­­Owners of Anaheim short-term rental properties may see some restrictions eased as the city tries to settle a lawsuit.

But city residents who feel the parking and other impacts of short-term rentals strongly object to the changes.

“All the changes the city brings forward are to make it easier for the STRs (short-term rentals),” resident Bob Donelson told the City Council Tuesday.

City staff say the changes approved by a split city council Tuesday will lead to a settlement of the lawsuit filed by Anaheim Rental Alliance, but also could extend the time some rental owners were given to phase out their businesses.

The city council voted last year to impose a strict ban on short-term rental homes in residential zones. The ban came in response to a deluge of complaints from residents about the growing number of rentals, fueled by websites like Airbnb and HomeAway, that have drawn tourists into their neighborhoods to homes that operate like mini-hotels.

Existing rentals were given 18 months to phase out their businesses. Owners, represented by the Anaheim Rental Alliance, almost immediately challenged the phase-out, or amortization, period and filed the lawsuit. They said they needed more time to recoup their investment into their properties.

As short term rentals become increasingly popular, cities across Orange County and nationwide have ventured into uncharted territory crafting regulations that can withstand legal scrutiny. Anaheim, along with major cities like San Francisco and New York city,  have faced lawsuits from companies like Airbnb challenging the legitimacy of their regulations.

In addition to the lawsuit from the Anaheim Rental Alliance, Airbnb and HomeAway both sued Anaheim, claiming aspects of the ban violated property owners’ constitutional rights to free speech and equal protection as well as the 1996 Communications Decency Act, which prohibits states and local jurisdictions from making websites liable for content created by its users.

That prompted the city to drop a regulation that would fine web platforms that list unlicensed rentals, and the companies dropped their lawsuit.

Tuesday’s vote also does not guarantee a settlement of the Anaheim Rental Alliance lawsuit will occur. The terms of the settlement ultimately would need to be approved by all 300 of the short term rental owners represented by the Anaheim Rental Alliance, according to city staff.

The revised regulations on existing rentals drew opposition from several anti-STR activists, who said various changes to the ban since it originally passed have eased its requirements.

For example, an earlier provision, meant to ensure strict enforcement, required rental owners to provide immediate access to city code enforcement to inspect rental properties. But it was removed after a judge raised concerns the regulation would violate the Fourth Amendment’s prohibition on warrantless searches.

Planning Director David Belmer said the changes to the ordinance would increase the likelihood rental owners will settle their lawsuit, save the city litigation costs and offer some certainty to concerns about how the lawsuit will affect the overall ban.

Entering into a settlement also means the city can avoid the ordinance going before a judge, who could potentially invalidate the ban on short term rentals in its entirety.

“If it were that, as part of the settlement, we had to water down our ordinance, I would not recommend this to you,” Belmer said.

The council voted 4-3, with council members Jose Moreno, Denise Barnes and Mayor Tom Tait voting against the changes.

The changes to the city’s ban approved Tuesday include:

  • Extending the time trashcans are required to be removed from public view from the current 5 p.m. to 12 midnight, which is when residents are already required to have their trash cans removed.
  • Allowing rentals to park one car on public streets. They were previously prohibited from using any street parking.
  • Removing the requirement for some rentals to install fire sprinklers and additional exit doors
  • Make it a minor violation to have an outdoor disturbance during quiet hours
  • Changing the number and type of violations that can be accumulated before a permit is potentially revoked
  • Offering some owners the option of extending their phase-out time to 2 years, if they promise not to seek a longer hardship extension.

Tait said for residents living next to short term rental homes, 18 months is already a long time to wait and objected to provisions that would potentially extend that time.

The city is legally required to allow owners with a vested interest in a property to recoup the investments they made based on their short term rental permit, although how much time they need to do so depends on each case and is debatable.

Belmer said the city only has received two hardship applications so far, but expects to receive up to 284 applications.

“I think we have a good case. If we lose, we do another ordinance,” said Tait. “We did this right the first time.”

Councilwoman Kris Murray said allowing the lawsuit to play out could take years to resolve, and extend the amount of time residents have to put up with short term rentals.

“And that’s the choice we have in front of us tonight. We have limitations,” Murray said. “We can play the political card, roll the dice, and let the chips fall where they may, and everyone could end up in a far worse position.”

“I would have loved to have heard those comments when I was a plaintiff trying to fight for voting rights in the city of Anaheim,” said Moreno in response, referring to a lawsuit he filed against the city to compel district-based elections, which the city fought for nearly two years to the tune of $2 million in legal fees. “It would have been wonderful to hear those words — settle a lawsuit so we can move on.”

Moreno said the ban was a “worthwhile investment” to protect quality of life in neighborhoods.

Acting City Attorney Kristin Pelletier, responding to a question from Councilman Steve Faessel, said the lawsuit has already cost “several hundred thousand dollars” and that the process of developing a hardship application and vetting the requests has cost almost as much as the litigation. At a March 7 meeting, council members approved a $520,000 contract with a consultant to review the hardship applications.

“We think that it’s…a multi-million dollar proposition,” Pelletier said.

Tait defended the original ban ordinance.

“We came up with a solution, of course they didn’t like it, and of course they sued – that’s what happened,” Tait said of rental owners. “I say we stand with the neighbors and do the right thing.”

A previous version of this article incorrectly stated that the Airbnb and HomeAway lawsuit is ongoing. 

Contact Thy Vo at tvo@voiceofoc.org or follow her on Twitter @thyanhvo.

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