Socioeconomic study on South Lake Tahoe vacation rentals released

When the South Lake Tahoe City Council voted on a new Vacation Rental Ordinance in 2015 they also promised to hire a consultant to prepare a socioeconomic study on the impact vacation home rentals (VHRs) have on the community.

The results of the study were presented to the City Council and the public during a special meeting on Tuesday.

Michael Baker International was hired by the City to conduct the study with the assistance of California State University, Sacramento. The result is a 156-page report that delves into several areas including the impact on housing, saturation of neighborhoods, fee suggestions and more.

The City Council will discuss what action might be taken at their July 11, 2017 meeting, giving everyone time to read the document. The study was not designed to adopt changes right away and needs further review.

Amy Sinsheimer, the lead on this project for Michael Baker International, along with Jessica Hayes of the company, told Council there were some challenges in preparing the report due to data accuracy and availability. The most reliable data source, the American Community Survey, uses better data but they don't break it down to neighborhoods or even cities, but focuses on El Dorado County as a whole.

In the county, $79,100 is the average income with $59,350 considered low income. In the City of South Lake Tahoe the median is $40,000 with $24,000 the average which is in line with other service industry cities.

More challenges were in breaking down each neighborhood as well, since characteristics are different. Some are saturated with vacation homes, others are not, some are predominately second home owners, while others may have full-time locals.

The community response to a survey the company conducted between November 2016 and February 2017 was better than most areas. 1600 people completed the survey which Sinsheimer and Hayes said is a good response rate and statistically significant. They recently surveyed the Rancho Cordova citizens (a city with a population of about 64,000) and received just 447 responses. During two workshops on VHRs, residents participated as well, giving Michael Baker good information on local's and homeowner's opinions and stance on VHRs.

So why is South Lake Tahoe a favorable place to both buy a second home to be used as a short-term rental and for vacationers to rent a home?

When the economy drove many families out of the Lake Tahoe Basin in 2008, home prices dropped and became desirable to Californians who live where home prices are closer to one million dollars. They felt it was a good investment, just as investors bought up properties in many downs that had good deals.

The new age of travelers appreciate being in a neighborhood in a home where they have a kitchen, outside space and rooms for their family and/or friends. It gives them a glimpse into how it would be to live in Lake Tahoe, even if just for a weekend or a week. Ordinary motel rooms no longer attract the discerning traveler as they once did which is evident in a lower occupancy rate at motels and hotels.

As many already know, the lack of affordable housing is a concern in South Lake Tahoe as well as cities across the country. Many towns can just build more when in need, something that cannot happen in the Lake Tahoe Basin due to building restrictions.

The study results showed home values and the availability of long-term housing have been impacted by VHRs, though it didn't show that this would be fixed if homeowners weren't able to rent their homes out for short-term rentals.

Now the City will be faced once again by looking at their current VHR policy with the new information provided by the study. To be successful in making policies the Council will need to identify the community priorities, decide what their vision is and establish goals for that vision, according to Sinsheimer.

Policy Consideration
Michael Baker separated policy considerations into three categories: Community Focused, Economic Growth-Focused and Comprehensive Program. Every policy will have known and unknown affects and there is no 'one size fits all' solution.

Community Focused Policy Considerations
Suggestions from the company:
1. Limit the number of new VHR permits available each year. Consider establishing the limit based on a ratio of occupied housing to VHRs or through another formula that responds to specific community priorities. VHR applications for units in the tourist core can be exempt from limits. Consider exempting applications for VHRs that deviate from other homes in neighborhoods either in character of in larger size. Limiting the number of permits will help slow the increase of VHR units, and will provide more control over VHR density in sensitive neighborhoods.

2. Implement a waiting period from the sale of a unit or transfer of title (recommended one year) before it is eligible to apply for a VHR permit. Consider exempting VHR permits for new units in the tourist core. Implementing a waiting period may discourage prospective property buyers from purchasing a home to use as a VHR by delaying the return on investment.

3. Develop a permit fee structure that substantially increases the cost of permitting for VHRs in heavily impacted or saturated neighborhoods. Consider using the number of VHRs in the 1/4 mile radius as a saturation guide. Increased costs will discourage additional VHR saturation in sensitive neighborhoods while additional revenues could be used to address neighborhood priorities.

4. Analyze the total number of existing VHRs, establish per geography VHR permit limits. Invite public participation in the analysis to determine which neighborhoods are particularly sensitive, and which neighborhoods can better handle higher densities. Set limits.

5. Shortage of available long-term occupancy housing. Require registration of every vacant unit with a nominal annual fee. implement program designed to provide windshield inspections of vacant units that will identify problems associated with prolonged vacancy.

6. Include a transaction fee for all units sold in the city that will not be used as a primary owner's resident, a VHR or a long-term rental unit. Implement an additional graduated annual fee for units that spend more than 30 consecutive days vacant.

7. Designate a portion or all of the new fees collected from vacant and VHR units for affordable subsidized housing and long-term rental housing development. According to Michael Baker, between 1970-2015, there was an 80.2 percent increase in vacant homes with a 19.5 percent increase in housing units.

8. Nuisance VHRs: require full-time certified local managers who are available when the VHR is occupied. Certify them with professional training. Increase fees. Michael Baker said the City's fees are in the middle of the range when compared to other markets. Establish high cost penalties for illegal VHRs as well as for those who get complaints.

Economic Growth-Focused Policy

1. Establish regulations where the City may increase fees or TOT during a year, but cannot do both. Gives VHR owners and managers more stable operational costs.

2. Provide a TOT discount to VHRs that meet all of the City's regulations, and those that do not get nuisance complaints. Incentives for being a 'good neighbor.'

3. Consider allowing hardship deferrals for full-time hosted home sharing VHRs which are less of a nuisance for neighborhoods.

4. Regularly review economic conditions of VHR industry twice a year to identify potential trends indicating excessive economic depression in the tourist economy that correlates with regulatory pressure on VHRs. Balance regulation with a robust market.

5. Increased regulations mean an increase in administrative costs. Implement an online interface for VHR owners and managers where they can update and manage permits, report TOT, respond to complaints, make payments and interact with staff. Michael Baker said the City's website on VHRs has too many layers and is currently hard to navigate.

6. Increased VHR fees translate to higher costs for tourist and may negatively impact the secondary tourist economy. Reinvest in the tourist core, including small businesses assistance, street improvements, property frontage improvements, hotel/motel rehabilitation and other primary and secondary tourist economy features.

Comprehensive Policy Considerations

1. VHR program administrative burden and data recording inconsistencies. Complete an audit to identify obsolete data, redundant practices, inconsistent uses of existing programs and databases, excessive admin demands and other capacity and consistency gaps and breakdowns.

2. Adopt a consolidated and dedicated program management module, one that has an online client side interface for VHR owners and managers. Be consistent for future data collections. Keep all lists accurate. Automate reminders on permits. Bring others into the process like AirBnB and VRBO.

3. Compare ordinances and regulations for VHRs across the Lake Tahoe Basins. Differences in regulations may result in increased tourist impacts in environmentally sensitive areas or in neighborhoods facing other housing-related negative impacts. Create a regional board so the whole basin is consistent.

4. Require VHRs obtain tourist accommodation commodities for homes that deviate from other homes in the neighborhood such as mega-homes. Consider commodities prorated depending on the size of the new VHRs since big homes have a greater impact.

The whole report can be found on the city's website: http://www.cityofslt.us/vhr

The next steps begin with the July 11 City Council meeting. Community input will be necessary as the process continues to create a vision and driving forces for the future.