palm-springs-measure-c

There Goes the Neighborhood

Jeffrey Marino Current PSL, Real Estate

palm-springs-measure-c
PHOTOGRAPHS BY LANCE GERBER

Palm Springs is at war. Despite a strict ordinance on short-term vacation rentals 
by homeowners, some full-time residents are pushing for even tighter 
regulations. Opponents, citing the economic benefits of tourism, are fighting the measure, which goes to a vote June 5. Will rental properties be effectively banned?

Norm Lofthus embodies the contradictions inherent to Palm Springs: A successful entrepreneur with a degree in sculpture, he’s laid-back yet intense, open but guarded, self-deprecating yet displaying a steely resolve when it comes to his community.

“Neighborhoods are the fabric of our society,” Lofthus says. “When you lose sight of that, the fabric begins to fray.”
Sitting at his dining room table, Lofthus is framed by the towering San Jacinto Mountains and sprawling canyons that were his stomping grounds as a child. His father first moved his family here in the 1950s to pursue a career in radio.

With an impish grin that quickly turns to a nostalgic smile, Lofthus says, “We arrived in August, and I thought my parents had brought me to hell. But I quickly fell in love. As a kid I was overwhelmed by the beauty of the landscape. That’s why I came back. I chose this neighborhood because it’s quiet; it’s blissful.”

But not long after he settled in to the peace and quiet of his desert paradise, Lofthus watched his neighborhood transform from a sleepy hamlet of retirees and well-heeled desert rats to a collective of itinerant party animals.

At one time Lofthus was surrounded on three sides by short-term vacation rentals. He describes such nuisances as people urinating on lawns, food trucks parked curbside with generators humming, and upward of 30 cars lining the streets for events as diverse as high school reunions and memorial services.

“These homes were being used as businesses. That is not what a neighborhood was intended for,” says Lofthus.

So rather than allow what he saw as the degradation of his community to continue, Lofthus took matters into his own hands. He hired an attorney and covered all the costs to circulate a ballot among his neighbors proposing an amendment to their covenants, conditions, and restrictions limiting rentals to no fewer than 28 days.
The ballot passed 25 to 3, and peace was restored. “It’s so hard for regular people to win. But it’s worked here,” he says.

normlofthus

While Lofthus was fighting his battle, a war over the fate of vacation rentals in Palm Springs was just beginning, one that will come to a head June 5, when residents vote in a special municipal election on a measure that would impose similar limitations — some say a “ban” — on short-term rentals citywide. Known as Measure C, it was placed on the ballot in large part due to the efforts of a community organization called Palm Springs Neighbors for Neighborhoods (PSN4N).

Since 2008, when the vacation rental permitting process was first developed, regulations on short-term rentals have steadily increased. The current iteration of the ordinance, which took effect in April 2017, is 21 pages long. In essence, the ordinance requires owners of short-term rentals to pay a $900 permit fee, limits new applicants to one permit per owner, caps the number of times a home can be rented at 36 per year, and requires an in-person key exchange at every check-in.

In addition to the regulations, the city established the Vacation Rental Compliance Department, which includes officers who respond to community complaints that come through a 24-hour hotline that has been in use since 2008. Since April 2017, calls to the hotline have decreased by 39 percent, and police involvement in vacation rental complaints has fallen by 90 percent, according to the department staff.

Opponents to Measure C say the current ordinance has proved effective in a very short time. “We passed what is considered the most stringent regulation on short-term vacation rentals in the country,” says City Council member Geoff Kors. “At one time, everybody was on board with the current ordinance. It is working.”

But PSN4N disagrees. Measure C proposes to limit vacation rentals to a minimum of 28 days in residentially zoned, single-family neighborhoods. Homeowners will have two years to adjust their business models or relocate.

“They want to call this a limit,” says Bruce Hoban. “But make no mistake, it’s a ban.”

Hoban is the co-founder of Vacation Rental Owners and Neighbors of Palm Springs and one of the architects of the campaign against Measure C, spear-headed by a community organization dubbed “We Love Palm Springs.”

 brucehoban

Bruce Hoban is fighting Measure C, saying it would effectively ban vacation rentals. An impact report says the measure would cost the city nearly $200 million per year.

Hoban is a man on a mission. Sitting on the patio of Ernest Coffee, he is armed with a dossier 4 inches thick and, notably, no coffee. His affect is friendly, but his readiness for debate is clearly written in his piercing blue eyes. “Where are the facts?” he asks. “They say vacation rentals are ruining Palm Springs. But they’ve always been here. I came here as a kid, and we would rent a house for a week. It’s always been going on. I think it’s just more visible now.”

Hoban argues that there is no way to accurately claim an unsustainable increase in vacation rentals, since the city began tracking them only in 2008. Even then, many homes were rented without a permit since the penalty was low and amounted to a slap on the wrist, codified by the city as a “courtesy notice” to nonpermitted units.

In 2014 the courtesy notice went away, and the city authorized the first administrative action against illegal vacation rentals. From that point to April 2017, the number of permitted homes jumped from 1,400 to 2,135, according to the City of Palm Springs Finance and Treasury Department. “Since the latest ordinance went into effect in April, the number of permitted homes actually declined to 1,986,” says Hoban.

Another bone of contention for Hoban, one with a more philosophical bent, has to do with the opposition’s zoning argument. Does use of a single-family home as a vacation rental mean that it is no longer a residence? Proponents of the ordinance argue that short-term rentals are a business that have no place in a residential neighborhood. But Hoban asks, “If I choose to rent out my home for a year, and I make income from it, isn’t that also a business? It doesn’t violate the zoning regulations, because the use of the property has not changed. It’s not a convenience store or a disco. It’s still a home where people reside.”

Data-driven and existential debates aside, the heart of the matter for Hoban and the members of We Love Palm Springs is that the city thrives because it has always welcomed tourists. To ban the use of single-family homes as short-term vacation rentals would fundamentally change the character of this town and have a dramatic economic effect on the full-time residents who call Palm Springs home.

There is evidence Hoban is right, at least when it comes to the economics of the issue. Prior to the decision to put the ordinance to a vote in June, the City Council commissioned an economic impact report to determine how enacting Measure C would affect the city’s bottom line.

 palmspringsneighborsforneighbors

“We don’t hate tourists,” insists Stephen Rose of Palm Springs Neighbors for Neighborhoods, which led the charge for Measure C to be placed on the June ballot.

The report, which all sides agree has flaws, claims that enacting the proposed ordinance would lead to a loss of nearly $200 million per year. This staggering figure accounts for both the direct impact of lost tax revenue and the indirect impact that a reduction in visitors to the city would have on retail and hospitality spending.

PSN4N, We Love Palm Springs, and the City Council agree that this estimated loss is likely inaccurate, since the study does not account for the economic benefits created by full-time residents who would likely replace the short-term renters. As council member J.R. Roberts put it: “These homes aren’t going to just vanish into thin air.”

“Every dollar I make from my rental I reinvest into my property and the community.”Anne Winthrop, Palm Springs 
rental house owner

One figure, however, is not disputed. In the fiscal year 2016–17, vacation rentals generated $7.58 million in transient occupancy tax revenue. This accounted for 25 percent of the total amount of tax revenue collected from all types of transient lodging. The impact report estimates that the city would lose $6.3 million in annual tax revenue if the ordinance were to be adopted.

There’s no question that short-term vacation rentals are a significant aspect of the Palm Springs economy. Vacation Palm Springs is the largest short-term rental-property management company in the region and has been operating since 2001 — seven years before Airbnb was founded. Around lunchtime on a weekday afternoon, the company’s bright and cheerful office is bustling. Phones are ringing off the hook, the staff seems harried but welcoming, and clients ebb and flow through the front door.

One of those clients is Anne Winthrop, who lives full time in Newport Beach and uses Vacation Palm Springs to manage her second home as a short-term rental. Winthrop is spritely and animated, in town for the day to check on her rental and take her sister out to lunch for her birthday.

“I hope to retire here someday,” Winthrop says. Eschewing the notion that vacation rental owners are absentee landlords who take their profits and run, Winthrop insists: “Every dollar I make from my rental I reinvest into my property and the community. I am very involved in Palm Springs.”

“I view vacation rentals as a complementary industry to the hotel industry in Palm Springs.”Aftab dada, Hilton exec and president of the Palm Springs Hospitality Assocation

So involved, in fact, that Winthrop changed her voter registration from her Newport Beach address to Palm Springs specifically so she could vote “no” on Measure C in June.

“I check in with my neighbors all the time, and I have never had a problem. There were a few bad apples … problem houses. But the city’s done a great job with the new rules.”

This is a sentiment that PSN4N does not share. For that organization’s members, foes align on all sides.

“It’s really hard when you don’t have a single ally on the City Council,” says Stephen Rose, treasurer and designated spokesperson for PSN4N. “This isn’t a David and Goliath story; this is more like an elephant versus a flea.”

In addition to the City Council and We Love Palm Springs, the organization counts among its opponents the hospitality association, Airbnb and other gig-economy tech giants, and real estate developers.

Rose, Robert Grimm, and Marla Malaspina are sitting around Rose’s dining room table, forming a dais in the late afternoon light filtering over Mount San Jacinto. Rose and Grimm are clad in branded royal-blue PSN4N polos, while Malaspina is dressed in tasteful business casual. “They’re retired,” she jokes. “I still have to work.”

“Zoning is really what this is all about,” says Rose. “There’s always been pressure to operate commercial business in residential areas because it’s cheaper. Airbnb found a crack in the dike, and now it’s overflowing.”

Because of that crack, says PSN4N, neighborhoods have become overrun with absentee landlords operating rental businesses that have led to, in addition to noise nuisances, a loss of community spirit, a rising crime rate, and a compromised quality of life for full-time residents.

City leadership looms large on the list of adversaries for PSN4N. The group is quick to point out that the approval of steep tax incentives for recent development deals, including the Kimpton Rowan and Virgin hotels, reveals the extent to which the city has become dependent on the transient occupancy tax generated from short-term rentals.

“If it weren’t for the city’s petulance, we wouldn’t be here,” says Rose in his rapid-fire style. “The Johnny-come-latelies are now coming into our working-class neighborhoods and evicting them. The council has never looked into how many full-time residents have been evicted and replaced with short-term renters.”

Although the group participated in the drafting of the city’s current ordinance, it was motivated to draft Measure C since, in members’ experience thus far, enforcement isn’t working.

However, the city claims that its code enforcement officers are the first responders to every complaint and have proved effective. In the City Council meeting held Feb. 21, Mayor Robert Moon took the opportunity to personally thank them.

“I live in Vista Las Palmas … I have three [vacation rentals] on my block, and they’ve been a nightmare. Since you guys took over and started doing this, there haven’t been hardly any problems whatsoever.”

Grimm, who says he moved from Palm Springs to Palm Desert because of the nuisance created by short-term renters, is dubious. “The first responder is not the city; it’s the homeowner next door,” he says. “Nobody wants to make that call. You don’t know if they’re going to come after you if you call. The only way enforcement is working is if the city gets no calls.”

Despite their deep disaffection with city leadership, the members of PSN4N are keen to express that they are not anti-tourism. “We don’t hate tourists,” insists Rose. Malaspina follows this proclamation with what sounds like a reasonable, albeit canned, response: “We just need to encourage developers to look outside our blocks.”

Aftab Dada, vice president and managing director of the Hilton Palm Springs, as well as president of the Palm Springs Hospitality Association, doesn’t think that will work. Even with the tax incentives the city offers to developers, Dada points out, “the city of Palm Springs went from 1987 to 2016 without one single full-service hotel being built. Arrive is the only new boutique hotel; the rest are all conversions.”

Since 2016, Palm Springs has undergone a development boom, with last year’s opening of the 153-room Kimpton Rowan and other large-scale hotels — including Virgin, Hyatt Andaz, and Dream — on the horizon.
Dada, who has been involved in the hospitality industry in Palm Springs for 30 years, seems an unlikely character to endorse short-term rentals. It begs the question, why would someone with such a stake in the hotel industry encourage what seems to be the competition?

“I view vacation rentals as a complementary industry to the hotel industry in Palm Springs. In any other town, I might not say so. During the weekends and high season, the hotels have 100 percent occupancy. Without the rentals, we would not be able to satisfy the demand,” he explains.

A staunch opponent of Measure C, Dada wishes its proponents would give the current ordinance a chance to work. “The City Council worked very hard with all parties involved to come to a consensus on the best way to regulate STRs in our neighborhoods,” says Dada. “It’s only been 10 months since the current rules have been in place, and we are already seeing vast improvement. I would urge those who want to ban vacation rentals to give it at least two years.”

Time will tell. On June 5, rather than the volley of arguments from both sides of the debate over who is right, the citizens of Palm Springs will cast their votes. During the 
Feb. 21 council meeting, City Attorney Edward Kotkin warned that if the measure passes, the city will likely face a deluge of litigation from business owners to the Agua Caliente Band of Cahuilla Indians, who publicly oppose what they term “the ban.”

But for Rose’s part, the whole point is to put the matter 
to rest at the will of the voters. Asked if he will continue the fight should the measure be defeated at the ballot box, he replies, “After June 5, I’m done.”