There are a pool of obstacles to choose from in the housing conversation, and short term rentals are one of the more tenacious topics to pop up. Making a barside stand on either side of the issue is as apt to lead to a storm-off as making a new friend — and local governments have taken note. Placer County placed a moratorium on new short term rental (STR) permits that ended in April to be guided by a new, stricter ordinance, and Truckee’s own moratorium on new permits will lift in June with similar requirements. As the playing field shifts and we take note of the new rental climate post-covid shutdown, the question of what exactly is being managed becomes more important. Are we regulating people or businesses?
STRs have had a constant presence in the Truckee/North Lake Tahoe lodging community for many decades, but the format and operation of this allowed use has changed substantially with the rise of the gig economy and internet-based rental companies like Airbnb. Not only have more than 1,300 STRs come online in the last 20 years in Placer County alone, but the rate they have been occupied at has almost doubled. In an already crunched housing market, possible homebuyers can now look at a residential neighborhood with the eye of an investor perusing competing business opportunities. Websites like Mashvisor are riding the wave of Airbnb accessibility, offering analytics for investors looking to compare the cost analysis of traditional versus short term renting, complete with blog post titles like: The Complete Beginner’s Guide For Investing In Vacation Home Rentals, and Top Skiing Destinations to Invest in Vacation Rentals. Tahoe City was at the very top of that list.
JUST BUSINESS: Websites like Mashvisor have made it increasingly easy for amateur real estate investors to enter the short term rental market. Screenshots mashvisor.com
“It has definitely turned into a business, not for everyone but for a lot of them,” said Ulli White, who owns Tahoma Meadows Cottages with her husband, Dick. “We’re competing fivefold [with STRs].” She says she sees the issue from both sides, having also operated vacation rentals in the area over 20 years ago, but that the status quo has shifted from periodically rented second homes and people renting just to make ends meet, to many properties being bought and operated strictly as STRs. This has put her lodging business in direct competition with STR owners, many of whom may not fully realize they have entered a business environment. White says there is a large amount of responsibility in operating tourist accommodations that she has seen go ignored — from fire safety to snow removal. It’s an ongoing occurrence that visitors will show up to their vacation rental in Tahoma to find it unplowed, and walk down to the Cottages to ask to borrow White’s snowblower.
As an established business and one of the last privately owned lodges in the area, White has a slew of standards and requirements she has to fulfill at exorbitant costs that many STRs simply skate by. Although STRs now have to apply for a business license with their permit in both Truckee and Placer County, many still pay residential rates for things like insurance and internet while White pays a much higher commercial rate. Additionally, she hasn’t been able to compete with the cleaning fees recently established with rental companies like Airbnb, and says she lost a housekeeper of over four years because she couldn’t afford to compete with the rates offered by the vacation rental companies.
In spite of all of this, White says she isn’t against STRs, only the stacked playing field that is making it exceedingly difficult to compete with poorly managed and sometimes unsafe rentals. “I’m all for vacation rentals,” White said. “Just do it right.”
It’s not just the Tahoma Meadows Cottages that have been fighting to keep pace with the vacation rental boom. According to a 2021 Bay Area Economics study on STRs commissioned by Placer County, hotels and similar lodging overall have barely grown in the county over the last 20 years (roughly 18% growth in occupancy) while STRs skyrocketed (over 90% growth in occupancy). The historic 113-room Tahoe Biltmore hotel and casino is set for demolition this month, and the last hotel built in North Lake Tahoe was constructed 60 years ago. The BAE report stated that the demand for hotel lodging would need to increase by at least 10% to make it feasible to build another. The proposed Tahoe City Lodge by Kila Properties was slated to go vertical this spring, but construction has been delayed due to high costs, according to the company. This overall downward trend for hotels is due to a variety of factors — environmental hoops, lawsuits, a shortage of developable land, and a changing customer base, to name a few — but could be in part due to occupying a market where the competition is playing by a different set of rules.
“Not only are we allowing short term rentals, we’re subsidizing them,” said Andrew Ryan, a Kings Beach resident and president at PR Design & Engineering. As a local engineer, Ryan has seen project after project stalled in the development phase while countless STRs open up shop with what he believes to be an unfair advantage. He calls this an “outsourcing of our wealth and housing,” due to the fact that most of these rentals are owned by people who live elsewhere.
Ryan spoke to a number of the inconsistencies in how hotels and STRs are treated in the Truckee/Tahoe region, believing that they are unintentionally subsidized by virtue of lower operating costs. For example, hotels are required to pay for one of the limited tourist accommodation units (TAUs) in the Tahoe Basin, which Ryan has calculated can carry costs ranging from $12,000 to $15,000 per unit. Jeff Cowen, TRPA public information officer, confirmed that the acquisition of TAUs could include permit fees, mitigation costs, or the cost of purchasing existing units from another parcel, then transferring them.
“What those fees are really depends on the situation and I don’t know if there is a standard calculation out there,” Cowen wrote in an email to Moonshine Ink. While Ryan’s calculations seem high to Cowen, he confirmed they could be possible. Because the TRPA considers STRs as a residential use in the Basin, Cowen said, they are not required to apply for TAUs.
Fees for things like traffic mitigation are also lower or nonexistent for residential properties as compared to commercial entities, as are the costs for insurance and utilities, according to Ryan. Additionally, many of the safety standards hotels need to meet are either not required for short term rentals, and if they are, are routinely overlooked. This is in spite of the fact that STR usage has far outpaced that of hotels in recent years. In total, there are more than twice as many rooms available in STRs (233,620 in total) in Placer County than hotel rooms. South Lake Tahoe, by contrast, has more than six times as many hotel rooms as STR rooms.
Yet at the same time, multiple court case rulings, usually involving homeowner associations, have determined STRs to be a residential and not a commercial use. One such California case in Cathedral City in which an HOA attempted to restrict a resident’s ability to short term rent her property, stated, “We cannot see how the prohibition on ‘business or commercial‘ activity can be read to prohibit short-term rentals but not longer term ones.”
In contrast, a bill on the most populous island of Hawaii signals one tourist area’s attempt to delineate commercial versus residential. Rick Blangiardi, the mayor of Honolulu, signed bill 41 in late April to establish strict limitations on where vacation rentals can be located on Oahu, as well as the length of stays in certain areas on the island. “[This] is to bring back our neighborhoods, where people grow up, where families are raised and not have them be mini-hotels, but be the neighborhoods they were designed to be, a source of great pride for all of us who have raised families here in Oahu,” Blangiardi said in a press conference at the bill signing on April 26.
No matter the accepted definition, as the hotel industry gets weaker and tourist accommodation lodging becomes more and more prevalent throughout residential zones in Tahoe/Truckee, both neighborhoods and commercial cores have become shaken by the new reality.
“I think for many of us that have been involved, especially in Tahoe City and Kings Beach, the emphasis of our community plans and our area plans has been to get more lodging in our downtown areas,” said Cindy Gustafson, former CEO of the North Lake Tahoe Resort Association and current Placer County District 5 Supervisor. “So I think planning for this kind of change — it wasn’t anticipated … that we were going to see this kind of dispersal and this heavy use of short term rentals.”
One of Gustafson’s first jobs in Tahoe was working for Dick Read Realty, a job that entailed managing both short- and long-term rentals in the Tahoe Basin. “The big difference was, it wasn’t on an online platform and you didn’t see the kind of demand we have today,” Gustafson said. Most vacation rental owners — primary and second homeowners alike — were simply trying to offset the cost of their home by renting it out short term here and there. Forty years later, as North Tahoe’s representative on the Placer County Board of Supervisors, she is leading the charge against what she has called one of the “biggest issues” for the region.
“With the advent of Covid, the skyrocketing real estate values, and the stories I heard personally from realtors who said people are buying these homes just to rent them out as investment properties,” Gustafson said, “now that’s a whole different turn from what had been our tradition of people offsetting some of their costs. Now people were using short term rentals as an investment property, which was quite a bit different from what we had ever seen in the past.”
With the wave of noise, trash, and parking complaint issues; housing stock aftershocks; and health concerns brought on by STRs in the world of Covid, Placer County placed the moratorium last summer on new STR permits, capped the number available at the current level of 3,900 (25% of Placer County’s total housing units), and drafted an ordinance to address many of the concerns regarding STRs. A large part of this ordinance, which took effect March 11, introduced standards that bring STRs closer to a level of regulation resembling hotels.
These new requirements include requiring a local contact person available 24 hours a day who can respond to any issue with a rental within 60 minutes. Ironically, White from Tahoma Meadows Cottages said she has been approached numerous times by STR owners asking if she could provide this role for them; she says she laughed.
The ordinance also includes stricter requirements for parking, noise control, trash management, and yearly required fire inspections. Fines for violations at any of these levels start at $1,500 for a first violation and climb to $5,000 for a third before a permit is revoked.
Truckee has drafted a similar ordinance that will go into effect on May 12. This includes a cap of 1,255 permits (just under 10% of the total housing stock), phasing out STRs in ADUs and multifamily units, and modified inspection fees. Washoe County will have a second reading of its proposed STR ordinance amendments on May 10, including changes to occupancy as well as application processing requirements, parking, insurance, and bear boxes. El Dorado County capped the number of STRs in 2020, and recently adopted an ordinance last year requiring a 500-foot buffer between all STR permitted properties.
Gustafson said that the current regulations in Placer County are not at the level required for hotels, but they could perhaps reach that level in the future. She believes this is a fluid issue and wants the county to be nimble in continually reacting to it.
“As with any ordinance we’re going to learn from it,” Gustafson said. “We’re going to have to be diligent in making sure we enforce against the bad actors and support the good, the folks that are doing well and need that income.”
Full time STR’s are hotels–businesses inappropriately operating in residential areas. They increase the cost of housing and reduce availability. They hurt the quality of life in neighborhoods. The most important step to reduce or eliminate them would be to limit the number of nights per year an STR can be rented. This would continue to allow first and second homeowners to subsidize the cost of their houses but would discourage the absentee innkeepers from buying houses as a business. Unfortunately Truckee declined to enact this restriction, apparently based on one jurisdiction telling the town’s committee that the restriction was hard to enforce. That is a weak excuse in my opinion, and an obstacle that can be overcome–by using Host Compliance to monitor rental nights.