DEL MAR — The Del Mar City Council plans to put forward a ballot measure in November to impose a transient occupancy tax on short-term rentals as part of a larger effort to adopt new regulations for these rentals by the end of the year.
The lengthy discussion on Monday marked the sixth City Council meeting in the past two years focused on short-term rentals, or STRs, as officials continue to slowly iron out details for a new ordinance. These rentals are not currently subject to TOT, causing the city to lose thousands of dollars in revenue annually.
Del Mar currently imposes a 13% TOT on hotels and seeks to impose the same tax on STRs in the ballot measure. City Manager Ashley Jones said the city’s current code language only allows TOT to be collected from hotels with three or more units, and this needs to be changed to explicitly mention STRs.
“As written, the current code only allows us to charge TOT on properties with three or more units, which would not be applicable for all of the short-term rentals,” Jones said.
If passed, Finance Manager Monica Molina estimates that the annual TOT revenue from these rentals will be around $775,000.
While TOT is generally applied to the total cost of the rent or room price, the council still needs to determine whether this should also include cleaning and booking fees often charged by vacation rentals.
Some community members argued that including these fees in the taxed total would make things too expensive for those renting an STR. They also noted that hosting platforms like Airbnb already charge guests a service fee of around 15% and that many guests may decide to look elsewhere once they see the total cost at checkout.
“It’s just a huge money grab,” said STR owner Gina Mattern. “People have a finite amount of money that they’re willing to spend.”
Council members Terry Gaasterland and Dan Quirk said at this point, they were not supportive of including booking fees in the TOT total.
Members of the local hotel industry also had reservations regarding the proposed tax, particularly draft language stating that resort fees would also be included. Management at L’Auberge Del Mar said in an email that they support imposing TOT on short-term rentals, but that including resort fees would be detrimental to hotel guests and business operations.
“Resort fees are often bundled to provide better value for guests. Taxing these fees may lead hotels to reconsider offering bundled services, potentially resulting in higher costs for individual services and a less satisfactory guest experience,” L’Auberge said.
The TOT item is the second local measure proposed to voters in November. Earlier this month, the City Council also agreed to move forward with a measure to increase council members’ monthly salaries.
Mayor Dave Druker said the measure’s outcome, whether it passes or not, will inform the council’s policy on STRs.
“I think it’s absolutely essential that this be on the ballot,” Druker said.
STR ordinance
Principal Planner Amanda Lee said the city plans to introduce a draft ordinance to the council in October following Planning Commission approval, receive the outcome of the TOT ballot measure in November, and then vote on the ordinance in December based on that outcome.
The council has already agreed upon several elements for the ordinance, including limiting STRs to a primary residence (where someone permanently resides for at least six months of the year), setting a citywide cap of 129 new STRs, setting a three-night minimum stay, and implementing a transient occupancy tax.
The council has also supported grandfathering in existing STRs and exempting them from some of these restrictions until the property changes ownership or loses its permit.
One of the main concerns discussed at Monday’s meeting was whether an existing STR would remain exempt from the new requirements if the owner transferred it to a family member. Several vacation rental owners in the city said they want to pass on their rentals to their kids but don’t want their kids to be forced to live at the rental as their primary residence.
“I have a huge issue with attrition… If we pass these down to our kids, but then our kid has to live in the unit, that won’t work,” said Kimberly Jackson, owner of Vacation Rentals by Kimberly.
City officials assured residents that while ownership changes would require a new permit, transferring the title to another family member would not require them to obtain or live at the home as their primary residence.
The council also indicated they would allow STRs owned by family LLCs and trusts run by natural persons, but not those owned by timeshares, business trusts or corporations.
Current short-term rental owners continue to oppose the 129-unit cap, which would include 60% in the North Beach area, 25% in the South Bluff area, and 15% in the Hills. The cap would not apply to existing rentals, of which 101 have registered with the city.
Residents said STRs provide a unique opportunity for visitors to stay near the beach and that limiting these opportunities will limit overall coastal access. Many also argue that these rentals are part of the fabric of the community, having been used since the city’s early days, when people first started coming to see the horse races.
“What is Del Mar? It’s a tourist town. To cap people’s ability to come and see this unique town, it’s so small, there really aren’t a lot of places they can come and stay right by the beach,” said STR operator Lauren Ranes.
Councilmember Dwight Worden has continued to uphold the city’s position from previous years that STRs were never a legal, permitted use in the city.
“They’ve never been allowed to be used, and that’s what our planning department has told us and that’s what our city attorney has told us,” Worden said, to scoffs from audience members.
The city also plans a 10% cap on STRs in condominium and apartment buildings.
While 101 active STRs have registered with the city, the true number of operating rentals is believed to be much higher.
