The world’s first recorded vacation home was the Palais de Versailles in France, built originally to serve as a hunting lodge for Louis XIII in 1624, according to Rentals United.
Nearly 400 years later, the international vacation-rental industry was worth an estimated $85 billion as of 2015, again according to Rentals United, a channel-managing service for rental-home owners around the world—and that number has surely risen in the years since.
Here in the Coachella Valley, vacation rentals are indeed big business—and, according to some neighbors of short-term rentals, a big hassle. As a result, short-term rentals—aka STRs—have become a focal point of debate and dispute between rental-property owners, neighboring residents and city governments.
At the heart of the conflict is the individual right of owners to rent out their desirable Coachella Valley homes as vacation getaways—appropriately regulated, of course—versus the rights of residents who, in some cases, have to deal with traffic, noise and other negative impacts on their quality of life as a result of nearby vacation rentals.
Predictably, the passage of the ordinance angered affected STR owners, who responded by filing a lawsuit against the city of Palm Desert on March 10, 2021.
Cody Carlson, a Palm Desert resident who was impacted by the new ordinance, is a co-founder of the Vacation Rental Owners and Neighbors of Palm Desert (VRON-PD); both he and VRON-PD are plaintiffs in the lawsuit. In a press release, Carlson claimed the city acted illegally, because the ordinance “is contrary to the city’s general plan, city policy, and the city goals of promoting tourism and accommodations.” He said short-term rentals bring the city more than $1 million in transient occupancy taxes each year.
At that Dec. 10, 2020, Palm Desert City Council meeting, the ordinance was adopted on a 3-1 vote. Kathleen Kelly, Jan Harnik and Sabby Jonathan voted in favor of the ordinance, while Karina Quintanilla voted against it; Gina Nestande recused herself due to a conflict of interest. Comments made by the three councilmembers who voted for the ordinance sum up many of the arguments often made against short-term rentals in the Coachella Valley.
“This pandemic has driven home, with great drama, just how critical it is that we diversify our economy,” Mayor Kathleen Kelly said. “I have participated in two economic summits, both of which have illustrated that Palm Desert, and the rest of the Coachella Valley, are suffering more greatly than some other communities because of our tourism dependence. … At one of those economic summits, Joe Wallace (CEO of Coachella Valley Economic Partnership) … was imploring the elected officials of Coachella Valley to be visionary, to set policy and to stick with it. This council has done that by heavily investing in a vision of making a dramatic step toward economic diversification. As that begins to happen, we’re going to be attracting additional workers to Palm Desert, and a paramount policy of this city has been to house more of the workers who are employed in Palm Desert within the city. That is probably the single most significant thing we could do to have a positive impact on the environment, because housing more of the people who work in Palm Desert within the city reduces, or eliminates, commutes. To accomplish that, we have to, as a matter of policy, guard against the commercialization of traditional neighborhoods, which would reduce, rather than increase, available housing for working people who are part of Palm Desert.”
In a recent interview with the Independent, Carlson disagreed with Kelly’s premise. He said that Palm Desert should be protecting tourism revenue for now, because there are no firm plans that he knows of for major companies to bring hundreds of jobs to Palm Desert, nor are there any concrete plans for a full four-year university to come to Palm Desert.
City Councilmember Jan Harnik referenced another common argument made against short-term rentals: the lack of affordable housing.
“For us to take more houses out of the housing market (to use as STRs) when we are hearing, time after time, that there’s a housing crisis, does not help that problem,” Harnik said at the Dec. 10 meeting. “I think one of the most valid thoughts I ever heard (came) from a gentleman who said, ‘You know, it’s not always the loud music that bothers me (about STRs), or the loud parties. … He said, ‘Jan, I don’t have any neighbors anymore.’ Well, that’s what a neighborhood is: It’s neighbors, and so what we’re doing when we instead offer a business to come into a neighborhood is diluting the neighborhood, and we’re turning it into something else.”
Sabby Jonathan expressed a similar stance at the meeting. “At the end of the day, it’s a matter of policy,” he said. “There are valid concerns all around, but I have to say, to be very honest, that I embrace a policy that places the welfare of our residents over the profits of the STR owners.”
Carlson responded that concerns regarding short-term rentals should be dealt with via proper regulation, not illegal bans.
“VRON-PD wants the Palm Desert and the general Coachella Valley communities to know that our goal here is to hold public entities accountable when they act illegally,” he said. “But it’s not so we can keep short-term rentals and wreak havoc on neighbors who are upset. We want to solve these problems with a commission. We want Palm Desert to build a STR commission so that we can create the blueprints for our future, and build the gold-standard for the STR community.”
The same basic arguments being made for and against short-term rentals in Palm Desert are being made in the valley’s other cities—and increasingly, the tide seems to be turning against STRs.
In La Quinta, the City Council recently approved an indefinite stay on the issuance of any new permits, with a few exceptions—although existing permits may be renewed. The council is also increasing fees and penalties for STR properties that break the rules.
During the public comment portion of the April 6 meeting, the council was addressed by La Quinta resident Marlene Fradis, who said the city should rein in STRs.
“This argument that profits trump human rights and health is not a valid, humane position to take,” Fradis told council members. “In reality, property values diminish when you have short-term renters who destroy property, and when you have landlords who purchase these homes with the intent of making a profit out of it.”
The Independent could not locate any data on the impact that STRs have had on local property values. However, according to Inman—“the industry’s leading source of real estate information,” according to the company’s website—STRs may actually increase property values: “Home-renting service Airbnb has raised ire and eyebrows in recent years for totally transforming the way people can book travel accommodations. It also appears to be raising rents and home prices in major U.S. cities, at least according to a new working paper from academics at UCLA, the University of Southern California’s Marshall School of Business, and the National Bureau of Economic Research.”
Bruce Hoban, a co-founder of the Vacation Rental Owners and Neighbors of Palm Springs (VRON-PS), said STRs tend to have detractors anywhere they’re found.
“I would say that there’s a small group in every city who does not like vacation rentals, for whatever reasons,” Hoban said during a recent interview. “And they grossly over-exaggerate the size of the problem in each of these towns. It’s not about people’s personal financial interests. It’s about (the fact that) vacation rentals have been a source of lodging in the Coachella Valley since the ’50s. In this new culture we’re in for this last year, people just want to start cancelling everything out. There’s a trend.”
In 2018, VRON-PS successfully led an effort to overwhelmingly defeat Palm Springs Measure C, which would have phased out short-term rentals in the city. Since then, however, STR proponents in the Coachella Valley have suffered a string of defeats. Last year, the Rancho Mirage City Council voted to phase out STRs, except in some HOAs. During a March special election, Cathedral City voters resoundingly upheld an ordinance that will phase out most STRs by 2023.
Despite the decisive vote in Palm Springs just three years ago, some residents there are now calling for increased restrictions on existing STR operations.
“Palm Springs is now the outlier when it comes to STRs,” said Hank Plante, a well-known journalist who has recently spoken out in favor of more STR restrictions in Palm Springs, where he lives. “The other major cities in the valley have moved very definitively either to scale them back or get rid of them all together—and this is happening statewide. Tourist cities like ours (here in the valley), from Laguna to South Lake Tahoe, have moved to ban them.
“At some point, I do think that more and more people will become fed up with (STRs), because the city has done nothing to curb their growth, and has done nothing to stop entire neighborhoods from being taken over. I’ll give you an example: In Vista Las Palmas, on North Rose Avenue, the neighbors tell me that there are 19 vacation-rental homes in a four-block stretch. Now, that’s ridiculous. We have zoning laws for a reason. The city would never allow 19 cannabis dispensaries in a row, or 19 liquor stores in a row, or 19 massage parlors in a row. So, I think (the City Council members) need to address the issue of density. They have to impose a cap on STRs in neighborhoods that are overly saturated, and they need to rewrite the ordinance, now that we’ve had some experience with what is not working.”
Hoban said Palm Springs’ current STR ordinance is working just fine—despite a sudden spike in complaints during the pandemic-riddled summer of 2020.
“(STR complaints) had calmed down across the whole valley until we hit last summer,” he said. “And there are two parts to this tale. We (STR owners) were shut down for March, April and May, and then we were allowed to open up. We got this COVID-crazed crowd that came out to all the cities in Coachella Valley. They just didn’t want to follow the rules. So, complaints went up; calls (to code enforcement) went up; and citations and fines went up.
“But, then as mysteriously as they showed up, after Labor Day, everything went back to normal, even though the homes were still very crowded. So it’s that second part of the story that nobody’s telling: What happened after Labor Day? STR houses were rented way above normal in September, October and November, but a better crowd came back. That’s the part of the story that nobody wants to get into. They just want to talk about a 200 percent increase in calls in July 2020. Well, that’s true. But they didn’t finish the story. So … all these small groups start getting ahold of their City Council, and jumping up and down all over them, and everyone just wants to talk about bans.”
We asked Plante and Hoban whether there is room for compromise.
“Well, there has to be,” Plante said. “I would prefer a ban, but in the adult world, we have to work together. So, there has to be some co-existence. They (the Palm Springs City Council) were moving in this direction last fall, but they backed away from it.”
Hoban said: “We want collaborative decisions made for the betterment of vacation rental owners and neighbors. We realize that you have to balance what goes on in a vacation rental with what the neighbors around it experience. That’s what (VRON-PS) is working on, and that’s what we’re guiding the other (valley) VRONs towards. Sometimes some of these other VRONs say, ‘We’re not going to allow this in the ordinance. We can’t have this.’ And then I’ll sit there and say, ‘Well, how do you want to create a balance with the City Council, so that they feel like they’re regulating properties, and to appease the other side?’ It can’t be the Wild West, and we know that.”
In Yucca Valley the SRT (vacation rentals) are everywhere in this small community, and people who live here can’t afford to live here; Park Rangers for Joshua Tree park can’t find housing, smoke fills the air at night because charcoal grills are used as outdoor fire pits, and traffic is bumper to bumper, grocery stores stock is super low and the town is catering to out of towners, and the residents here suffer with traffic, trash, loud parties etc. And the hills at night are lit up like Christmas trees, which tells you just how many vacation rentals are in the community. It’s terrible, absolutely terrible, and the light pollution from all these lit up homes doesn’t let you view the stars at night. The older residents are being run out of town, like them I moved here to be in a quiet lazy town, with peace and quiet. SRT’s have ruined neighborhood after neighborhood.
The fact is that homes are now priced in terms of the potential revenue generation via STRs. Yes, home values do rise. However the homeowner cannot benefit in any meaningful way unless they move to a hovel in Oklahoma.
These prices increase long term rental costs for regular folks and create a greater barrier to rental for lower income workers.
As the Coachella Valley is a luxury destination for tourists, it supports a lot of workers who are not very well paid. We need to support their ability to find affordable housing by regulating STRs to prevent the rise in rental prices that STRs bring.
As for people complaining about regulation, we have zoning laws exactly for this reason. I am not allowed to raise sheep or pigs, nor can I mine for gold or install a windmill. Suggesting that STRs are a Constitutional right is nonsense.
Pompei had the first vacation homes, not France. See Smithsonian mag. https://www.smithsonianmag.com/arts-culture/roman-splendor-in-pompeii-59083755/
In my experience, STR owners are great neighbors! The homes are immaculate, the properties have zero deferred maintenance, and unlike the guy down the street who likes to practice his drums in the garage at 2AM or the biker down the block who LOVES his straight pipes, STRs are legally required to be respectful neighbors. Plus the massive taxes STR owners pay are terrific for the community.
As someone who has been a California real estate broker for over ten years, I’ve seen first hand numerous times how STR investors with no other “roots” in the community easily outbid people looking to buy a home for their families. While it’s great to earn an easy commission on sales to deep-pocketed out-of-town investors, I agree that STRs have a high risk for a long-term destabilizing impact on neighborhoods, and should be banned. Investors wishing to invest in vacation rentals in our community should buy a hotel instead.
Short term rentals are owned primarily by investors. An analysis of Airbnb rental notices revealed that 63% of the total are from hosts who own three or more properties. In 2017 there were 24 licensed short term rentals within a ten minute walk of my home in Palm Desert. Nineteen of them were owned by people who lived outside the Coachella Valley. I know this because I looked up the ownership of each of the homes being used as an STR in my neighborhood.
Airbnb does not talk about this and proclaims they are about “home sharing” but the business is hoteling and Airbnb is now the most valuable hotel company in the world. The market value of Airbnb is $75 billion today while the combined capitalization for Marriott and Hilton is $78 billion.
The economic function of short term rentals, given the ownership of properties is largely by people who don’t live in the cities where the rental properties are located, is extractive. The people who rent are not neighbors who send their kids to local schools, who pickup the newspaper when you are gone for a few days, who are invested in the city. The net profits from the rental properties do not remain in the city for reinvestment. They move to another city, another state, or another country. When the ore runs low, the mining company sells out and moves on.
A study done in London showed that there are 80,000 short term rentals in that city. This number is two percent of all the housing units in London. But their effect has been to raise monthly rents in the entire city by 15-20% in a few years. The same thing is happening globally and it is happening in our valley.
Extractive industries are parasitic and have numerous negative effects on the social and economic fabric of a community. Politicians like them because they produce tax revenue but the upside of this has been exaggerated. The Economic Policy Institute in Philadelphia, which is a liberal think tank, did a lengthy study on the industry and reached conclusions that local governments should know about:
* The shift from traditional hotels to STR lodging leads to less reliable tax payments to cities
* STRs make the problem of controlling externalities in neighborhoods almost impossible to control
* Many cited benefits are found to be possible benefits
* The economic costs Airbnb imposes on a city likely outweigh the benefits to residents
* Because Airbnb is a business competing with hotel lodging, it should be subject to the same taxation and regulatory requirements as hotels.
One final thought: Mr. Cody Carlson says twice in the article that city ordinances he does not like are “illegal” but he does not tell us what he means by his statement. I encourage Mr. Carlson, if he has not done so, to read the decision on short term rentals that was handed down in Ewing v. City of Carmel-by-the-Sea in 1991. I actually encourage everyone with an interest in this matter to read that paper. While you are at it, you should read Euclid v. Ambler Realty, 1922, the seminal decision on the proper use of zoning regulations and the character of residential neighborhoods.
Let all the houses next to and behind Cody Carlson become STR. There must be more regulation on these things, our neighborhoods are being destroyed by them. Two homes behind us are STR and while, for the most part they are OK, I have had to call the Hotline too many times at 1AM (and not just last summer). And they are definitely making it extremely difficult for residents to find affordable housing here in the valley. Service workers shouldn’t have to go all the way to Banning, Beaumont, Redlands just to find somewhere to live they can afford. Maybe set aside particular streets or areas where STRs can locate, leaving the rest of the residential areas alone for residents to enjoy the peace and quiet.
Mr. Hoban states that every city has a small group who grossly over exaggerate the problem. Over 5000 Cathedral City residents voted to phase out STRs in non HOA areas. That is not a small group.
The vote in Cathedral City was a landslide against the STR industry. A 2-1 landslide, Mr. Hoban. VRON is an organization made up of professional lobbyists, real estate brokers, and vacation rental managers and owners. Their interest in this dispute is purely financial. People who live in the wasteland of party houses they have created have interests that primarily rely on a desire to live in peace and quiet.
The people who object most strenuously have one or more STRs next to or near their homes. How many VRON members live in gated communities that do not allow STRs? How many VRON members live next door to an STR party house? How many city council members who support the STR industry are real estate agents?
The opposition to the STR industry is completely grass-roots. There is nothing grass-root about VRON. It is well organized, well financed, and very slick. They repeat things that are not true using propaganda aimed at the media and politicians. Most objectionable is the fact that the STR industry has introduced a set of disruptions to residential neighborhoods and then tell the residents it is their job to report problems and the city’s responsibility to police the matter. The basic message is “live with it and shut up.”
If VRON and Airbnb had any integrity they would create and pay for the security and rule enforcement of the properties they own, rent, manage, and operate. Marriott pays for their own 7×24 security and they evict disruptive tenants immediately when there are problems. Marriott understands they have responsibility for their property and to the city they function in. The STR industry pretends they don’t have this same responsibility and toss the problem over the fence in exchange for a few dollars in occupancy tax revenue.
It’s not just investors who’ve purchased and own STRs. We’re everyday working people who scrimped and saved to purchase a second home in the La Quinta Cove eight years ago. Our plan was to retire in La Quinta and in the interim to rent the home so that it’d be paid off by the time we were ready to retire. We’ve kept the house in good standing, paid taxes on it, and have been good neighbors. One of the first things we did when we purchased our home was to introduce ourselves to our neighbors and give them our number, so they could call us directly with any complaints or concerns. We’ve always paid local, reputable companies to rent and monitor our home, and we’ve also employed local gardeners and pool maintenance people. When we lived in Los Angeles, we rented the house out as an STR, so we could also enjoy it on the weekends. Like our STR guests, whenever we were in La Quinta we supported the local community by shopping and eating locally. When we moved out of state, we rented the house out year round at a rate well below the suggested Zillow rate, so it served as affordable housing for local families – one of whom lived in our house for a year before purchasing a home of their own in La Quinta. We so loved La Quinta that last year we cashed out an IRA and bought a second home there. So when locals condemn STRs and the people who own them, please remember you may actually be condemning your neighbors, and you’re definitely condemning the people who’ve helped turn La Quinta around.
People like us and even investors who don’t live in the area nor plan to ever do so have contributed to the area’s tax base (Transient Occupancy Taxes was the third-largest source of tax funding $6,455,100). People like us and investors and short-term renters contribute hugely to the community via sales tax. People like us and investors contribute hugely to the community via property taxes.
Even just the talk of eliminating the STR market is hurting La Quinta. Properties are being listed for sale in droves and escrows on recently sold homes are being cancelled. This will undoubtedly lower the value of those properties and that of the people supporting the ban/elimination of STRs. And it’s not as if those homes will be magically purchased by these dream neighbors some people are hoping for. When we purchased our home eight years ago, it was empty, as were hundreds of others. At that time, it was an affordable home relative to the prices of the area and of LA – the same as is the case now. Yet it sat empty then, just as hundreds will again if people like us and investors are dissuaded from investing in the community.
The people who hate STRs and the people who own them all want and benefit from the same thing – a serene, beautiful, fully functioning and funded La Quinta. Banning or eliminating STRs isn’t going to deliver that. Per this news story, in Coachella Valley there were 1432 registered STRs and 71 citations issued. Eliminate STRs and you lose the sales tax, property tax and transient occupancy tax associated with them. Additionally, you lose people like us who were originally drawn to this area because of STRs. Would it not be easier and more economically feasible to find better ways to address the issues that generated the citations – for example: make STR owners contribute to a fund used to hire 24/7 security to immediately address complaints; include in STR rental agreements that breaking rules may result in immediate eviction from the property; clearly disclose to the local community which homes are used as STRs and where to voice complaints for immediate attention.
I fully understand and empathize with the desire to live in a neighborhood where neighbors send their kids to the local school and actively participate in and enhance the community. Unfortunately, I don’t think eliminating STRs entirely will magically create those neighborhoods. I fear that instead we’ll see La Quinta Cove with hundreds of homes sitting empty and untended to and current and future home buyers investing in Palm Springs instead of La Quinta (this is already happening, as many buyers won’t even consider any valley city other than Palm Springs). I also feel like this attack on STRs will more negatively affect the working class people it purports to help. People who own the more expensive homes in HOAs that already restrict STRs won’t be affected by this ban. Their neighborhoods will remain as is. People who live in neighborhoods like The Cove will see the most change. People who’ve seen their home values increase and previously empty lots now occupied with beautiful, brand-new homes will bear the brunt of this ban, as home values decrease along with investment in the community.
Full disclosure, we own a house in The Cove and one in Laguna de la Paz. We found out about The Cove while staying with family friends who lived in Kansas and bought a second home in The Cove and used it as an STR to help pay the mortgage. We bought our house in The Cove when we lived in Los Angeles and have several friends who did the same. Recently, we put the house in The Cove on the market, planning on using the proceeds to purchase with my Mom a larger home with a casita in La Quinta. Every dollar we’ve made in La Quinta, we’ve reinvested in La Quinta. That’s not necessarily the case for most investors, but it is for us, so if you hate STRs and ‘investors’ please keep people like me and my family in mind when making decisions that affect us, as well as you.