establish a limit to the number of vacation rentals during the Plan update.

Each was discussed at some length. Many of the conversations led to questions of legality or the need for more information. Commissioner Tim Blanchard, for example, noted that the county had “inherited a problem from folks who adopted a system of vested property rights . . . permits that run with the land. We’d be facing litigation to revoke them. We need more information to know what limits to set and how to establish them. . . . What can we realistically and legally do and keep the county from having to defend itself?” Perhaps, he suggested, we should just “start from scratch.”

There was additional conversation on whether vacation rentals are a residential or commercial use. Zack responded that, “VRs are subject to performance standards similar to commercial use,” adding that “a business license instead of a land use permit could provide more flexibility.” Blanchard cited several legal cases in which a conversion to commercial use ended up in the Supreme Court. “It would be better to approach them as ‘hospitality,’” he said. Commissioner David Lane brought up Jackson Hole, Wyoming, a similarly sized town but with four times the visitor traffic. “They treat them like hotels.”

When the commissioners were asked specifically whether they agreed in principle with the idea of setting a cap on vacation rentals, the general consensus was yes, but they still had plenty of questions. To that end, they directed the DCD to come back with more information.

Town-based or Rural

The second issue the commissioners contended with was whether future vacation rental permits should be limited in UGAs based on concerns that VRs cannibalize long-term rentals and that current densities in certain neighborhoods are having excessively negative impacts. Three options were presented:

1. Prohibit new vacation rentals in ADUs (Accessory Dwelling Units) and limit them to one per property in the Urban Growth Area.
2. Allow vacation rentals in commercial designations but prohibit them in all residential designations in UGAs.
3. No Change.

The general pluses and minuses were summarized as follows:

Benefits

• Vacation rentals in UGAs do not affect rural character,
• UGAs have most of the retail, restaurants, and other services tourists often seek, potentially reducing the car trips per day and vehicle miles traveled by those staying in the UGA; and
• Vacation rental can be a source of income for residents, many of whom are living in the UGA because it is more affordable.

Drawbacks

• More affordable and less‐expensive market rate housing are in the UGAs. This means that vacation rentals in UGAs are more likely to take place in housing that would be in middle‐ and low‐income price ranges;
• Higher housing density can exacerbate noise and other impacts to neighboring property owners because houses are closer together; and
• The ability to vacation rent may facilitate purchase of housing by second homeowners, who compete with residents for limited housing available in the market.

This was a much shorter discussion and, again, there were more questions than answers. The DCD was again directed to provide more information.

The entire session made clear that the issue of limits on and location of vacation rentals is not an easy one to un-entangle. It was also apparent that the DCD is concerned over the time it might take to enact and enforce stronger standards and limits. The idea of a moratorium on new permits until such issues are sorted out was never raised, and it’s anyone’s guess when such regulations, if approved, would actually go into effect.

The DCD’s memo (dated August 7, 2020) elicited two notable responses: one from Rick Hughes as “candidate” and the other from long-time growth management activist Joe Symons. Not surprisingly, they see the issue through very different lenses. Their responses are linked below, along with the DCD memo and a December 2019 letter from the then-named Vacation Rental Work Group Steering Committee to the County Commissioners with recommendations and options for regulating VRs:

• DCD Memo: Comp Plan update and Vacation Rentals
• Rick Hughes: Vacation Rentals, Tourism & COVID-19 in San Juan County
• Joe Symons: Comments on the August 7, 2020 DCD Memo
• VRWG Memo to County Commissioners