SANTA CRUZ >> As part of an effort to address the local housing crisis, Santa Cruz County leaders agreed to take a hard look at policies related to hosted and unhosted housing rentals.

The board, at the urging of supervisors Manu Koenig and Justin Cummings, unanimously agreed Tuesday to form a temporary ad hoc committee that seeks to explore possible revisions to short-term rental ordinances in hopes of rebalancing permitting numbers in terms of rental varieties, while also cracking down on unpermitted locations, among other things.

One of the primary issues that Koenig and Cummings, the sponsors for the item and the committee’s only members, would like to see addressed is how local permitting code treats hosted and unhosted rentals. Koenig believes that county ordinances, as they are currently written, favor unhosted rentals where the property owner does not live onsite, also known as vacation rentals. According to Koenig, the number of vacation rental permits allowed in unincorporated territory is unlimited outside of three specified zones. Conversely, the number of hosted rentals, where the homeowner lives on site, is limited to 250.

“I don’t know what the number of unhosted rentals in our community should be,” said Koenig. “But it’s probably not unlimited.”

While there is no restriction on the number of unincorporated area vacation rentals overall, strict caps based on percentages within each block are in place within three specific populated coastal regions that include Live Oak, Seacliff, Aptos, La Selva, Davenport and Swanton, county staff told the Sentinel.

According to a report prepared by Koenig and Cummings, 665 out of 841 short-term rentals in Santa Cruz County are classified as unhosted, with Districts 1 and 2 holding an outsized number of that total.

Cummings — who also currently sits on the powerful California Coastal Commission, which has jurisdictional authority over developments in the coastal zone — said that while the commission was previously in favor of unhosted short-term rentals, experts recently provided testimony undercutting that view.“Through (the experts’) data analysis, they’ve noticed that the unintended consequences of having unhosted rentals has reduced housing stock in many communities,” said Cummings, adding that “hosted rentals actually have less of an impact on housing within the community.”

Santa Cruz County was recently named the most expensive rental market in the nation, where a local renter would need to earn $77.96 per hour to afford a two-bedroom rental at the fair market rate. According to Koenig and Cummings, there are 9,856 local applicants waitlisted for the federally subsidized Section 8 housing voucher program.

A few vacation rental hosts from the public were in attendance and, prior to the board’s vote, spoke up to share their concerns. John Pickart, owner of Beachnest Vacation Rentals, which has 50 properties in the county, told the Sentinel he feared this was the beginning of an effort to get rid of vacation rentals altogether and that the role of the rentals in the local housing crisis was overblown.

Pickart also told the board that during the 2020 CZU Lightning Complex Fire, he cancelled all reservations so his properties could house residents displaced by the disaster.

“We said to them, ‘I’m sorry, our community is hurting right now and they need us,’” said Pickart.

Koenig, responding generally to comments minimizing the proliferation of vacation rentals locally, said there were about 30 pending applications for vacation or unhosted rental permits in the county’s queue as of Tuesday.

“It’s still an issue that continues to grow and I think that we could look for some improvements here,” he added.

The board was supportive of the ad hoc committee’s mission, but Supervisor Bruce McPherson cautioned that Koenig and Cummings should take into consideration potential transient occupancy tax losses new regulations might precipitate. McPherson, having checked with the auditor’s office, said from July 2022 to March 2023, the county took in $6.8 million in transient occupancy revenue from about 1,200 short-term rental properties compared to $2.8 million from 20 or so hotels/motels.

“It could have a revenue impact that should be addressed or looked into, at least,” said McPherson. “That said, we know there’s also a financial impact created by our lack of housing in the community which is very hard to quantify; can’t be overstated.” McPherson encouraged the committee to consult with other local jurisdictions in hopes of moving toward consistent local policy.

After Supervisor Zach Friend recommended the committee narrow its focus, Koenig and Cummings will give special attention to addressing the lack of limits for unhosted rentals outside of the three areas that are already regulated in unincorporated territory. They will also look at developing meatier enforcement strategies because, according to Koenig, there are 70 unpermitted vacation rentals operating in the county.

As part of its effort to eliminate unpermitted occurrences, the board plans to enlist help from the hosting platforms themselves, such as Airbnb and VRBO, and it has instructed county counsel to share a letter with industry giants requesting that they take down the unpermitted listings.

Other elements of local policy that the committee may consider reforms to include regulatory compliance, short-term rental noise violations, ordinance consolidation, tenant protections and cost recovery efforts.

While Koenig and Cummings intend to interview various groups and stakeholders involved in the local short-term rental industry, they will remain the only two ad hoc committee members. They plan to return to the board with proposed policies to consider on or before its first meeting in March.