After significant public debate, the Morro Bay City Council is moving forward with new regulations for short-term vacation rentals.

The city hopes to balance business interests and property rights with neighborhood concerns.

At its Sept. 22 meeting, the City Council formed a framework around a new city policy, revising its cap on the number of homes that can be used as vacation rentals from 250 to 175.

The council is also planning to create buffer zones between rental properties and impose a host of rules to prevent noise, parking and littering problems.

Morro Bay’s first vacation rental ordinance established in 2016 and extended in 2018.

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In advance of the council’s latest proposal, the City Council has received hundreds of emails from the public on the issue, with business owners and homeowners arguing about the restrictiveness of a new law.

“This is by far the most input I’ve received on any issue in my four years on the council,” City Council member Marlys McPherson said. “There are so many competing interests.” …in short, this is a compromise.”

The council is scheduled to vote on the new ordinance at its Oct. 13 meeting.

Debate over vacation rentals in Morro Bay

Morro Bay residents have expressed numerous concerns about the impact of vacation rentals on the community, including noise, parking, trash and the reduction of neighborhood property values. They also worry that short-term rentals reduce the availability of long-term rental housing rentals in the city.

“We are writing to urge you to consider reducing the amount of vacation rentals in our neighborhood and penalizing those owners who are renting without a license,” Josh and Gibsey Beckett wrote in a letter to the city. “The issues we have with these vacation rentals are the increase in the number of strangers and the unsafe traffic it has brought to our narrow streets.”

The Gibneys wrote that Morro Bay has a “a myriad of hotels in commercial zoned areas and camping locations for tourists to enjoy safely.”

But some depend financially on the vacation rental industry, including business owners, housekeepers, landscapers and property managers.

Taxes on vacation rentals generate about $600,000 for the city each year, making up about 17% of overall bed taxes in Morro Bay, according to city officials.

“Short-term rentals and visitors support our economy here on the Central Coast,” said Maggie Guy, a Morro Bay property owner. “Without them we would not have our restaurants, candy shops, gift shops, etc. The people that rent short-term rentals are not criminals and people to fear.”

Who is eligible for rent homes?

On Sept. 22, the City Council majority spoke in favor of grandfathering in properties who currently aren’t in compliance with the new draft law — such as vacation rentals that aren’t located at least three lot spaces apart, as the draft law dictates.

Those currently included many homes located near the beach in North Morro Bay.

Vacation rentals that aren’t in compliance will be phased out with attrition, meaning once the operator gives up a permit.

“Those who wait three years to have their name drawn out of a hat operate under a cloud of uncertainty,” Councilman Robert “Red” Davis said. “I think a lottery would destabilize neighborhood compatibility. I would like to avoid that through natural attrition (of nonconforming homes as owners give up permits).”

The city will continue to crack down on illegally operated vacation rentals, which are doing business without city permits.

Morro Bay contracts with the company Host Compliance, which monitors illegal rentals and take complaints from neighbors about violations at specific properties.

A recent survey conducted by the city showed that 34 vacation rentals in Morro Bay didn’t have permits.

The city will create a module on its website for people to access vacation rental rules and compliance issues, City Manager Scott Collins said.

Morro Bay’s new draft law doesn’t allow a transfer of a permit between owners, such as through a sale or inheritance of property.

Annual permit fees for vacation rental operators will be $500 to $750 per year, covering costs including code enforcement and inspections.

Apartment complexes will not be allowed to offer short-term vacation rentals. And accessory dwelling units that have vacation rentals will be phased out when their current permits are given up.

There is no cap on vacation rentals in commercial zones, just residential limits. Vacation rentals that operate as homeshares won’t count toward the cap, but will be allowed, Morro Bay community development director Scot Graham said.

Morro Bay typically sees about 20 vacation rental permits phase out each year, with new permits routinely added to replace them in residential areas, according to a city staff report.

Rules for vacation rentals

Morro Bay’s proposed vacation rental ordinance would also require that a local person be available around the clock to respond to complaints and issue corrective action within one hour of being notified. No more than 10 people can stay in one home at a time.

The new draft law requires that vacation guests abide by the city’s ordinance calling for reduced noise between 7 p.m. and 7 a.m. The law limits parking to onsite use on the rental property only; street parking is not allowed.

The draft law also establishes rules to prevent trash and recycling from littering streets.

In addition, the draft law requires that short-term rental operators provide guests with good neighbor brochures and information related to local contact people, the city’s hotline number and short-term housing rules.

“This gets to a lot of the neighborhood concerns that we heard in public comment,” Collins said at the Sept. 22 meeting.

Morro Bay’s proposed new policy took into consideration from a diverse group of stakeholders that met on the issue to formulate recommendations, including three vacation rental operators, three community members, one hotelier and one Morro Bay planning commissioner.

Over the span of five months from October 2019 through February 2020, the committee met 12 times to discuss various aspects and weigh in on the planned new ordinance.

“I’m sure we got close to 500 emails on this,” City Council member Dawn Addis said. “I do see this as a balance between property rights, economic development and neighborhood quality.”

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