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HomeMy WebLinkAbout16 - Code Amendment Related to Reinvestment and Improvements of Short -Term Lodging Units (PA2023-100)Q SEW Pp�T CITY OF z NEWPORT BEACH c�<,FORN'P City Council Staff Report May 23, 2023 Agenda Item No. 16 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Seimone Jurjis, Community Development Director - 949-644-3232, sjurjis@newportbeachca.gov PREPARED BY: Jaime Murillo, Principal Planner, jmurillo@newportbeachca.gov PHONE: 949-644-3209 TITLE: Ordinance No. 2023-9: A Code Amendment Related to Reinvestment and Improvements of Short -Term Lodging Units (PA2023-100) ABSTRACT: For the City Council's consideration is an ordinance amending Chapter 5.95 (Short -Term Lodging Permit) of the Newport Beach Municipal Code (NBMC) requiring owners of short- term lodging units to reinvest and improve their units at least once every three years. These new reinvestment requirements are intended to ensure that visitors to the City of Newport Beach (City) experience a high-level guest experience, and that residential neighborhoods are not burdened by unkept short-term lodging units. Nx0101LhI TT I=10lm7_rIEel ki6*5 a) Find the action is not a project subject to the California Environmental Quality Act (CEQA) in accordance with Section 21065 of the California Public Resources Code and Sections 15060(c)(2), 15060(c)(3), and 15378 of the California Code of Regulations Title 14, Division 6, Chapter 3 (CEQA Guidelines), because it has no potential for resulting in physical change to the environment, directly or indirectly. The proposed action is also exempt pursuant to CEQA Guidelines Section 15061(b)(3), the general rule that CEQA applies only to projects which have the potential for causing a significant effect on the environment. The amendments to NBMC Chapter 5.95 provide additional regulations on short-term lodging, which is an existing, permitted use, and thus do not authorize development that would directly result in physical change to the environment; and b) Waive full reading, direct the City Clerk to read by title only, introduce Ordinance No. 2023-9, An Ordinance of the City Council of the City of Newport Beach, California, Amending Chapter 5.95 (Short Term Lodging Permit) of the Newport Beach Municipal Code Related to Reinvestment and Improvement of Short Term Lodging Units, and pass to second reading on June 13, 2023. 16-1 Ordinance No. 2023-9: A Code Amendment Related to Reinvestment and Improvements of Short -Term Lodging Units (PA2023-100) May 23, 2023 Page 2 DISCUSSION: Short-term lodging is a dwelling unit that is rented or leased for a period of less than 30 consecutive calendar days. The City initially regulated short-term lodging by establishing NBMC Chapter 5.95 in 1992, which includes permitting requirements, standard operating conditions, and penalties. Chapter 5.95 was amended in 2004 when the City prohibited the establishment of short-term lodging in most residential zoning districts except the R-1 Zones. In 2019, the City Council held a study session on short-term lodging and later formed an ad hoc committee to review and recommend changes to the ordinance. Over the past years, the City Council has adopted a number of ordinances related to short-term lodging as summarized below: In July 2020, the City Council adopted Ordinance No. 2020-15, amending NBMC Chapter 5.95. This ordinance was adopted in response to complaints about unlicensed units, noise, too many guests in one unit, shortage of available street parking, and improper use of trash containers at short-term lodging units. The ordinance requires permit holders to post their permit number on all advertisements, register a local contact person with the City, limit the number of transient users that can stay overnight at a unit, comply with stricter noise standards, and provide transient users with a copy of a good neighbor policy. In October 2020, the City Council adopted Ordinance No. 2020-26, amending portions of NBMC Chapter 5.95, as recommended by the ad hoc committee, relating to short-term lodging citywide that consisted of the following: • Transferability - Include provisions clarifying the transferability of permits and establishing when a permit is deemed abandoned; • Minimum Age - Prohibit the rental to users under the age of 25; and • Responsibility for Parking Violations - Allows owners of the short-term rental unit to be cited if a user receives a parking ticket while utilizing a short-term lodging unit. After receiving California Coastal Commission approval, the City Council adopted Ordinance No. 2021-28 in November 2021, updating the regulations for short-term lodging applicable to properties citywide to establish a maximum cap of 1,550 permits and a minimum night stay of two consecutive nights. The ordinance also established additional short-term lodging regulations applicable to Newport Island that included establishing a maximum of 20 permits, requiring properties with short-term lodging to be owner -occupied and owner -managed, establishing maximum daytime and overnight occupancy limits, restricting rentals to a maximum of one per week, and establishing minimum parking requirements. 16-2 Ordinance No. 2023-9: A Code Amendment Related to Reinvestment and Improvements of Short -Term Lodging Units (PA2023-100) May 23, 2023 Page 3 Proposed Ordinance The proposed ordinance requires owners of short-term lodging units, at least once every three years, to reinvest a minimum of 10 percent of the rent collected from a lodging unit over the preceding three years back into the unit as improvements. For purposes of the ordinance, "improvements" means structural and/or fagade maintenance or repairs, including but not limited to finishes and fixtures, along with landscape and associated maintenance or repair to the exterior or interior of a lodging unit. Recognizing the large investment required by new construction, newly constructed lodging units are exempt from this reinvestment requirement for the first five years following receipt of a certificate of occupancy from the City. The intent of these regulations is to protect the character and property values of residential neighborhoods burdened with a concentration of short-term lodging units with high turnover. The City has an interest in preserving its housing stock and preventing the deterioration of its neighborhoods by requiring owners of short-term lodging units to reinvest in and maintain the units. Self -Certification Short-term lodging permit applicants would self -certify their compliance with these reinvestment requirements as part of their annual permit renewal process, which significantly reduces the need for the City to hire additional staff. FISCAL IMPACT: If approved, staff will review the incremental time needed to review the compliance documents and to administer hearings for any appeals filed and propose fees for cost recovery accordingly. ENVIRONMENTAL REVIEW: The introduction and adoption of this ordinance is not a project subject to the California Environmental Quality Act (CEQA) in accordance with Section 21065 of the California Public Resources Code and Sections 15060(c)(2), 15060(c)(3), and 15378 of the California Code of Regulations Title 14, Division 6, Chapter 3 (CEQA Guidelines), because it has no potential for resulting in physical change to the environment, directly or indirectly. The proposed action is also exempt pursuant to CEQA Guidelines Sections 15061(b)(3), the general rule that CEQA applies only to projects which have the potential for causing a significant effect on the environment. The amendments to NBMC Chapter 5.95 provide additional regulations on short-term lodging, which is an existing, permitted use, and thus do not authorize development that would directly result in physical change to the environment. 16-3 Ordinance No. 2023-9: A Code Amendment Related to Reinvestment and Improvements of Short -Term Lodging Units (PA2023-100) May 23, 2023 Page 4 NOTICING: The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item). ATTACHMENTS: Attachment A — Ordinance No. 2023-9 Attachment B — Redline Strikeout Version of Proposed Code Revisions 16-4 ATTACHMENT A ORDINANCE NO.2023- 9 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH, CALIFORNIA, AMENDING CHAPTER 5.95 (SHORT TERM LODGING PERMIT) OF THE NEWPORT BEACH MUNICIPAL CODE RELATED TO REINVESTMENT AND IMPROVEMENT OF SHORT TERM LODGING UNITS WHEREAS, Section 200 of the Charter of the City of Newport Beach ("City") Charter vests the City Council with the authority to make and enforce all laws, rules and regulations with respect to municipal affairs subject only to the restrictions and limitations contained in the Charter and the State Constitution, and the power to exercise, or act pursuant to any and all rights, powers, and privileges, or procedures granted or prescribed by any law of the State of California; ' WHEREAS, Newport Beach is a popular tourist destination with a significant percentage of tourists opting to stay in short term lodging units subject to a permit issued by the City in accordance with Chapter 5.95 (Short Term Lodging Permit) of the Newport Beach Municipal Code ("NBMC"); WHEREAS, the high turnover of short term lodging units within concentrated areas of Newport Beach impacts the residential character of those neighborhoods, results in additional deterioration to the short term lodging units and reduces the value of real property within its vicinity; WHEREAS, the City has an interest in preserving its housing stock and preventing the deterioration of its neighborhoods by requiring owners of short term lodging units to reinvest in and maintain the units; and WHEREAS, a hearing was held by the City Council on May 23, 2023, in the Council Chambers located at 100 Civic Center Drive, Newport Beach, California. A notice of time, place and purpose of the City Council meeting was given in accordance with California Government Code Section 54950 et seq. ("Ralph M. Brown Act). Evidence, both written and oral, was presented to, and considered by, the City Council at this meeting. NOW THEREFORE, the City Council of the City of Newport Beach ordains as follows: Section 1: Subsection 5.95.005(L) is amended and Subsection 5.95.005(M) is hereby added to Chapter 5.95 (Short Term Lodging Permit) of the NBMC to read as follows: 16-5 Ordinance No. 2023- Page 2 of 14 L. The high turnover of short term lodging units results in additional deterioration to the short term lodging units and surrounding area, which necessitates regulations to ensure owners of short term lodging units are regularly reinvesting in and maintaining the units. M. The restrictions of this chapter are necessary to preserve the City's housing stock, the quality and character of the City's residential neighborhoods as well as to prevent and address the impacts on residential neighborhoods posed by short term lodgings. Section 2: Section 5.95.010 (Definitions) of Chapter 5.95 (Short Term Lodging Permit) of the NBMC is hereby amended to read as follows: 5.96.010 Definitions. For the purpose of this chapter, the following definitions shall apply: A. "Accessory dwelling unit" shall have the same definition as set forth in Chapter 20.70. B. "Agent" shall mean any person who is authorized in writing by the owner to represent and act for an owner. C. "Booking transaction" shall mean any reservation or payment service provided by a person who facilitates a short term lodging rental transaction between a transient user and owner for the use of a unit for a period of less than thirty (30) consecutive calendar days. D. "City Manager" shall mean the City Manager of the City or his or her designee. E. "Finance Director" shall mean the Finance Director of the City or his or her designee. F. "Gross floor area" shall mean the area of the lodging unit that includes the surrounding exterior walls and any interior finished portion of a structure that is accessible and that measures more than six feet from finished floor to ceiling. Stairwells and elevator shafts above the first level shall be excluded from the calculation of gross floor area. 16-6 Ordinance No. 2023- Page 3 of 14 G. "Home -sharing" shall mean an activity whereby the owner hosts a transient user in the owner's lodging unit, for compensation, for periods of less than thirty (30) consecutive calendar days, during which time the owner of the unit lives on site, in the unit, throughout the transient user's stay and the owner, the transient user and any other occupants live together in the same unit as a single housekeeping unit. H. "Hosting platform" shall mean a person, other than an owner or agent, who participates in the short term lodging business by facilitating a booking transaction using any medium of facilitation. "Improvement(s)" shall mean structural and/or facade maintenance or repairs, including but not limited to finishes and fixtures, along with landscape and associated maintenance or repair to the exterior or interior of a lodging unit. J. "Lodging unit" or "unit" shall mean a "dwelling unit" as that term is defined in Chapter 20.70. An accessory dwelling unit shall not be considered a lodging unit or unit for purposes of this chapter. K. "Owner" shall mean the person(s) that hold(s) legal and/or equitable title to the lodging unit. L. "Person" shall mean any individual and any form of business entity including, but not limited to, all domestic and foreign corporations, associations, syndicates, joint stock corporations, partnerships of every kind, clubs, business or common law trusts, societies, or limited liability companies. M. "Rent" shall have the same definition as set forth in Section 3.16.020, or any successor section. N. "Residential district" shall mean those areas of the City so designated by Title 20 as well as any other area in the City designated for a residential use as part of a planned community development plan, specific area plan or planned residential district. O. "Short term" shall mean a lodging unit that is rented or leased as a single housekeeping unit for a period of less than thirty (30) consecutive calendar days. This also includes home -sharing. P. "Short term lodging unit registry" shall mean the published registry maintained by the City that sets forth a list of all owners and the address of all units that have a 16-7 Ordinance No. 2023- Page 4 of 14 valid short term lodging permit and business license with the City, a copy of which is available, without charge, to any person who requests a copy and which shall be accessible on the City's website. Q. "Single housekeeping unit" shall have the same definition as set forth in Chapter 20.70. R. "Transient" or "transient user" shall mean any person or persons who, for any period less than thirty (30) consecutive calendar days either at his or her own expense, or at the expense of another, obtains lodging in a lodging unit or the use of any lodging space in any unit, for which lodging or use of lodging space a charge is made. Section 3: Section 5.95.030 (Application for Permit) of Chapter 5.95 (Short Term Lodging Permit) of the NBMC is hereby amended to read as follows: An application for an annual short term lodging permit, renewal of a short term lodging permit, reinstatement of a short term lodging permit or transfer of a short term lodging permit shall be filed with the Finance Director upon forms provided by the City. A. An application for a new permit, renewal permit, the reinstatement of a permit or the transfer of a permit shall contain the following information: 1. The name, address and telephone number of the owner of the unit for which the short term lodging permit is to be issued. 2. The name, address and telephone number of the agent, if any, of the owner of the unit. 3. Evidence of a valid business license issued by the City for the separate business of operating a short term lodging unit or units. 4. The number of bedrooms in the lodging unit. 5. The gross floor area of the lodging unit. 6. The number of parking spaces available on site and a description indicating the location and size of each parking space. 16-8 Ordinance No. 2023- Page 5 of 14 7. A nuisance response plan, which sets forth the owner's plan for handling disruptive transient users. 8. A certification that the applicant has reviewed the covenants, conditions and restrictions, if any, and a short term use is permitted at the location pursuant to the terms of the covenants, conditions and restrictions, if any. 9. A certification that the applicant will comply with, has complied with, or is exempt from, the reinvestment and improvement requirement provided in Section 5.95.045(A)(24) as well as supporting documentation, if any. 10. Acknowledgment of receipt and inspection of a copy of all regulations pertaining to the operation of a short term lodging unit. 11. Such other information as the Finance Director deems reasonably necessary to administer this chapter. B. An application for the renewal of a short term lodging permit shall be filed within thirty (30) calendar days of the short term lodging permit's expiration, or the short term lodging permit shall be deemed abandoned. C. An application for the reinstatement of a short term lodging permit closed by the Finance Director pursuant to Section 5.95.080 shall be filed within thirty (30) calendar days of the date the permit was closed by the Finance Director, or the short term lodging permit shall be deemed abandoned. D. An application for the reinstatement of a previously suspended short term lodging permit shall be filed within thirty (30) calendar days of the end of the suspension period, or the short term lodging permit shall be deemed abandoned. E. If any application is deemed incomplete, which shall be determined in the sole discretion of the Finance Director, the application shall be completed within thirty (30) calendar days of the service of notice that the application is incomplete, which shall be served in accordance with Section 1.08.080, or the application and any associated permit shall be deemed abandoned. F. If good causes exist, as determined in the sole discretion of the Finance Director, the Finance Director may extend the deadlines set forth in subsections (B) through (E) of this section. 16-9 Ordinance No. 2023- Page 6 of 14 G. For purposes of calculating the maximum number of permits under Section 5.95.042, a short term lodging permit shall be deemed valid until the applicable permit has been deemed abandoned. Section 4: Section 5.95.035 (Denial of Permit) of Chapter 5.95 (Short Term Lodging Permit) of the NBMC is hereby amended to read as follows: If permits are available for issuance, no timely application filed by an owner for an annual permit, renewal of a permit, reinstatement of a permit or transfer of a permit for a unit eligible to be used as a short term lodging unit, as provided for in Section 5.95.015 and this Code, shall be denied unless: the owner does not have a current valid business license; the owner has failed to pay transient occupancy tax, the visitor service fee, a penalty, a fine or inspection cost, due and owing to the City; the nuisance response plan is deemed inadequate by the Finance Director; the owner has failed to comply with Section 5.95.045(A)(24); or the short term lodging permit for the same unit and issued to the same owner has been revoked. Section 5: Section 5.95.045 (Conditions) of Chapter 5.95 (Short Term Lodging Permit) of the NBMC is hereby amended to read as follows: A. All permits issued pursuant to this chapter are subject to the following standard conditions: 1. The owner shall prohibit a lessee of a lodging unit from renting the lodging unit to a transient user for a short term and from home -sharing. 2. The owner shall not rent a lodging unit to a transient user that is under the age of twenty-five (25). 3. The owner shall enter into a written agreement with the transient user that requires: a. All persons residing in the short term lodging unit to live together as a single housekeeping unit; and b. Limits the overnight occupancy of the short term lodging unit to the maximum permitted by the building code and fire code. 4. The owner shall ensure that the transient user complies with all terms of the written agreement set forth in subsection (A)(3) of this section. M-W Ordinance No. 2023- Page 7 of 14 5. The owner shall use best efforts to ensure that the transient user, occupants and/or guests of the short term lodging unit do not create unreasonable noise or disturbances, engage in disorderly conduct, or violate provisions of this Code or any state or federal law pertaining to noise, disorderly conduct, the consumption of alcohol, or the use of illegal drugs. 6. The owner shall, upon notification that any transient user, occupant and/or guest of his or her short term lodging unit has created unreasonable noise or disturbances, engaged in disorderly conduct or committed violations of this Code or any state or federal law pertaining to noise, disorderly conduct, the consumption of alcohol or the use of illegal drugs, promptly use best efforts to prevent a recurrence of such conduct by any transient user, occupant or guest. 7. The owner of the short term lodging unit shall use best efforts to ensure compliance with all the provisions of Title 6. 8. The owner of the short term lodging unit shall provide the transient user with a copy of Sections 5.95.047, 10.28.007, 10.28.010, 10.28.020, 10.58.030, and 10.66.020. 9. The owner of the short term lodging unit shall provide the transient user with a copy of the good neighbor policy created by the City and available on the City website, post a copy of the short term lodging permit and post a copy of the conditions set forth in this subsection in a conspicuous place within the unit. The notice shall be in substantial compliance with a template created by the City, which shall be available on the City website, and contain the following: a. The name of the local contact person(s) and phone number at which that person(s) may be reached on a twenty-four (24) hour basis. The local person(s) must be located within twenty-five (25) miles of the unit and shall respond to any call related to the unit within thirty (30) minutes; b. The number and location of on -site parking spaces; C. The street sweeping schedule for all public rights -of -way within three hundred (300) feet of the unit; Ordinance No. 2023- Page 8 of 14 d. The trash collection schedule for the unit, and the Code rules and regulations concerning the timing, storage and placement of trash containers and recycling requirements; e. Notification that no amplified sound or reproduced sound is allowed outside or audible from the property line between the hours of 10:00 p.m. and 10:00 a.m.; and f. Notification that any transient user, occupant or guest is responsible for all activities occurring on the property and that any transient user, occupant or guest may be cited and fined for creating a disturbance or violating any provision of this Code. 10. With respect to any short term lodging unit that is located in any safety enhancement zone, the owner of the unit and any agent retained by the owner shall take immediate action during the period that the safety enhancement zone is in effect to prevent any transient user, occupant or guest from engaging in disorderly conduct or committing violations of this Code or state or federal law pertaining to noise, disorderly conduct, the consumption of alcohol or the use of illegal drugs. 11. The owner shall: a. Ensure that all transient occupancy taxes and visitor service fees are collected and remitted to the City and otherwise comply with all transient occupancy tax and visitor service fee requirements, as set forth in Chapters 3.16 and 3.28. b. If the owner uses an agent to collect and remit the transient occupancy tax and the visitor service fee, either voluntarily or as directed by the City, the owner shall be responsible for ensuring that the agent collects and remits the transient occupancy tax and the visitor service fee to the City pursuant to the requirements set forth in this chapter and Chapters 3.16 and 3.28. C. If the Finance Director directs, in writing, a hosting platform to collect and remit the transient occupancy tax and the visitor service fee, the owner shall: (i) be responsible for ensuring that the hosting platform collects and remits the transient occupancy tax and the visitor service 16-12 Ordinance No. 2023- Page 9 of 14 fee to the City in accordance with this chapter; and (ii) when filing a return in accordance with Sections 3.16.070 and 3.28.040, the owner shall provide the City with a copy of all receipts showing the date the short term lodging unit was rented, the name of the hosting platform, the amount of transient occupancy tax and visitor service fee collected by the hosting platform, and proof that the transient occupancy tax and visitor service fee was remitted to the City. 12. The owner shall provide the City with the name and twenty-four (24) hour phone number of a local contact person(s) (who resides within twenty-five (25) miles of the property) who shall respond to contacts from the answering service, respond to any call related to the unit within thirty (30) minutes, and ensure compliance with this chapter in a timely manner. The owner or agent must provide a new local contact person and his or her phone number within five business days, if there is a change in the local contact person(s). 13. The owner shall ensure that all available parking spaces on site, which may include garage, carport, and driveway spaces as well as tandem parking, are available for the transient user, occupant or guest of the short term lodging unit. The owner shall disclose the number of parking spaces available on site and shall inform the transient user, occupant and/or guest that street parking may not be available. 14. The owner shall maintain a valid business license and short term lodging permit when engaging in short term lodging. 15. The owner shall include the City issued short term lodging permit number on all advertisements for the rental of the short term lodging unit and shall ensure the transient user is informed of the amount of the transient occupancy tax and visitor service fee prior to completion of the booking transaction. 16. The owner shall ensure that a permitted short term lodging unit is only used for residential purposes and not used for nonresidential uses, including, but not limited to, large commercial or non-commercial gatherings, commercial filming and/or nonowner wedding receptions. 17. The owner shall ensure that no amplified sound or reproduced sound is used outside or audible from the property line between the hours of 10:00 16-13 Ordinance No. 2023- Page 10 of 14 p.m. and 10:00 a.m. and that the transient user does not violate the requirements set forth in this chapter and Chapters 10.28, 10.58 and 10.66. 18. The owner shall comply with the nuisance response plan submitted with the application for a short term lodging permit and approved by the Finance Director. 19. The owner shall allow the City to inspect the short term lodging unit to confirm the number of bedrooms, gross floor area, and number/availability of parking spaces, seven calendar days after the City serves the owner with a request for inspection in accordance with Section 1.08.080. If, based on the inspection, it is determined that the information submitted to the City in accordance with Section 5.95.030 was false, in addition to any other remedy set forth in this chapter, the owner agrees that the owner shall be liable for the cost of conducting the inspection. 20. The owner shall provide the City with a copy of any written rental agreement(s) and the good neighbor policy, within seven calendar days after the City serves the owner with a notice of request for written rental agreements and the good neighbor policy in accordance with Section 1.08.080. 21. Neither an owner nor the owner's agent shall rent, let, advertise for rent, or enter into an agreement for the rental of any lodging unit, for less than two consecutive nights. 22. The owner shall: a. Require every transient user and guest of the transient user to comply with all State and local laws that regulate parking while staying at or visiting the short term lodging unit; b. Require every transient user to provide the owner with the license plate number for all vehicles which are used by the transient user or the transient user's guest while staying at or visiting the short term lodging unit; and C. Provide the City with the vehicle license plate number(s) for every vehicle which was used by the transient user or the transient user's guest while staying at or visiting the short term lodging, within seven Ordinance No. 2023-_ Page 11 of 14 calendar days after the City serves the owner with a notice of request for the vehicle license plate number(s) in accordance with Section 1.08.080. 23. The owner shall ensure that any transient user or transient user's guest complies with all State and local laws that regulate parking while the transient user or transient user's guest is staying at or visiting the short term lodging unit. For purposes of this condition, a transient user or transient user's guest shall be presumed to be staying at or visiting a short term lodging unit if a parking citation is issued to the transient user or the transient user's guest within one hundred (100) feet of the property line of the short term lodging unit during the time the transient user is renting the short term lodging unit. 24. The owner shall be required to invest in the lodging unit and report the investment to the City as follows: a. Commencing October 1, 2023, the owner shall be required to invest a minimum of ten percent (10%) of all rent collected from the short term lodging unit into improvements at that short term lodging unit. b. Beginning October 1, 2026, and every three years thereafter, as part of the renewal application process set forth in Section 5.95.030, the owner shall be required to certify and submit supporting documentation that a minimum of ten percent (10%) of all rent collected from the short term lodging unit during the reporting period, set forth below, was invested into improvements at that" short term lodging unit. The first reporting period shall cover all rent collected from October 1, 2023, through June 30, 2026, and the required investment of all rent collected shall occur prior to October 1, 2026. Thereafter, the reporting period shall cover all rent collected from the short term lodging unit beginning July 1 and ending on June 30, three years later, and the required investment of all rent collected shall occur prior the first day of October of that year. C. A newly constructed lodging unit shall be exempt from the minimum investment requirement provided in this subsection for the first five (5) years following the receipt of a certificate of occupancy from the City. d. For a specific reporting period, an owner of a lodging unit may seek relief from the requirements of this subsection by filing with the Finance Director a request for hearing on forms provided by the City and paying the fees established by the City Council by resolution at 16-15 Ordinance No. 2023- Page 12 of 14 least 180 calendar days prior to having to submit proof of compliance pursuant to Subsection 24 (b). If the owner requests a hearing and pays the hearing fee, the Finance Director shall serve written notice on the owner, pursuant to Section 1.08.080, setting forth the date, time, and place for the hearing. The hearing shall be scheduled not less than fifteen (15) calendar days, nor more than sixty (60) calendar days, from the date on which notice of the hearing is served by the Finance Director. At the hearing, the hearing officer will preside over the hearing, take evidence and then submit proposed findings and recommendations to the City Manager as to whether: i. The owner has made a significant investment in the lodging unit; and ii. The lodging unit is being properly maintained. For a specific reporting period, the City Manager may exempt, or conditionally exempt, the owner from the requirements of this section, in whole or in part, if there is substantial evidence to support a finding the lodging unit is being properly maintained or only a reduced investment is necessary to properly maintain the lodging unit. The City Manager shall render a decision within thirty (30) calendar days of the hearing and the decision shall be final. B. The City Manager shall have the authority to impose additional standard conditions, applicable to all short term lodging units, as necessary to achieve the objectives of this chapter. C. The City Manager shall have the authority to impose additional conditions on any permit in the event of any violation of the conditions to the permit or the provisions of this chapter subject to compliance with the procedures specified in Section 5.95.065. Section 6: The recitals provided in this ordinance are true and correct and_ are incorporated into the substantive portion of this ordinance. Section 7: If any section, subsection, sentence, clause or phrase of this ordinance is for any reason held to be invalid or unconstitutional, such decision shall not affect the validity or constitutionality of the remaining portions of this ordinance. The City Council hereby declares that it would have passed this ordinance and each section, subsection, sentence, clause or phrase hereof, irrespective of the fact that any one or Ordinance No. 2023- Page 13 of 14 more sections, subsections, sentences, clauses or phrases be declared invalid or unconstitutional. Section 8: The City Council finds the adoption of this ordinance is not a project subject to the California Environmental Quality Act ("CEQA") in accordance with Section 21065 of the California Public Resources Code and Sections 15060(c)(2), 15060(c)(3), and 15378 of the California Code of Regulations Title 14, Division 6, Chapter 3 ("CEQA Guidelines"), because it has no potential for resulting in physical change to the environment, directly or indirectly. The proposed action is also exempt pursuant to CEQA Guidelines Section 15061 (b)(3), the general rule that CEQA applies only to projects which have the potential for causing a significant effect on the environment. The amendments to NBMC Chapter 5.95 provide additional regulations on short-term lodging, which is an existing, permitted use, and thus do not authorize development that would directly result in physical change to the environment. Section 9: Except as expressly modified in this ordinance, all other sections, subsections, terms, clauses and phrases set forth in the Newport Beach Municipal Code shall remain unchanged and shall be in full force and effect. 16-17 Ordinance No. 2023- Page 14 of 14 Section 10: The Mayor shall sign and the City Clerk shall attest to the passage of this ordinance. The City Clerk shall cause the ordinance, or a summary thereof, to be published pursuant to City Charter Section 414. This ordinance was introduced at a regular meeting of the City Council of the City of Newport Beach held on the 23rd day of May, 2023, and adopted on the 13th day of June, 2023, by the following vote, to -wit: AYES: NAYS: ABSENT: NOAH BLOM, MAYOR ATTEST: LEILANI I. BROWN, CITY CLERK APPROVED AS TO FORM: CITYATTORNEY'S OFFICE AA ON C. HARP, CITYATTORNEY 16-18 ATTACHMENT B Redlines of Proposed Code Amendment Related to Reinvestment and Improvements of Short -Term Lodging Units (PA2023-100) Section 1: Subsection 5.95.005(L) is amended and Subsection 5.95.005(M) is hereby added to Chapter 5.95 (Short Term Lodging Permit) of the NBMC to read as follows: L. The hiah turnover of short term lodaina units results in additional deterioration to the short term lodging units and surrounding area, which necessitates regulations to ensure owners of short term lodging units are regularly reinvesting in and maintaining the units. M. The restrictions of this chapter are necessary to preserve the City's housing stock, the quality and character of the City's residential neighborhoods as well as to prevent and address the impacts on residential neighborhoods posed by short term lodgings. Section 2: Section 5.95.010 (Definitions) of Chapter 5.95 (Short Term Lodging Permit) of the NBMC is hereby amended to read as follows: 5.95.010 Definitions. For the purpose of this chapter, the following definitions shall apply: A. "Accessory dwelling unit" shall have the same definition as set forth in Chapter 20.70. B. "Agent" shall mean any person who is authorized in writing by the owner to represent and act for an owner. C. "Booking transaction" shall mean any reservation or payment service provided by a person who facilitates a short term lodging rental transaction between a transient user and owner for the use of a unit for a period of less than thirty (30) consecutive calendar days. D. "City Manager" shall mean the City Manager of the City or his or her designee. 16-19 E. "Finance Director" shall mean the Finance Director of the City or his or her designee. F. "Gross floor area" shall mean the area of the lodging unit that includes the surrounding exterior walls and any interior finished portion of a structure that is accessible and that measures more than six feet from finished floor to ceiling. Stairwells and elevator shafts above the first level shall be excluded from the calculation of gross floor area. G. "Home -sharing" shall mean an activity whereby the owner hosts a transient user in the owner's lodging unit, for compensation, for periods of less than thirty (30) consecutive calendar days, during which time the owner of the unit lives on site, in the unit, throughout the transient user's stay and the owner, the transient user and any other occupants live together in the same unit as a single housekeeping unit. H. "Hosting platform" shall mean a person, other than an owner or agent, who participates in the short term lodging business by facilitating a booking transaction using any medium of facilitation. "Improvement(s)" shall mean structural and/or fapade maintenance or repairs, including but not limited to finishes and fixtures, along with landscape and associated maintenance or repair to the exterior or interior of a lodging unit. J. �. "Lodging unit" or "unit" shall mean a "dwelling unit" as that term is defined in Chapter 20.70. An accessory dwelling unit shall not be considered a lodging unit or unit for purposes of this chapter. K. J. "Owner" shall mean the person(s) that hold(s) legal and/or equitable title to the lodging unit. L. K-. "Person" shall mean any individual and any form of business entity including, but not limited to, all domestic and foreign corporations, associations, syndicates, joint stock corporations, partnerships of every kind, clubs, business or common law trusts, societies, or limited liability companies. M. "Rent" shall have the same definition as set forth in Section 3.16.020, or any successor section. N. L-. "Residential district" shall mean those areas of the City so designated by Title 20 as well as any other area in the City designated for a residential use as part of 16-20 a planned community development plan, specific area plan or planned residential district. O. M-. "Short term" shall mean a lodging unit that is rented or leased as a single housekeeping unit for a period of less than thirty (30) consecutive calendar days. This also includes home -sharing. P. N-. "Short term lodging unit registry" shall mean the published registry maintained by the City that sets forth a list of all owners and the address of all units that have a valid short term lodging permit and business license with the City, a copy of which is available, without charge, to any person who requests a copy and which shall be accessible on the City's website. Q. 0- "Single housekeeping unit" shall have the same definition as set forth in Chapter 20.70. R. P—. "Transient" or "transient user" shall mean any person or persons who, for any period less than thirty (30) consecutive calendar days either at his or her own expense, or at the expense of another, obtains lodging in a lodging unit or the use of any lodging space in any unit, for which lodging or use of lodging space a charge is made. Section 3: Section 5.95.030 (Application for Permit) of Chapter 5.95 (Short Term Lodging Permit) of the NBMC is hereby amended to read as follows: An application for an annual short term lodging permit, renewal of a short term lodging permit, reinstatement of a short term lodging permit or transfer of a short term lodging permit shall be filed with the Finance Director upon forms provided by the City. A. An application for a new permit, renewal permit, the reinstatement of a permit or the transfer of a permit shall contain the following information- 1. The name, address and telephone number of the owner of the unit for which the short term lodging permit is to be issued. 2. The name, address and telephone number of the agent, if any, of the owner of the unit. 3. Evidence of a valid business license issued by the City for the separate business of operating a short term lodging unit or units. 16-21 4. The number of bedrooms in the lodging unit. 5. The gross floor area of the lodging unit. 6. The number of parking spaces available on site and a description indicating the location and size of each parking space. 7. A nuisance response plan, which sets forth the owner's plan for handling disruptive transient users. 8. A certification that the applicant has reviewed the covenants, conditions and restrictions, if any, and a short term use is permitted at the location pursuant to the terms of the covenants, conditions and restrictions, if any. 9. A certification that the applicant will comply with, has complied with, or is exempt from, the reinvestment and improvement requirement provided in Section 5.95.045(A)(24) as well as supporting documentation, if any. 10. -9-. Acknowledgment of receipt and inspection of a copy of all regulations pertaining to the operation of a short term lodging unit. 11. 4$ Such other information as the Finance Director deems reasonably necessary to administer this chapter. B. An application for the renewal of a short term lodging permit shall be filed within thirty (30) calendar days of the short term lodging permit's expiration, or the short term lodging permit shall be deemed abandoned. C. An application for the reinstatement of a short term lodging permit closed by the Finance Director pursuant to Section 5.95.080 shall be filed within thirty (30) calendar days of the date the permit was closed by the Finance Director, or the short term lodging permit shall be deemed abandoned. D. An application for the reinstatement of a previously suspended short term lodging permit shall be filed within thirty (30) calendar days of the end of the suspension period, or the short term lodging permit shall be deemed abandoned. E. If any application is deemed incomplete, which shall be determined in the sole discretion of the Finance Director, the application shall be completed within thirty 16-22 (30) calendar days of the service of notice that the application is incomplete, which shall be served in accordance with Section 1.08.080, or the application and any associated permit shall be deemed abandoned. F. If good causes exist, as determined in the sole discretion of the Finance Director, the Finance Director may extend the deadlines set forth in subsections (B) through (E) of this section. G. For purposes of calculating the maximum number of permits under Section 5.95.042, a short term lodging permit shall be deemed valid until the applicable permit has been deemed abandoned. Section 4: Section 5.95.035 (Denial of Permit) of Chapter 5.95 (Short Term Lodging Permit) of the NBMC is hereby amended to read as follows: If permits are available for issuance, no timely application filed by an owner for an annual permit, renewal of a permit, reinstatement of a permit or transfer of a permit for a unit eligible to be used as a short term lodging unit, as provided for in Section 5.95.015 and this Code, shall be denied unless: the owner does not have a current valid business license; the owner has failed to pay transient occupancy tax, the visitor service fee, a penalty, a fine or inspection cost, due and owing to the City; the nuisance response plan is deemed inadequate by the Finance Director; the owner has failed to comply with Section 5.95.045(A)(24); or the short term lodging permit for the same unit and issued to the same owner has been revoked. Section 5: Section 5.95.045 (Conditions) of Chapter 5.95 (Short Term Lodging Permit) of the NBMC is hereby amended to read as follows: A. All permits issued pursuant to this chapter are subject to the following standard conditions: 1. The owner shall prohibit a lessee of a lodging unit from renting the lodging unit to a transient user for a short term and from home -sharing. 2. The owner shall not rent a lodging unit to a transient user that is under the age of twenty-five (25). 3. The owner shall enter into a written agreement with the transient user that requires: 16-23 a. All persons residing in the short term lodging unit to live together as a single housekeeping unit; and b. Limits the overnight occupancy of the short term lodging unit to the maximum permitted by the building code and fire code. 4. The owner shall ensure that the transient user complies with all terms of the written agreement set forth in subsection (A)(3) of this section. 5. The owner shall use best efforts to ensure that the transient user, occupants and/or guests of the short term lodging unit do not create unreasonable noise or disturbances, engage in disorderly conduct, or violate provisions of this Code or any state or federal law pertaining to noise, disorderly conduct, the consumption of alcohol, or the use of illegal drugs. 6. The owner shall, upon notification that any transient user, occupant and/or guest of his or her short term lodging unit has created unreasonable noise or disturbances, engaged in disorderly conduct or committed violations of this Code or any state or federal law pertaining to noise, disorderly conduct, the consumption of alcohol or the use of illegal drugs, promptly use best efforts to prevent a recurrence of such conduct by any transient user, occupant or guest. 7. The owner of the short term lodging unit shall use best efforts to ensure compliance with all the provisions of Title 6. 8. The owner of the short term lodging unit shall provide the transient user with a copy of Sections 5.95.047, 10.28.007, 10.28.010, 10.28.020, 10.58.030, and 10.66.020. 9. The owner of the short term lodging unit shall provide the transient user with a copy of the good neighbor policy created by the City and available on the City website, post a copy of the short term lodging permit and post a copy of the conditions set forth in this subsection in a conspicuous place within the unit. The notice shall be in substantial compliance with a template created by the City, which shall be available on the City website, and contain the following: a. The name of the local contact person(s) and phone number at which that person(s) may be reached on a twenty-four (24) hour basis. The 16-24 local person(s) must be located within twenty-five (25) miles of the unit and shall respond to any call related to the unit within thirty (30) minutes; b. The number and location of on -site parking spaces; C. The street sweeping schedule for all public rights -of -way within three hundred (300) feet of the unit; d. The trash collection schedule for the unit, and the Code rules and regulations concerning the timing, storage and placement of trash containers and recycling requirements; e. Notification that no amplified sound or reproduced sound is allowed outside or audible from the property line between the hours of 10:00 p.m. and 10:00 a.m.; and f. Notification that any transient user, occupant or guest is responsible for all activities occurring on the property and that any transient user, occupant or guest may be cited and fined for creating a disturbance or violating any provision of this Code. 10. With respect to any short term lodging unit that is located in any safety enhancement zone, the owner of the unit and any agent retained by the owner shall take immediate action during the period that the safety enhancement zone is in effect to prevent any transient user, occupant or guest from engaging in disorderly conduct or committing violations of this Code or state or federal law pertaining to noise, disorderly conduct, the consumption of alcohol or the use of illegal drugs. 11. The owner shall: a. Ensure that all transient occupancy taxes and visitor service fees are collected and remitted to the City and otherwise comply with all transient occupancy tax and visitor service fee requirements, as set forth in Chapters 3.16 and 3.28. b. If the owner uses an agent to collect and remit the transient occupancy tax and the visitor service fee, either voluntarily or as directed by the City, the owner shall be responsible for ensuring that 16-25 the agent collects and remits the transient occupancy tax and the visitor service fee to the City pursuant to the requirements set forth in this chapter and Chapters 3.16 and 3.28. C. If the Finance Director directs, in writing, a hosting platform to collect and remit the transient occupancy tax and the visitor service fee, the owner shall: (i) be responsible for ensuring that the hosting platform collects and remits the transient occupancy tax and the visitor service fee to the City in accordance with this chapter; and (ii) when filing a return in accordance with Sections 3.16.070 and 3.28.040, the owner shall provide the City with a copy of all receipts showing the date the short term lodging unit was rented, the name of the hosting platform, the amount of transient occupancy tax and visitor service fee collected by the hosting platform, and proof that the transient occupancy tax and visitor service fee was remitted to the City. 12. The owner shall provide the City with the name and twenty-four (24) hour phone number of a local contact person(s) (who resides within twenty-five (25) miles of the property) who shall respond to contacts from the answering service, respond to any call related to the unit within thirty (30) minutes, and ensure compliance with this chapter in a timely manner. The owner or agent must provide a new local contact person and his or her phone number within five business days, if there is a change in the local contact person(s). 13. The owner shall ensure that all available parking spaces on site, which may include garage, carport, and driveway spaces as well as tandem parking, are available for the transient user, occupant or guest of the short term lodging unit. The owner shall disclose the number of parking spaces available on site and shall inform the transient user, occupant and/or guest that street parking may not be available. 14. The owner shall maintain a valid business license and short term lodging permit when engaging in short term lodging. 15. The owner shall include the City issued short term lodging permit number on all advertisements for the rental of the short term lodging unit and shall ensure the transient user is informed of the amount of the transient occupancy tax and visitor service fee prior to completion of the booking transaction. 16-26 16. The owner shall ensure that a permitted short term lodging unit is only used for residential purposes and not used for nonresidential uses, including, but not limited to, large commercial or non-commercial gatherings, commercial filming and/or nonowner wedding receptions. 17. The owner shall ensure that no amplified sound or reproduced sound is used outside or audible from the property line between the hours of 10:00 p.m. and 10:00 a.m. and that the transient user does not violate the requirements set forth in this chapter and Chapters 10.28, 10.58 and 10.66. 18. The owner shall comply with the nuisance response plan submitted with the application for a short term lodging permit and approved by the Finance Director. 19. The owner shall allow the City to inspect the short term lodging unit to confirm the number of bedrooms, gross floor area, and number/availability of parking spaces, seven calendar days after the City serves the owner with a request for inspection in accordance with Section 1.08.080. If, based on the inspection, it is determined that the information submitted to the City in accordance with Section 5.95.030 was false, in addition to any other remedy set forth in this chapter, the owner agrees that the owner shall be liable for the cost of conducting the inspection. 20. The owner shall provide the City with a copy of any written rental agreement(s) and the good neighbor policy, within seven calendar days after the City serves the owner with a notice of request for written rental agreements and the good neighbor policy in accordance with Section 1.08.080. 21. Neither an owner nor the owner's agent shall rent, let, advertise for rent, or enter into an agreement for the rental of any lodging unit, for less than two consecutive nights. 22. The owner shall: a. Require every transient user and guest of the transient user to comply with all State and local laws that regulate parking while staying at or visiting the short term lodging unit; 16-27 b. Require every transient user to provide the owner with the license plate number for all vehicles which are used by the transient user or the transient user's guest while staying at or visiting the short term lodging unit; and C. Provide the City with the vehicle license plate number(s) for every vehicle which was used by the transient user or the transient user's guest while staying at or visiting the short term lodging, within seven calendar days after the City serves the owner with a notice of request for the vehicle license plate number(s) in accordance with Section 1.08.080. 23. The owner shall ensure that any transient user or transient user's guest complies with all State and local laws that regulate parking while the transient user or transient user's guest is staying at or visiting the short term lodging unit. For purposes of this condition, a transient user or transient user's guest shall be presumed to be staying at or visiting a short term lodging unit if a parking citation is issued to the transient user or the transient user's guest within one hundred (100) feet of the property line of the short term lodging unit during the time the transient user is renting the short term lodging unit. 24. The owner shall be required to invest in the lodging unit and report the investment to the Citv as follows: a. Commencing October 1, 2023, the owner shall be required to invest a minimum of ten percent (10%) of all rent collected from the short term lodging unit into improvements at that short term lodging unit. b. Beginning October 1, 2026, and every three years thereafter, as part of the renewal application process set forth in Section 5.95.030, the owner shall be required to certify and submit supporting documentation that a minimum of ten percent (10%) of all rent collected from the short term lodging unit during the reporting period, set forth below, was invested into improvements at that short term lodging unit. The first reporting period shall cover all rent collected from October 1, 2023, through June 30, 2026, and the required investment of all rent collected shall occur prior to October 1, 2026. Thereafter, the reporting period shall cover all rent collected from the short term lodging unit beginning July 1 and ending on June 30, three years later, and the required investment of all rent collected shall occur prior the first day of October of that year. 16-28 C. A newly constructed lodging unit shall be exempt from the minimum investment requirement provided in this subsection for the first five (5) years following the receipt of a certificate of occupancy from the City. d. For a specific reporting period, an owner of a lodging unit may seek relief from the requirements of this subsection by filing with the Finance Director a request for hearing on forms provided by the City and paying the fees established by the City Council by resolution at least 180 calendar days prior to having to submit proof of compliance pursuant to Subsection 24 (b). If the owner requests a hearing and pays the hearing fee, the Finance Director shall serve written notice on the owner, pursuant to Section 1.08.080, setting forth the date, time, and place for the hearing. The hearing shall be scheduled not less than fifteen (15) calendar days, nor more than sixty (60) calendar days, from the date on which notice of the hearing is served by the Finance Director. At the hearing, the hearing officer will preside over the hearing, take evidence and then submit proposed findings and recommendations to the City Manager as to whether: i. The owner has made a significant investment in the lodging unit; and ii. The lodging unit is being properly maintained. For a specific reoortina period. the Citv Manaaer may exempt. or conditionally exempt, the owner from the requirements of this section, in whole or in part, if there is substantial evidence to support a finding the lodging unit is being properly maintained or only a reduced investment is necessary to properly maintain the lodging unit. The City Manager shall render a decision within thirty (30) calendar days of the hearina and the decision shall be final. B. The City Manager shall have the authority to impose additional standard conditions, applicable to all short term lodging units, as necessary to achieve the objectives of this chapter. C. The City Manager shall have the authority to impose additional conditions on any permit in the event of any violation of the conditions to the permit or the provisions of this chapter subject to compliance with the procedures specified in Section 5.95.065. 16-29