Study: Non-VHR second homes need to be considered in regulations
June 7, 2017
Allowing vacation home rentals to continue operating as they are will have significant negative impacts on South Lake Tahoe, according to a recent study commissioned by the city — but so would a ban.
The city of South Lake Tahoe released the findings of a study it commissioned by Michael Baker International and California State University's Public Policy and Administration Department on Monday, June 6.
According to the 152-page report, which was compiled using surveys and interviews with residents and stakeholders as well as analysis of public data, the existing city regulations for vacation home rentals (VHRs) do not "address the deeper socioeconomic issue in which VHRs are both a symptom and a contributing factor."
"Housing in the city will continue to increase in cost without regulatory intervention. The rate of conversion from fully occupied to vacant units will continue to outpace the development of new units as the city grows closer to full buildout," states the report, which acknowledges the complex development restrictions upheld by the TRPA. "Nonresident homebuyers will continue to put pressure on the available for-sale housing stock, as housing costs in South Lake Tahoe are still considered affordable in comparison to the San Francisco and Los Angeles housing markets."
The median household income in South Lake Tahoe in 2015 was around $40,000, compared to $70,000 in El Dorado County and $62,000 across California. This translates to over 44 percent of the households in South Lake Tahoe having a "severe housing cost burden," meaning more than 50 percent of the household's gross monthly income goes toward housing.
However, phasing out VHR permits and prohibiting their operation would have "significant negative economic impacts," according to the study. Though it would open some housing up to long-term occupancy, many units would revert to second or seasonal homes, sitting vacant much of the year.
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Furthermore, it would mean a loss in Transient Occupancy Tax — the city collected $2,868,148 in TOT from VHRs in the last fiscal year — and a shrinking of the city's tourist economy, says the study.
The researchers suggest looking at additional regulation, such as "limiting the number of annual permits available, increasing the permit fees, requiring full-time local managers and liability insurance, implementing high penalties for illegal units, requiring house policy contracts, and requiring full-cost recovery for calls for service could be combined into a cohesive VHR program."
Other suggestions include establishing VHR limits per neighborhood, requiring a waiting period after a property is sold before it can become a VHR, and increasing fees.
However, this approach is leaving out one important factor that is impacting the long-term housing stock in South Lake Tahoe: minimally-occupied second homes.
Though the number of VHR units in the city jumped from 1,213 in 2011 to 1,861 in 2016 — an increase of 53 percent — VHRs only account for 25 percent of the city's vacant housing stock. (The California Department of Housing and Community considers VHRs and second homes "vacant.")
"Policy responses aimed at the larger population of second and vacation home owners could by default capture both VHRs and vacant homes and address some of the impacts that both have on the city's neighborhoods," states the report.
The researchers suggest a "moderate fee-based regulation" on vacant homes. This could take the form of an annual fee, around $100, for properties that are unoccupied for more than 30 days consecutively, or a transaction fee for units that will not be a primary residence, VHR or long-term rental.
"These fees could be used to further address the affordable housing challenges, improve neighborhood assets, and could even be a resource to help support redevelopment of the city's downtown to better facilitate environmental, economic, and community needs," according to the study.
There will be a special workshop and public meeting on Tuesday, June 13, at 9 a.m. where the consulting team behind the report will make a presentation to City Council summarizing its key findings and suggested policies. The meeting will be held in the City Council chambers located at 1901 Airport Road.
The full report can be found at http://www.cityofslt.us/vhr.