Frequently Asked Questions about the Ban on Vacation Rentals
What does the Initiative do?
- Changes the current Vacation Rental Ordinance (PSMC 5.25).
- Phases out the use of any existing permitted single-family home in any R1 zone1 as a rental of 28 days or less 24 months after passage.
- Immediately bans issuing new Vacation Rental (VR) permits for single-family residences.
- Specifically allows “multi-family units including condominiums”.
a. However, this is misleading since approximately 97% of Homeowner Associations (HOA’s) prohibit guest stays of 28 days or less.
b. Highly unlikely any HOA board and its’ members would approve of changing their Covenants, Conditions and Restrictions (CC&R’s) to allow rentals of 28 days or less.
- Passage of the initiative means that it can only be modified by a subsequent voter initiative. That is the ONLY way anything in the section of city law related to vacation rentals could be changed.
a. The City Council will not be able to touch any part of the new restrictions once it is enacted.
b. Only the courts could invalidate a section(s) of the new ordinance.
What could be the economic impact on the city as a whole?
- Over 2 the year phase-out, over 4,600 currently permitted bedrooms in over 1,400 single-family residence homes will be eliminated.
- The current ordinance is already reducing up to nearly 600 bedrooms in nearly 400 condo’s. Permit renewals for condos are now required to have a letter from the condo HOA explicitly stating stays or 28 days or less are allowed. This initiative does not change the HOA letter requirement despite stating it “allows multi-family units including condominiums”.
- There are 5,246 vacation rental bedrooms and 6,134 hotel rooms.
a. That’s 11,380 sleeping accommodations.
b. If passed, up to 46% of the total number of sleeping accommodations are gone.
- Reducing almost half the tourists means eliminating over $100M of annual tourist spending to restaurants, shops, homeowners and other tourist dependent businesses.
What is the economic impact to the City’s budget?
- Will eliminate virtually all of the $8M in Transient Occupancy Tax (TOT) at 11.5% that goes to the City’s $109M General Fund.
- A reduction in sales tax revenue from the portion of the 9.25% sales tax collected in Palm Springs from which the City derives 1.5% portion of the sales tax collected in our city by vacation rental guests.
Will this Impact Emergency Services, especially the police department?
R1’s are residential zones with mostly single-family homes in non-gated communities.
- Vacation Rentals are currently self-supporting because compliance is paid for by vacation rental permit fees of $900 annually. The $1.7M from these fees created the Vacation Rental Compliance Department (VRCD) which employs 9 city staff who respond to any complaints or issues and write citations that range from $500 to $10,000.
a. If there are no VR permit fees, there will be no Vacation Rental Compliance Department.
b. Issues related to illegal vacation rentals will have to be handled by the police department or other city employees that are paid through the General Fund.
How could this effect all homeowner property values?
- Sales of Single Family Residences (SFR’s) in Palm Springs were 929 (2016, 1,002 (2016) and 1,062 (2017) according to the Multiple List Service (MLS). There are approximately 1,400 SFR’s with vacation rental permits, a number that has declined since April 2017.
- If a conservative estimate of 7055 (60^%) of these homes had to be quickly sold, it would be a 70% increase in inventory.
- Do you think the price would remain at their current all-time highs?
How does this harm current and legally permitted vacation rental homeowners?
Individual vacation rental owners who depend on the income for their retirement will be harmed by the reduction of income they have planned for and come to depend upon as well as the lower property values.
- It is inevitable that the City will face a budget deficit from the loss of nearly $8M in TOT as well as some sales tax revenue. To stem the loss, the city could be forced to impose a parcel tax which is essentially an increase in everyone’s property taxes. By law, this would have to be at fee irrespective of property value.