Landowner Prevails in Short-Term Vacation Rental Lawsuit Against Santa Barbara

Miller Starr Regalia
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Miller Starr Regalia

On May 4, 2021, the Second District Court of Appeal affirmed a trial court decision, in Kracke v. City of Santa Barbara, __ Cal.App.5th __ (2021) (Case No. B300528), enjoining the City of Santa Barbara’s enforcement of a short-term vacation rental ban in the coastal zone, through proactive enforcement of existing zoning regulations, unless it obtains Coastal Commission approval or a waiver of such requirement.

Before 2015, the City encouraged short-term vacation rentals along its coast by treating them as permissible residential uses.  The City only required the homeowner to register the rental, obtain a business license, and pay the transient occupancy tax.  But in June 2015, the City began regulating the vacation rentals as “hotels” through more stringent interpretation of its zoning ordinance, which effectively banned the rentals in the coastal zone.  Although the Coastal Act defines the term “development” broadly and requires a coastal development permit for “any change in the density or intensity of use of land,” the City did not seek a coastal development permit or an amendment to its certified local coastal program before instituting the ban.

The owner of a company that manages short-term vacation rentals sued the City, challenging its new enforcement policy as “development” under the Coastal Act.  The trial court explained that the loss of short-term rentals impacted the “density or intensity of use of land” because rentals provide a resource for individuals and families to visit the Santa Barbara coast.  Consequently, it issued a writ requiring the City to allow short-term vacation rentals in the coastal zone on the same basis as the City had allowed them to operate prior to June of 2015, until such time as the City obtains a coastal development permit or otherwise complies with the Coastal Act.

The Court of Appeal relied substantially on Greenfield v. Mandalay Shores Community Assn., a 2018 case in which the Second District Court of Appeal held that an Oxnard homeowners’ association ban of short-term vacation rentals changed the intensity of use and access to single-family residences in the coastal zone and must be approved by the city and Coastal Commission.  The Court in Kracke explained that “the same is true here.”  Although the City, rather than a private entity, imposed the coastal short-term vacation rental ban, it was also accomplished without the Commission’s input or approval.  The City cannot act unilaterally.  As in Greenfield, “[t]he decision whether to ban or regulate [short-term vacation rentals] in the coastal zone is a matter for the City and the Commission to decide.”

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