COVID-19 has been devastating to our economy and to people’s sense of income security. Many have lost jobs or had to radically change how they work. The impact on small businesses has been no less than catastrophic. This last year, if nothing else, has indeed forced us to become resilient and adaptive.
Pre-pandemic, I used to travel for work approximately 50% of the year. While away, I rented my home as a Short Term Rental (STR) to couples and families enjoying a few days at Disneyland, visiting family, nearby beaches or Chapman University. My family is a first generation owner of our property in Orange and, since my father’s passing a few years ago, the under 30-day stay homeshare model has allowed me to pay the bills and still have access to our home, especially for holidays and other important events.
Airbnb, one of the tech platforms that offers homesharing, held an IPO only a few months ago. The listing saw the company’s valuation skyrocket from $1b to over $100b literally overnight. Even in a pandemic, it became clear that this company as well as the shared economy business model are here to stay. Now consider our adoption of similar peer-to-peer platforms: Uber, Lyft, EBay, even Facebook, Twitter and NextDoor – all companies that didn’t exist 15 years ago. Yet we have adapted to these new modes of transacting in our day-to-day lives.
As we emerge from the pandemic, and as the true economic impact is realized, we’ll need to face our ‘new normal’ adapting once again to ensure we make ends meet as needed. The STR business model might not be right for everyone, but it has worked for me and many others who do the same in our city. It helps supplement work or retirement income, pay the mortgage, even make some money to reinvest in our homes and community, in turn driving up real estate values and quality of life in our neighborhoods.
As with everything in life, there are also bad actors. The irresponsible STR operators typically do not implement house rules and might not always monitor what happens in their house or, equally important, the impact this may have on their neighbors. Angry neighbors then call police to get them try to resolve what is effectively a neighbor-to-neighbor dispute. (Sometimes angry neighbors call just to be difficult too.) In fact, the most common complaints – noise and occupancy limits – already have city code that can and should be enforced.
To be sure, over-reliance on our police to manage neighborhood squabbles when they have enough on their plate trying to do their jobs amidst twin health and social injustice pandemics, is simply unfair.
What we need is a more balanced approach to STRs through regulation.
You read that right. I and a group of other Orange-based homeowners that represent approximately half of the STRs in the City of Orange are asking to be reasonably regulated and taxed.
Unbeknownst to many, homeowners in Orange have operated STRs for almost a decade. Maybe more surprisingly, the City of Orange actually accepted permits and transient occupancy tax (TOT) for vacation rentals from 2013-2017. However, since 2017, the city stopped managing this use case and looked the other way. STRs still exist in our neighborhoods, and it’s basically the Wild West as far as the city’s ability to control them. The few bad actors give us all a bad reputation and make it more difficult for us responsible people who care about our homes and neighborhoods.
To add to matters, the city has a revenue shortfall of more than $3.5m previously coming from TOT between 2017 to 2020. That gap could easily be filled by contributions from STR homeowners through permit fees and TOT. Indeed, revenue from STRs would also fund additional code enforcement to help monitor STR compliance. Once we see the true impact of the pandemic, especially in physical store sales tax revenue which is the largest revenue source for the City of Orange, we all might not want to ignore this incremental revenue opportunity.
Without regulation providing direction for incorporation of these small businesses to our city, how can we control for problem actors? How do we even know if a party house down the street is a short term rental, a long term renter, a Chapman University student house, or the actual homeowner?
Irvine and Garden Grove have instituted bans of STRs. However their presence has actually grown in number since the bans were instituted due to the cities’ lack of information and ability to control. California Consumer Privacy Act and CPRA regulatory framework may further complicate the efforts of technology vendors currently contracted by some cities to provide personally identifiable information on the STR homeowners. And what about the US Constitution’s 4th amendment which prohibits search & seizure without a judicially-sanctioned warrant?
On the other side, Newport Beach has regulated STRs since 1992 and the most recent trend in other neighboring cities to Orange seems to be toward regulation. Fullerton, Buena Park, Anaheim (which reversed its ban in 2019) and, just in the last couple of months, Placentia and Huntington Beach have all adopted ordinances that recognize and regulate STRs.
Why not Orange too?
The best way forward is to adapt, not reject or ignore. Passing reasonable regulation for STRs will provide ability to control bad actors, support our small businesses and add revenue to the city budget. What’s wrong with a win-win-win outcome in this otherwise difficult time?
Susan Tillou was born and raised in Orange, and studied at the University of California before completing her post-graduate studies in Washington DC. She has served as an electoral and political officer with the OSCE and United Nations in Europe and Asia and most recently for the November 2020 elections with the Registrar of Voters in Orange County. She currently works for a large marketing research firm.
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For a different view on this issue, consider:
Mundekis: When an STR is Opened, a Home is Lost and a Neighborhood is Harmed