Resident wins court battle against SB regulations on short-term rentals
The city of Santa Barbara lost another court battle against a local resident fighting for the permission of short-term vacation rentals in the coastal zone.
On Tuesday, Second Appellate District Judge Steven Perren upheld the Ventura trial court’s decision in February 2019 that Santa Barbara must allow short-term vacation rentals in the coastal zone — a practice the city banned in 2015.
“The city incorrectly contends that because STVRs are not expressly included in the Local Coast Programs, they are therefore excluded, giving the city the right to regulate them without regard to the Coastal Act,” Judge Perren wrote in his opinion. “… Regulation of STVRs in a coastal zone ‘must be decided by the city and the Coastal Commission.’…The city cannot act unilaterally, particularly when it not only allowed the operation of STVRs for years but also benefited from the payment of transient occupancy taxes.”
The California Coastal Act, which protects the state’s coast and ensures affordable accommodations for visitors, was enacted in 1976, but the court ruled that it still effectively protects the rights of property owners to rent their coastal residences to travelers. The court’s order is the first of its kind in California overturning local governments’ STVR rules, and it allows the plaintiff to recover his costs on appeal from the city.
“I was really happy. I wasn’t shocked, because I knew the facts and the evidence were on our side,” Theodore Kracke, the plaintiff and the owner of Paradise Retreats, told the News-Press. He was the original plaintiff who sued the city in 2015 after it passed a law regulating STVRs as “hotels” under its municipal code, effectively banning them. “It will ease the minds of property owners who do this and guests who have made their travel plans around this, but it will also secure this as a viable travel option for families in the future.”
The California Coastal Commission is a state agency that approves land-use decisions and checks for statewide consistency with the Coastal Act. In 2016, the commission sent a letter to several cities, Santa Barbara included, warning that vacation rental regulation in the coastal zone must occur within the context of the city’s local coastal program or be pursuant to a coastal development permit.
The letter also said that the commission didn’t believe regulation of rentals outside that context “is legally enforceable in the coastal zone” — which the Second Appellate District upheld on Tuesday.
Mayor Cathy Murillo told the News-Press, “With all due respect to the court ruling, we have scheduled a closed session for next week to discuss this matter.”
The city defended its decision in 2015 by saying the law would preserve affordable housing in Santa Barbara by allowing property owners to rent the STVRs out to locals instead of out-of-town visitors.
“The reason our city has been pursuing control over vacation rentals is that this lucrative commercial activity essentially turns houses and apartments into hotel rooms, taking them off the market for working people who need housing,” Mayor Murillo said, adding that the city was trying to protect the needs of local residents.
The appellate court also noted that it ruled in another case — a ban by the homeowners association on short-term vacation rentals in the Oxnard Shores beach community — that these types of bans leave the “use” of land in the coastal zone up to the California Coastal Commission. The ban in Oxnard was later overturned as well, but Judge Perren wrote that the regulation must be decided by both cities and the commission.
“Now is the time for the city to stop fighting the inevitable (and wasting taxpayer money) and to start developing a fair regulation for short-term rentals in the coastal zone,” Mr. Kracke said. “They spent $120,000 of your money on this appeal. It’s kind of funny that I financed my own city’s legal fight against me … They did this (prohibited STVRs) in the name of affordable housing … Prices have only gone up for rentals in this town, so obviously the prohibition didn’t work.”
Mr. Kracke was represented by attorneys Travis Logue and Jason Wansor with Rogers, Sheffield & Campbell, LLP.
Mr. Logue said in a statement to the News-Press, “This decision sets statewide precedence that cities and counties may not outright ban STVRs in the coastal zone like Santa Barbara relentlessly tried. They are, however, allowed to meet and confer with the Coastal Commission to enact reasonable regulations. The City of Santa Barbara elected to repeatedly ignore the commission for the last six years. Let’s hope city leaders finally see the light and comply with California law.”
James Fenkner and his wife have owned a single short-term rental in Santa Barbara’s coastal zone for 10 years, and the property had been a rental for six years prior to their purchase. Mr. Fenkner told the News-Press that he and his wife made a modest contribution to Mr. Kracke’s lawsuit because “we believe that the city has dramatically overreached their authority in subjectively prohibiting responsible transient occupancy tax paying STRs (short-term rentals).”
“The real hero of this story is Theo Kracke himself, who staked significant personal resources and his business reputation to protect property owners up and down the California coast,” Mr. Fenkner said. “This is also a victory for families of modest means who visit our world famous coast. Not everyone can afford a $600/night hotel at the (Hotel) Californian or the now-closed Biltmore, which costs nearly $1,000/night.”
Mr. Fenkner said he believes a big reason the ruling was upheld was because the case was tried outside of the city and noted that fact is “pertinent for anybody who takes on City Hall.”
“I think that was a very important aspect of the case, because in a small town, having dug into this myself, there’s so many interlocking relationships that it’s very hard to get objective justice,” he said.
Overall, the resident said the ruling is a “long, overdue win” against a “very self-motivated City Hall.”
“These are individual owners of this. This is not a corporation. This is not some big conglomerate that does this. For these people, it’s additional income to pay the property taxes to live in a very expensive town … It’s good to see the little guy win every once in a while,” Mr. Fenkner said. “We were originally trying to make a deal with the city, because everyone who operates a responsible STR wants good rules, right? You don’t want bad actors in anyone’s business, whether it’s a small business or a big business. But they went for prohibition and ‘lawfare.’ It’s a huge win for property rights.”