Arroyo Grande to update vacation rental policy, cap permits

Arroyo Grande could soon join a growing number of San Luis Obispo County cities that have voted to change their vacation rental ordinances.

On Sept. 13, the Arroyo Grande City Council voted 3-0 to update its vacation rental ordinance — capping the number of short-term rental permits available at 90 and increasing the buffer zone between vacation rental properties.

The update will attempt to address the number of vacation rentals in the city, which director of community development Brian Pedrotti said has been steadily growing since 2019.

“We started to get more and more short-term rentals applied for and approved,” Pedrotti said. “With that, we also started to get some complaints.”

In particular, community members have expressed “concerns about noise, parties (and) parking” in their appeals to the city Planning Commission, he said.

Those complaints prompted a Planning Commission study session in March, which resulted in the proposed update to the ordinance, Pedrotti said.

Pedrotti said the newly updated ordinance would cap the number of vacation rental permits available at 90, down from the originally proposed 120 permits.

The city has already issued 86 vacation rental permits, leaving four permits up for grabs.

Under the current rules for vacation rentals, Pedrotti said, “If everybody (in Arroyo Grande) was to get a vacation rental (permit) that could, we would hit about 30% of the rental units available in the city (being converted into rentals ), which is clearly significant from an affordable housing standpoint.”

If every eligible property owner applied for a short-term rental permit now, the city would have 716 permitted vacation rentals — 33% of rental units in Arroyo Grande.

In addition to keeping vacation rentals from proliferating Pedrotti said the City Council’s proposed ordinance aims to spread out the rentals to prevent high-density vacation rental neighborhoods.

This was accomplished by increasing the “buffer” between vacation rentals. Instead of being located 300 feet from each other on the same street, short-term rentals would need to be located 500 feet apart from each other in any direction, Pedrotti said.

There would also be a 500-foot buffer zone around schools to prevent people staying at vacation rentals from disturbing school sessions.

Pedrotti also said homestays — dwellings in which part of the home is occupied by the owner while other parts are rented — would be treated “very similarly” to vacation rentals, which do not need to be owner-occupied and operate solely as short- term rentals, under the updated ordinance.

The same buffer rules would apply to both forms of rental, he said.

Arroyo Grande’s transient occupancy tax, which applies to properties that are occupied by residents for 30 days or fewer, would remain at 13.5% under the updated ordinance, Pedrotti said.

He said the city has not been able to consistently collect fees from every rental in the past.

Under the proposed ordinance, for existing vacation rentals without a permit, Pedrotti said, city staff would begin sending notices to unauthorized vacation rentals — informing property owners to either close or get a permit if one is available.

“With code enforcement, our first intent is to get compliance,” Pedrotti said. “There’s no plan at this point to levy fines against unauthorized vacation rentals.”

The City Council will vote on the final version of the ordinance at its Sept. 27 meeting.

If council members approve the updated ordinance next week, it will go into effect 30 days after the adoption of the ordinance, which is slated for October. 11.

This story was originally published September 22, 2022 5:30 AM.

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John Lynch is a housing reporter at the San Luis Obispo Tribune. Originally from Kenosha, Wisconsin, John studied journalism and telecommunications at Ball State University, graduating in 2022.

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