Regulating Granny Units in Santa Cruz: Housing or Vacation?

Last Tuesday the Santa Cruz City Council continued to consider changes to the city’s Accessory Dwelling Unit (ADU) ordinance, which regulates smaller on-site units, sometimes referred to as “granny units,” within the city limits. City leaders and staff began this process in earnest last year, when they amended ADU design and setback requirements, making it easier for homeowners to build new ADUs. They also approved a pathway for legalization of existing illegal units, in the interest of preserving as many housing units as possible.

However, one aspect of ADU regulation that has yet to be decided is how to regulate short term vacation rentals. As it stands now, a homeowner could in theory construct a new ADU on site, so long as it meets local and state building codes, and then rent it out for short terms visits, essentially removing what could be a new housing unit. It is also easier than ever to find short term vacation tenets, with sites like Airbnb and Craigslist providing convenient and unregulated posting boards online.

In response to the growing trend of housing units being replaced by vacation rentals, the City Council began to consider an amendment to the ADU ordinance that would prohibit the use of ADUs for vacation rentals entirely, a move that irked some homeowners who say this would infringe upon their private property rights.

Housing advocates, including multiple council members, aren’t buying it. To them, vacation rentals are a direct threat to the housing stock, and disproportionately impact neighborhoods. Many of these rental units also avoid paying Transient Occupancy Tax (TOT), which is required of all vacation lodging within the city.

The Planning Commission unanimously approved the prohibition of ADUs as vacation rentals, but the City Council was reluctant to move forward, instead giving direction to rehear the issue in three weeks.

Some major points of debate include whether or not the Council should approve a complete ban on ADUs as vacation rentals, or if they should cap the number of ADUs that can be used. There are also questions related to retroactive regulation, such as whether or not the ban would apply to ADUs built before the ordinance, or just those constructed from this point onward. Many homeowners expressed frustration that their existing ADU vacation rentals could be made illegal, which is why some were built in the first place. Some homeowners admitted that they depended upon the revenue generated from their ADU vacation rental, and further expressed worry that they wouldn’t make enough if the unit were forced to be converted to rental housing.

Should the City ban outright the use of ADUs as vacation rentals, or should they pursue a compromise of sorts? Should existing ADU vacation rentals be grandfathered in, or should a transition period could be applied? Where do the rights of individual property owners end and the rights of the city to regulate on behalf of public welfare begin? Vote and add your comments below. City leaders will be listening in.

Prohibit the use of Accessory Dwelling Units as Vacation Rentals

The Santa Cruz City Council is considering a ban on all Accessory Dwelling Units (ADUs), sometimes referred to as “granny” or “in-law” units, being used as short term vacation rentals. Instead, these units would have to be used as more permanent rental housing housing. This initiative is in response to increasingly high and competitive rents within the city. However, some claim it is an unwarranted attack on private property rights, and that many homeowners are dependent on the revenue they generate through short term vacation rentals.

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