Have you ever considered Vacation Rentals?

Are you considering purchasing a second home, or currently own one? Do you have an extra room or portion of your house or duplex available?

Santa Cruz County, with all of its many splendors ranging from gorgeous coastlines and legendary surf spots, to majestically scenic redwood drives and hikes, to iconic landmarks and family-friendly entertainment, provides a great opportunity to venture into the proposition of gaining extra income from or investing in vacation rentals.

 

What is a Vacation Rental?

A vacation rental, also known as “short-term rental” or “transient rental use”, is defined as an entire or a portion of a residential home rented for a maximum of 30 days.

In Santa Cruz County, vacation rentals can include single-family houses, multi-family dwelling units (such as duplexes and triplexes), condominiums or townhouses. Apartments, mobile homes and Additional Dwelling Units (often referred to as “granny units”) are not accepted.

 

Where Are Vacation Rentals Allowed?

All residential use zoning areas of the county allow vacation rentals, with the exception of Live Oak, Seacliff/Aptos, Davenport/Swanton, Capitola and Santa Cruz, which have limited designated areas where the rentals are allowed.

Note that there are additional limitations including distances between vacation rentals and number of rentals allowed in specific areas inside these designated areas. It is important to contact the County Planning Department or City Planning Department to determine eligibility before buying a home to be used as a vacation rental or submitting your application.

Page two of this downloadable document, describes the limited designated areas as:

  • The “Live Oak Designated Area”, called “Yacht Harbor Special Community” is “that portion of Live Oak that lies east and south of East Cliff Drive and Portola Drive from the intersection of 9th Avenue and East Cliff Drive to the intersection of Portola Drive and 41st Avenue”.
  • The “Sea Cliff/Aptos Designated Area” is “that portion of the Aptos Planning Area bounded on the west by the Capitola city limit, on the north by Highway 1, and on the east and southeast by Bonita Drive, San Andreas Road, and the Urban Services Line from San Andreas Road to Monterey Bay”.
  • The “Davenport/Swanton Designated Area” is “that portion of the North Coast Planning Area bounded on the south by Riverside Ave and San Vincente Street in the unincorporated town of Davenport, and extending north along Highway 1 to include the areas of New Town and Davenport Landing south of Highway 1, and bounded on the north by the intersection of Swanton Road and Highway 1, and including all parcels within one-quarter mile of Swanton Road, but excluding any parcels that abut Last Chance Road”.
  • Capitola’s designated area is known as the “Transient Rental Use Overlay District”, as found on their Community Development page here, “This area consists of the Capitola Village, Riverview Avenue as far north as city hall, as far west as El Camino Medio, as far east as Cliff Drive and as far south as Capitola Beach”. A visual map can be viewed here.
  • Santa Cruz currently does not have designated areas, but is reviewing possible new limitations and designated areas, and it is recommended to contact the city’s Short Term Rental Planning Department for further information.

 

What is Required to Set-Up A Vacation Rental in Santa Cruz County?

Santa Cruz Country requires a permit and monthly report and payment of Transient Occupancy Tax, also known as “hotel tax”, as well as abiding by specific rules and regulations.

Applying for a Santa Cruz County permit includes submitting a Vacation Rental Permit Application and a Transient Occupancy Tax Application. The county’s Vacation Rental Permit Application, is found here.

The county permit application includes a list of required information, such as:

  • A copy of the current Rental/Lease Agreement that includes specific rules regarding maximum number of guests and vehicles, noise limitations, trash and prohibition of illegal behavior
  • A Site Plan and Floor Plan (instructions for Measuring your Vacation Rental and Drawing Scaled Plans are here)
  • Safety Verification Checklist
  • Proof of Transient Occupancy Tax Payment (instructions for obtaining proof is included)
  • The county’s application fee is $964.50 for dwellings of 0-3 bedrooms.

A public hearing is required for new applications for properties that have four or more bedrooms, and will include additional permit fees, to a total of $2800 or more.

County permits are valid for five years. To obtain a renewal permit, three out of the five years must have had significant rental occupancy, and the owner/operator and property must be in good standing in regards to abiding by the rules and regulations. It is specified that there is no vested right to a renewal permit. A permit can be withdrawn at any time due to noncompliance with permit conditions, and then a new permit cannot be obtained for a year or longer.

The Transient Occupancy Tax Application is located here. The County tax rate is 11% of the rental rates received every month. The tax must be paid monthly, along with submitting a monthly report, found here. If renting only through Airbnb, you are not required to submit the monthly report. For Airbnb tax Frequently Asked Questions pertaining to Santa Cruz County, see here. For Frequently Asked Questions regarding the transient tax, click here.

Click here for the tax ordinance information.

 

What if I live in Santa Cruz City, Capitola, or Pajaro Dunes?

The cities of Santa Cruz and Capitola each have additional rules and regulations. Pajaro Dunes has a special permit already established with existing resorts and managed associations.

The City of Santa Cruz is reviewing possible modifications and new limitations for vacation rentals and has put a freeze on accepting new permits until May 18, 2018. However, the planning commission is currently allowing renewal of permits for existing vacation rentals in good standing, and new permits for “hosted rentals” of owner-occupied houses and duplexes are exempted from the freeze (see more in Christine’s Corner). Also, if a vacation rental property, referred to as a Transient Occupancy Tax (TOT)-registered Short Term Rental, is sold, the new owner and property is exempt from the city’s freeze in most scenarios.

The City of Santa Cruz requires you first to fill out the Transient Occupancy Tax Eligibility Checklist form, as found here. If the city approves this checklist, they will notify you in two weeks to a month and send you a packet with the rest of the forms. To view Santa Cruz city’s Transient Occupancy Tax Return, click here, with instructions here, and a list of rental charges subject to the tax is located here, and Frequently Asked Questions are here. The city does require a monthly tax return for Airbnb rentals. To find the fees for the Transient Occupancy Tax Eligibility Checklist and other permit forms fees, see contact information here.

The City of Capitola has its own permit and transient occupancy tax application forms, as well. In addition, Capitola requires a business license to obtain a vacation rental permit. Capitola’s Transient Rental Permit Application document can be downloaded here. Capitola’s Business License Application is found here. Capitola will approve your new business permit after the approval of the permit. The license must be renewed yearly.

The permit application document requires different information than the County’s application, including:

  • Dwelling Space:
    • Number of Bedrooms
    • Dwelling’s square footage
    • Number of maximum occupancy
  • Parking:
    • Number of parking spaces on the property
    • Number of Pacific Cove Parking Passes
    • Pacific Cove Parking Pass ID#(s)

To obtain a Pacific Cove residential parking pass, you must provide proof of residency and current registration showing the rental address for all vehicles. Regardless of the number of people living at the property, two permits are allowed for residents if there is no available off-street parking, and only one permit is allowed for non-residents, although non-residents can get one transferable pass. There is additional parking allowed for those with passes for Capitola Village behind the police department and in some neighborhood parking areas, and for special events, up to 25 temporary permits may be granted.

The permit document also includes:

  • Capitola’s “Standard Conditions of Approval”, similar to the County’s rules and regulations, with additional requirements
  • A map of the Transient Rental Use Overlay District which consists of Capitola Village and parts of Riverview Avenue

Permits in Capitola are valid for one year, instead of the county’s five year period. The permit fee is $500 with a 5% Tech Fee.

There is no separate Transient Occupancy tax application. Click here to see Capitola’s required monthly tax report.

 

Conclusion

This is a lot of information to digest, but undoubtedly, if you are interested in investing in and profiting from a vacation rental in Santa Cruz County, understanding the ins and outs of each program is well worth your time.

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