Newport turns to local residents for advice on short-term rental rules

In step with surrounding communities that are grappling with how to regulate short-term rental operators, Newport Beach city leaders are seeking input from people who live or own homes next to vacation rentals.

City staff plans a series of community meetings and discussions, and at one meeting Wednesday night, about 100 residents of Balboa Island, Corona del Mar and the Balboa Peninsula shared their thoughts and grievances about Newport’s short-term rental market.

Chris Nielson, who has rented a Newport Beach home with his family for a week each year for the past three decades, flew in from his home in Salt Lake City to attend the meeting. This year, Nielson said, he decided to buy the Balboa Peninsula rental property as an investment and operate it as a short-term rental in compliance with city rules.

But as short-term rental websites such as Airbnb, TurnKey and Vacation Rentals by Owner continue to swell in popularity, he’s concerned he might be at a financial disadvantage.

The changing market has enabled virtually any property to become a vacation rental, with or without city approval. The sites also have made it more difficult for cities like Newport to regulate the business and keep track of who should be paying taxes. The city imposes transient occupancy taxes on short-term rentals, charging 10% of the price of each rental, like it would for hotel guests.

How the city enforces its laws will have a significant effect on owners who for years have played by the rules and paid taxes, Nielson said.

“I can’t have someone not remitting a 10% tax competing against me,” he said.

Short-term rentals aren’t a new phenomenon in Newport Beach. Since before the 1950s, weekly vacation rentals have thrived in the city, bringing in a variety of tourists — and revenue.

In the early days, vacationers often would look to rental companies and real estate agents to help them find a property. The city was able to more easily regulate the rentals and ensure that the property owners had an active business license, were in an area where rentals were permitted and were paying taxes to the city, according to city staff.

In 1992, the city adopted short-term lodging regulations that required property owners to have a city-issued permit before they could list a property to rent for less than 30 days.

Though short-term lodgings were previously permitted throughout the city, current law prohibits someone from obtaining a permit to rent out a property in an area zoned only for single-family homes. However, 211 properties were allowed to keep their permits when the new regulation was passed in 2004, according to city Development Director Kim Brandt.

Currently, there are 1,068 active permits, the majority of them in Corona del Mar, the Balboa Peninsula and Balboa Island.

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FOR THE RECORD
March 25, 2:56 p.m.: A previous version of this post incorrectly gave the number of active short-term lodging permits in Newport Beach as 91. There are 1,068 as of January.

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Now, with online vendors dominating the market in many communities, short-term rentals are popping up in neighborhoods where they aren’t allowed. Owners of unpermitted properties often aren’t aware that they need to pay taxes to the city, Brandt said.

“We haven’t figured out how to completely regulate the Internet business quite yet,” Brandt said. “It’s very important to have parity among everyone in the tourism industry to make sure one business isn’t getting more of a benefit than another.”

Like Newport, other cities across Orange County say they have been struggling with quality-of-life issues related to short-term rentals, including trash, excessive partying and parking headaches. Laguna Beach has placed a moratorium on new short-term rental permits, while Huntington Beach has chosen to ban them completely.

Several residents of Balboa Island, where short-term rentals are permitted in many areas, complained Wednesday about loud parties that stretch into the early morning and small rentals where dozens of people congregate. They create parking problems and other nuisances on the otherwise quiet island, residents said.

Corona del Mar and Balboa Peninsula residents shared similar stories of being awakened by raucous parties at unregulated rentals listed by online vendors.

Some residents asked the city to consider hiring more staff to enforce short-term rental rules. The city hired a seasonal employee last year to help identify unpermitted short-term rentals throughout Newport. At the time, more than 250 noncompliant listings were identified from short-term rental sites, and the city collected about $218,700 in fees and occupancy taxes as a result, according to a staff presentation.

The city also launched an interactive map on its website where residents can search for listings to find out whether their neighbors are operating short-term rentals without the required permit. If such as property is found, a resident can contact the city for a response.

During a January study session, the City Council indicated its support for staff to look into expanding guidelines and rules for short-term rentals, consider a code amendment regarding homesharing — when guests rent a portion of a property while the owner is at the home — and possibly enter agreements with online operators in which they would remit occupancy taxes. The council also asked staff to seek input from residents affected by the businesses.

The council is expected to take up the issue again by summer.