• Datta Khalsa

Hotels get the last Laugh

Homeowners in Santa Cruz County have a long tradition of finding creative ways to offset the high cost of housing here. One common way they have managed this is through vacation rentals to help maximize the earning potential of a second or third home. Another lesser-used variation of this is the hosted short-term room rental of rooms located within a home, generally with the owner present.

Hosted short-term rentals fill a useful niche for the less-than-affluent traveler, with their rates locally averaging a relatively low $133 per night during the high season. And since the activities of the guests are generally in close quarters with the owners, there is a nice system of controls built in to mitigate potential negative impacts on the neighbors. Worldwide, the benefits of home-sharing have seen great popularity, with Airbnb reporting 4 million listings in 191 countries, a figure that surpassed the top 5 Hotel companies combined. But not in Santa Cruz, it would appear.

Over that past few years, both City and County legislators have taken a sudden increased interest in controlling how property owners rent their homes out, re-categorizing the practice of home-sharing as a commercial enterprise and making the argument that short-term rentals deplete the inventory of long-term rental housing, which they contend drives rents up. But when you look at the numbers, they just don’t seem to add up:

The County Planning Commission recently drafted an ordinance to limit Hosted Short-Term Rentals to 180 nights per year with additional limitations, despite the results of their own survey counting only 169 HSTR’s in operation within the unincorporated areas, with less than 10 percent of these being used in the past for long-term rental. If anything, the results of the survey seemed to indicate (ironically) that hosted rentals pose more a cure for the high cost of living than a cause, when looking at their room rates compared to hotels.

What’s more, the survey revealed that a majority of short-term rental hosts are older property owners relying on the supplementary income of the rental as their primary motivation to host, while also benefiting from the flexibility, privacy and ability to retain their independent lifestyle as reasons why they wouldn’t consider long-term tenants even if they couldn’t host a short-term rental.

A more logical correlation appears when you read elsewhere in the news that there are 3 hotels with 390 rooms under construction right now in the county, with 6 more hotels with 519 rooms in the pipeline, and posted rates for a room with a King bed plus sofa bed running at $259 per night. With Transient Occupancy Taxes tied directly to money paid, it would certainly make better business sense for the County to back the hoteliers with their higher room rates over mom-and-pop vacation rental owners—but it just seems a bit unfair if that’s what’s actually happening here.

Their draft will get its first public reading at the Board on December 5, and if this ordinance is passed, we would become the only County in the State to impose a limit on the number of nights that a hosted rental can rent out a room in their own house, which many see as yet another clear step in the wrong direction.

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