Vacation Rentals Is a Booming Local Industry; But What’s It Doing to Our Neighborhoods?

BY JEN STEVENSON

Looking to rent a place? How about a two-bedroom, one-bath beachside bungalow, good views, short walk to the beach? Sound nice? It’s yours for $4,400 a month.

If that sounds steep, you’re not one of the thousands of renters who infiltrate North Coast neighborhoods every summer. Usually renting for a week or two, perhaps less, the refugees from Arizona, L.A., the Inland Valley, and the Bay Area come seeking the therapy of the crisp briny air.

By all accounts, most of these summer renters are quiet sorts out for no more than a stroll on the beach and a tour of Hearst Castle. But some are the "I’m on vacation, no rules apply" types. They stuff a beach house with 20 of their friends and acquaintances and proceed to drink and party more than folks in an average episode of "Real World."

For neighbors of the latter group, the summer season can be a daily struggle, made all the more difficult because at present the county has no enforceable laws regulating the summer rental industry.

Right now, the vacation rental industry is governed by a vague county ordinance that even county officials concede to be inadequate, a situation many North Coast residents have been struggling to change for years.

This month, however, prompted by the findings of a 1998 Grand Jury report, the county is moving toward a resolution. At an upcoming meeting the Board of Supervisors may approve a new ordinance drafted with the cooperation of residents, officials, property owners, and property managers weary of problems with vacation rentals.

Even with this step toward increased regulation, however, the issue is far from resolved. While many are calling the new ordinance a step in the right direction, there are those who say it is merely a band-aid, not a permanent fix.

The vacation rental controversy came to a head about four years ago with the request for a county Grand Jury investigation. However, undercurrents of resentment and frustration over the lack of county oversight of the industry have been stewing for much longer.

Vacation rentals are available countywide, but most of the dissent has centered on the small coastal towns of Cambria and Cayucos, where the close proximity of residences and the growing popularity of the area as a tourist destination spark trouble.

While the vacation rental issue is picking up speed in this county, it's not new to the California coastline.

In 1991, amidst fervent public outcry that the community was being ruined by transient vacationers, Carmel-by-the-Sea outlawed the use of vacation rentals for less than 30-day stays,

The northern California coastal town of Mendocino allows a maximum of 46 rentals in town at any time.

Locally, the debate over vacation rentals reached a peak in the mid-1990s, when Martin Verhaegh, a frustrated Cambria resident, sought a Grand Jury investigation into the issue.

A retired Lockheed engineer and 17-year Cambria resident, Verhaegh has become an unofficial spokesperson for hundreds of Cambria and Cayucos residents who are concerned and angry with the prevalence of what they call "commercial businesses" in their residential neighborhoods.

In 1996, Verhaegh said, the first stirrings of organized resident dissent against vacation rentals began. Some residents had grown tired of watching streams of strangers become their new "neighbors" every few days; they questioned the legality of property owners’ renting out residential homes for short stays.

Seeking answers to their questions, residents turned to the county and found none, he said.

"In 1996, when the problem first started, we had the county director of planning come out to a meeting and when asked what the ordinance stated, he said it applied to rentals for a minimum of seven days, up to 30 days," Verhaegh said. "Our actual experience was that the seven-day minimum was never observed, and when we asked the county for an explanation, there wasn't one."

The current law makes vague references to "Bed and Breakfast" and "Homestay" situations, requiring a stay of no less than seven days and no more than 30, but is mute with specific regard to "vacation rentals." In effect this allows the industry to slip through the legal cracks. The new ordinance would strengthen the definition of "vacation rental" and add regulations to the industry.

County officials readily agree that the current regulations are ineffective, and acknowledge that, as a result, little can be done to resolve complaints about them.

"Right now, there is no ordinance prohibiting vacation rentals and there is no ordinance allowing them," said Art Trinidade, county code enforcement supervisor. "The law is silent about what we call 'vacation rentals.’ If somebody is in violation, there is no way I can take them to court and point to the law and say ‘Mr. Smith or Mr. Jones is in violation of this section’ because there is no section.’

"That's what's been frustrating for people," he said. "This isn't the law–the law is something you can point at and say 'You're in violation of the law.’ "

It was this ambiguity that prompted Verhaegh to file a Grand Jury request in 1997, asking for an investigation into the county's regulation–or lack thereof–of vacation rentals.

The Grand Jury's findings confirmed what many residents and officials already knew: The vacation rental ordinance needed work.

Recognizing the need for action, county planners set to work developing ordinance changes.

In 1999, the county held two community meetings in Cambria and Cayucos, drawing on input from county residents, business owners, property owners, Realtors and officials to formulate a draft of new regulations. And while nobody involved seems ecstatic about the result, most say the action is a step in the right direction.

If passed, the new regulations will require:

• No more than one renting group in a seven-day period (not including the owner);

• A minimum stay of three to five days;

• A maximum number of renters of two per bedroom plus two;

• A business license for each individual residential rental;

• Designation of a local contact person who is available 24 hours a day;

• That all parking be on-site;

• That outdoor activities, special events, and noise levels be limited in the same way for renters as for full-time residents; and

• That there be no signs on the outside of the rented property.

The new rules will affect vacation home rentals in all unincorporated areas of the county, including the Lake Nacimiento area and Oceano. Most of the hullabaloo, though, is up in the North Coast, where vacation home rentals have been around since the days when celebrities would zoom through town on their way to William Randolph Hearst's San Simeon "ranch."

The evolution of the North County vacation rental industry goes back to the 1920s and 30s, explained Richard Watkins, a Cayucos real estate broker, resident, and general manager of Century 21 Coast Realty in Cayucos.

At that time, the improvement of county roads facilitated travel up the northern coastline, and people began to purchase plots of land along the coast and construct vacation homes, he explains in a written historical background.

"As word spread about the many benefits of vacationing on the Central Coast, some of the owners started letting friends or acquaintances use their vacation homes in exchange for modest rent," he said.

In the 1980s, many local real estate brokers began to function as professional property managers.

"In 1988 a few citizens and some motel owners raised the point that vacation rentals contributed no transient occupancy tax and depended on a poorly defined land use for residential zoning,"

Watkins said. "The current regulations evolved at that time."

The existing code is not adequate to keep up with SLO County's burgeoning vacation home rental industry, which is estimated by the California Department of Tourism to have been worth $60 million in 1998.

It's a booming business, and as the economy continues to flourish an increasing number of people are purchasing vacation homes now, choosing to live in them later.

In 1999 in Cayucos, 22 oceanfront sales went through, according to Watkins–a tremendous increase over the previous record of eight. In just one year, he said, oceanfront property values leaped up 30 percent.

"Homes that were $600,000 in the beginning, at the end were around a million," Richard said.

Many of the buyers are wealthy Southern California, Bay Area, or Valley residents who want to buy their piece of beach living now, he said, and settle down there later. In the meantime, they rent it out, often pulling down several hundred dollars a night.

At the least, according to disgruntled North Coast residents, vacation rental homes are sources of noise and parking headaches. At most, they reduce property values and threaten to shred communities’ social fabric.

Following the Grand Jury report, Verhaegh and about 10 fellow rental opponents circulated petitions in North Coast neighborhoods, gathering 552 signatures of people who wanted stricter vacation rental ordinances.

Leon Kent and his wife, Susan Hayek, 16-year Cambria residents, were among the signers.

Until the vacation rental next door to his Cambria home was sold to a permanent owner, Kent said, for three years he and his wife endured loud late-night hot tub sessions, parties until 2 a.m., and cars constantly clogging the street in front of his house.

The couple lodged formal complaints with the county 17 times, he said, and while the county was polite and cooperative, little was done.

"We found that the individual property owner had no rights in the issue," Kent said. "The county had codes on the book but they couldn't enforce them."

He received little response from the renters, either.

"When we would complain, the vacation renters themselves often told us that since we live in a resort we have to expect loud parties," he said.

When Shirley Bianchi, District 2 Supervisor, came into office a year and a half ago, she landed right in the middle of the vacation rental fray. She points out that while regulations are necessary to control the behavior of unruly renters, it's important to remember that most are well-mannered and respectful.

"The majority of them are good people, they are considerate of their neighbors," Bianchi said. "Some of them, unfortunately, are not.

They have loud parties and trash the neighborhood–and that has to stop. There are a good many responsible people out there, but as usual it's the 10 or 20 percent who mess it up for everybody."

While hundreds of North Coast residents have rallied against vacation rentals, many say they have no problem with their transient neighbors.

For 13 years Jim and Lyn Baker have lived in Cambria, in a sprawling oceanfront residence softly fringed with impeccably-trimmed cypress trees. For two of those years their neighbor to one side has been a vacation rental–a million-dollar getaway with a killer view of the blustery Pacific.

The Bakers don't mind their vacation-home neighbor, they say. Once they even rented the house themselves when they hosted a large family reunion.

In all the rental's history, Lyn has had but one complaint with the occupants of the property: One day a renter jumped the knee-high fence lining the small back yard, easily visible from the Baker home, and plunged into the thick iceplant below, a situation Lyn deemed dangerous.

The retired nurse called the property manager to report the incident "as a safety issue," she said. The property manager was immediately responsive, she said.

"She's on it right away, she is very sensitive," Lyn said.

With rentals next door, up the way, and down the street, the only significant problem they say they’ve encountered in their quiet, affluent neighborhood was with their non-transient neighbor across the street, who several months ago threw a loud party that lasted until the wee hours of the morning.

"Here everyone is screaming about vacation rentals," Jim said. "And the home owners are more noisy than the renters."

That's a sentiment echoed by many rental owners and managers, many of whom feel that the regulations the new ordinance will impose are unfair because permanent residents don't have to follow them.

"There seems to be an implicit idea among the critics of vacation rentals that vacationers should somehow be held to stricter standards of behavior than full-time occupants–owners or tenants–or friends of owners," Watkins said.

"Do zoning and operational standards apply to geographic areas and types of use, or are they focused at the people occupying the property? Focusing standards on people raises the specter of discrimination," he suggested.

The issue of enforcement, regardless of whom it’s directed at, is the one thing everyone involved with this issue seem to agree on. Namely, is adequate enforcement of the new regulations possible?

One advantage to the guidelines set down by the proposed ordinance, the county’s Trinidade said, is that the requirement that every rental home be licensed as a business will encourage greater accountability–especially among rentals operated covertly, which now slip through the enforcement cracks.

"We'll be requiring all these businesses to be exactly what they are–businesses, be licensed, pay transient occupancy taxes, business taxes," Trinidade said. "What that does is provide the homeowners next door with at least a system of responsibility. They know who to call and when to call because the laws are finally there in black and white."

There's no doubt that vacation renters have a considerable impact on the county economy. The $60 million that the industry brought in 1998 included not only rental fees but food and merchandise purchases as well.

"The vacation rentals are just the tip of the iceberg, and below are all the other businesses that thrive or stay in business because of the rentals," said Jeff Edwards, CCMA spokesperson and local planning consultant. "They create a business web, and rentals

are just the tip."

Cayucos resident Jan Lewis believes that vacation renters do indeed help the economy, especially in the tourist season, but worries that when the renters leave and vacancy rates soar, the community as a whole suffers.

Since Lewis first arrived in the beach town in 1971, she has watched Cayucos grow and change. Over the past few years she has watched it take what she believes to be an ominous turn.

Whether vacation rental occupants are too noisy in the hot tub, park their cars where they shouldn't, or pack too many people into a house aren't the real issues, she says.

More importantly, she said, the influx of vacation rentals is slowly stripping Cayucos of its character and sense of community, emptying its schools and leaving many of its businesses in the lurch when vacancy rates soar once the tourist season is over.

"My issue is the big picture, how this is changing our community," she said.

As for the argument that vacation rentals equal more tourists equal more dollars in the cash registers of local business owners, Lewis said there's a flip side to that equation.

"The tourist business depends on tourists, that's a given," Lewis said, "But year-round residents that used to be living here on the off-season also sustain the businesses."

Rick Roquet, 22-year Cayucos resident and owner of the Seaside Motel for 19 years, said he remembers a different Cayucos even 10 or 15 years ago.

"This was more of a self-sustaining town. There were four gas stations, a doctor, and a lumber store. Now the three biggest businesses are motels and vacation rentals, restaurants, and antique stores," Roquet said.

"The day may come when you may not be able to buy a fresh loaf of bread in Cayucos. I'm not saying the vacation rentals are directly responsible for that, but without year-round residents you won’t have full-time businesses."

Many locals are concerned that the negative byproduct of more homes going onto the vacation rental market is the removal of affordable housing from the reach of those who need it.

"It is taking housing out of the affordable housing market," said Bianchi. "I find this one of the major difficulties with vacation rentals."

"We have a tremendous amount of service workers who have no place to live," Kent said. "There are families that have had to move who cannot find a place to rent; they still drive back and forth to work. Something is wrong when a community cannot provide housing for people who actually work here."

Lewis, a Cayucos school board trustee, said one noticeable effect of the vacation rental boom is a decrease in enrollment figures for the city's one-school district, a trend that district Superintendent and Cayucos Elementary School Principal George Erdelyi confirms.

His tiny district contains one K-8 school and fewer than 15 teachers. When Erdelyi came to Cayucos three years ago, the district had 302 students. Now, he said, there are 264 students–a 13 percent drop in enrollment.

"We've lost about 40 students, which is very out of the ordinary," Erdelyi said. "Generally a school district grows two to three percent a year–just from the mere fact that the population is growing, or in the worst-case scenario is static. A decrease of that magnitude shows that there is a definable reason."

He has traced that reason, Erdelyi said, to Cayucos' housing crunch.

"We talk to parents when they leave the district, I talk to them about why they're leaving and if it is due to the quality of the school," he said. "It has never been about the quality of the school. It's mostly economic issues–basically, housing."

Families are choosing to leave Cayucos because they cannot afford to buy a home and long-term rentals are disappearing, he said.

"It's too expensive to live here, and there are fewer rentals available to families," Erdelyi said. "There's a housing crunch, because of the fact that a lot of homes are vacation rentals and cannot be utilized for families to rent" year-round.

For a small school district like Cayucos, Erdelyi said, a significant loss of enrollment can be financially–and ultimately educationally–devastating.

"Our revenues are based on enrollment," he explained, "and without the revenue, it's harder to offer quality programs."

Because the district's Board of Trustees has kept reserve funds up, he said, Cayucos Elementary hasn’t felt the economic pinch yet, Erdelyi said. But at a time when most school districts in California are scrambling to find teachers, if Cayucos' figures continue to decline, it may see the opposite, he said.

"We have sufficient reserves; the impact won't be felt for another year or two," Erdelyi said. "But next year we may have to look at the very real possibility of releasing staff members."

The resolution of this issue is unclear. Both sides remain generally unsatisfied, with vacation rental proponents arguing injustices and opponents claiming that the county has not gone far enough in dealing with the Grand Jury's findings.

But county officials are expressing the hope that the ordinance will quell this issue, at least for the time being.

"There needs to be a happy medium, and I believe this ordinance comes really darn close to being right down the middle," Trinidade said. "It says, 'We're watching, we don't want to intrude on your industry, but if it gets out of line, we will.' "

According to Bianchi, for now the public must wait and see what happens if the new regulations pass.

"The ordinance is a good first step," said Bianchi. "At this point we'll see how this works. It may need to be strengthened. If it doesn't work, if it still has problems, we'll redo it." Æ

Jen Stevenson is a New Times staff writer.