In the picturesque coastal region of Santa Cruz County, the allure of investing in vacation rental properties has captivated many aspiring entrepreneurs and real estate enthusiasts. However, navigating the intricate web of regulations and ordinances governing this industry can be a daunting task. This comprehensive guide aims to shed light on the current vacation rental landscape, providing invaluable insights and practical advice to those considering venturing into this lucrative yet complex market.
Understanding Vacation Rentals: Definition and Scope
Before delving into the nuances of Santa Cruz County’s regulations, let’s begin by defining what exactly we mean by vacation rental. A vacation rental, often referred to as a short-term rental, is a residentially-zoned property that is rented out for temporary accommodation, for periods of less than 30 days.  Rentals that are 30 days or longe are governed by standard long-term rental laws in the state and locality, and are generally permitted anywhere in Santa Cruz County (with some rare exceptions).
A “short term” or vacation rental is therefore any property that is periodically rented out for 29 days or fewer. These rentals can range from entire single-family homes, duplexes, triplexes, condominiums, and townhouses to individual rooms within a primary residence.
The appeal of vacation rentals lies in their ability to provide travelers with a unique and personalized experience, offering the comforts of a home away from home. For property owners, these rentals present an opportunity to generate supplemental income and capitalize on Santa Cruz County’s thriving tourism industry.
Jurisdictional Boundaries: Cities and Unincorporated Areas
When it comes to vacation rental regulations in Santa Cruz County, it is essential to understand the jurisdictional boundaries that govern different areas. The county is divided into four incorporated cities – Santa Cruz, Scotts Valley, Capitola, and Watsonville – each with its own set of rules and ordinances. Additionally, there are unincorporated areas under the jurisdiction of the county itself, further subdivided into designated zones with specific regulations.
To ensure compliance and avoid potential legal complications, it is crucial for prospective vacation rental owners to familiarize themselves with the specific rules and guidelines applicable to the area in which their property is located.
City Jurisdictions: A Closer Look
Santa Cruz City
The City of Santa Cruz has established a clear distinction between “hosted” and “non-hosted” vacation rentals. Hosted rentals are defined as properties where the owner resides on-site for more than six months out of the year, while non-hosted rentals refer to properties where the owner is absent or resides on-site for less than six months.
Currently, the City of Santa Cruz is not issuing new permits for non-hosted vacation rentals, although this policy may be subject to change in the future. Additionally, a maximum of 250 hosted rental permits (see below) are available on a first-come, first-served basis. It is important to note that properties with Accessory Dwelling Units (ADUs) are ineligible for short-term rental permits within the city limits.
Scotts Valley
The City of Scotts Valley has taken a more restrictive approach, prohibiting vacation rentals altogether as they are not considered a permitted or conditionally permitted use within the city’s zoning code.
Capitola
Capitola has designated a specific area, known as the Vacation Rental Use (VRU) overlay district, where vacation rentals are permitted. This area encompasses the Capitola Village, Riverview Avenue, portions of Cliff Drive, Monterey Avenue, and Capitola Beach. Properties located outside the VRU district are subject to long-term rental regulations, requiring a minimum rental period of 30 nights or more.
Watsonville
Information regarding vacation rental regulations in the City of Watsonville is forthcoming. Please check back here again later.
Unincorporated Santa Cruz County: Designated Areas and Zoning
In the unincorporated areas of Santa Cruz County, the regulations surrounding vacation rentals are more intricate, with specific designated areas and zoning restrictions in place. The county has established three distinct “Designated Areas” along the coastline, each with its own capacity limits and permit restrictions.
Live Oak Designated Area (LODA)
The Live Oak Designated Area (LODA) encompasses the Yacht Harbor Special Community and portions of Live Oak east and south of East Cliff Drive and Portola Drive, extending from the intersection of 9th Avenue and East Cliff Drive to the intersection of Portola Drive and 41st Avenue.
Within the LODA, a maximum of 15% of total parcels may have short-term rental permits, with an additional restriction of 20% per residential block. Currently, there is a waitlist for new permits in this area.
Seacliff/Aptos/La Selva Beach Designated Area (SALSDA)
The Seacliff/Aptos/La Selva Beach Designated Area (SALSDA) encompasses the Aptos Planning Area, bounded by the Capitola city limits to the west, Highway 1 to the north, and Bonita Drive, San Andreas Road, and the Urban Services Line to the east and southeast, including the community of La Selva Beach.
Similar to the LODA, the SALSDA has a 15% cap on the total number of parcels that can have short-term rental permits, with an additional 20% per block restriction. A waitlist is currently in place for new permits in this area.
Davenport/Swanton Designated Area (DASDA)
The Davenport/Swanton Designated Area (DASDA) covers the North Coast Planning Area, including the unincorporated town of Davenport, extending north along Highway 1 to encompass the areas of New Town and Davenport Landing south of the highway. It is bounded on the north by the intersection of Swanton Road and Highway 1, including all parcels within a quarter-mile radius of Swanton Road, excluding those abutting Last Chance Road.
In the DASDA, a maximum of 10% of total parcels may have short-term rental permits, with a 20% per block restriction. As with the other designated areas, a waitlist is currently in effect for new permits.
Live by the Beach
Non-Designated Areas: Opportunities and Regulations
While the designated areas have reached their permit capacity, there are still opportunities for vacation rental investments in the non-designated areas of Santa Cruz County. These areas are subject to a county-wide cap of 183 hosted vacation rental permits, excluding the permits allocated to the designated areas.
Certain neighborhoods within the non-designated areas, such as Beach Drive in Aptos, the condominiums on Rio Del Mar Boulevard above Beach Drive, and specific areas of Capitola Village, are not limited in the number of vacation rental permits allowed.
Permit Types and Requirements
Santa Cruz County recognizes three distinct categories of short-term rental permits: vacation rental permits, hosted rental permits, and bed and breakfast permits.
Vacation Rental Permits
Vacation rental permits are required for the short-term rental of an entire single-family dwelling, duplex, or triplex (including condominiums and townhouses). It is important to note that vacation rental permits are not issued for properties with Accessory Dwelling Units (ADUs).
These permits are valid for a period of five years and must be renewed upon expiration. Applicants are required to provide detailed documentation, including site plans, floor plans, rental agreements, proof of principal residency (for hosted rentals), and transient occupancy tax registration.
Hosted Rental Permits
Hosted rental permits are required for the short-term rental of one or two bedrooms within a primary residence where the owner resides on-site for more than six months per year. There is a county-wide cap of 250 hosted rental permits, with additional restrictions in certain beach districts.
Similar to vacation rental permits, hosted rental permits are valid for five years and require renewal. Applicants must provide documentation similar to that required for vacation rental permits.
Bed and Breakfast Permits
Bed and breakfast permits are issued for the short-term rental of three to five rooms within a primary residence where the owner resides on-site during the rental period. These permits are currently permitted in the RA (Residential Agricultural), RR (Rural Residential), R-1 (Single-Family Residential), and RM (Residential Multifamily) zoning districts but are not allowed in the Beach Residential (RB) zone district.
Permit Limitations and Restrictions
In addition to the overall permit caps and designated area restrictions, Santa Cruz County has implemented several other limitations and restrictions to ensure the responsible operation of vacation rentals.
Occupancy Limits
Vacation rentals are subject to strict occupancy limits based on the number of bedrooms in the property. The general rule is a maximum of two overnight guests per bedroom, plus two additional guests. During daytime hours, twice the number of overnight guests is permitted.
On-Site Parking Requirements
Properties seeking vacation rental permits must meet specific on-site parking requirements. For one- or two-bedroom units, a minimum of one on-site parking space is required, while three or more bedroom units necessitate at least two on-site parking spaces.
One Permit per Parcel
Santa Cruz County’s regulations stipulate that only one vacation rental permit is permitted per parcel, ensuring a balanced distribution of vacation rentals within residential neighborhoods.
Affordable Housing Exclusion
To preserve the availability of affordable housing options, vacation rental permits are not issued for legally restricted affordable housing units.
Permit Non-Transferability
It is crucial to note that vacation rental permits are non-transferable upon the sale or transfer of a property to new owners. This means that new owners must apply for a fresh permit if they wish to continue operating the property as a vacation rental.
Life’s a Beach
Application Process and Renewal
The application process for obtaining a vacation rental permit or hosted rental permit in Santa Cruz County involves submitting a comprehensive set of documents and adhering to specific guidelines.
Initial Application
For new vacation rental permit applications, applicants must provide a completed application form, non-refundable application fee, detailed site plans, floor plans, rental agreements, proof of principal residency (for hosted rentals), and transient occupancy tax registration.
Depending on the number of bedrooms and the specific location of the property, the application may require a public hearing or be subject to a public notice period before issuance.
Renewal Process
In the designated areas of LODA, SALSDA, and DASDA, vacation rental permits must be renewed every five years. Renewal applications must be submitted no earlier than 180 days before the expiration date and no later than the expiration date itself.
The renewal process typically involves providing proof of transient occupancy tax payments, a summary of rental dates during the previous permit period, and updated documentation, such as photographs of the required on-site signage.
Local Contact and Signage Requirements
To ensure effective communication and address potential concerns, Santa Cruz County mandates that all vacation rentals designate a local contact person within a 30-mile radius of the property. This contact person must be available 24 hours a day to respond to tenant and neighborhood inquiries or issues.
Additionally, all vacation rentals are required to display a conspicuous sign identifying the property as a permitted vacation rental and listing the contact information for the 24-hour local contact person. In the designated areas, these signs must also display the start and end dates of the five-year permit period.
Rules and Regulations: Noise, Disturbances, and Trash Management
Vacation rental operators are responsible for ensuring that their guests adhere to the county’s noise ordinances and maintain a respectful presence within the community. Rental rules must be prominently posted inside the vacation rental, addressing noise levels, illegal behavior, disturbances, and explicit statements regarding the prohibition of fireworks.
Proper trash management is also a crucial aspect of vacation rental operations. Rental agreements must specify guidelines for trash disposal, such as keeping trash in covered containers and adhering to established collection schedules.
Transient Occupancy Tax and Registration
Santa Cruz County imposes a transient occupancy tax (TOT) on short-term rentals, currently set at 11%. Vacation rental owners are required to obtain a TOT certificate and comply with all applicable regulations, including the timely payment of transient occupancy taxes.
While Airbnb and other online platforms may collect and remit the TOT on behalf of hosts, it is still the responsibility of the property owner to complete the necessary TOT application forms with the County Treasurer-Tax Collector.
Dispute Resolution and Enforcement
To foster a harmonious relationship between vacation rental operators and neighboring residents, Santa Cruz County encourages dispute resolution through mediation services, such as the Conflict Resolution Center of Santa Cruz County.
In the event of significant violations, including but not limited to citations, warnings from law enforcement or homeowners’ associations, false or misleading information provided on applications, evidence of health regulation violations, delinquent tax payments, or verified neighbor complaints, the county reserves the right to review and potentially amend or revoke vacation rental permits.
Conclusion
Navigating the intricate web of vacation rental regulations in Santa Cruz County can be a complex endeavor, but with the right knowledge and guidance, it can also be a rewarding investment opportunity. By understanding the jurisdictional boundaries, permit requirements, occupancy limits, and responsible operation guidelines, prospective vacation rental owners can make informed decisions and contribute to the sustainable growth of this thriving industry.
Whether you are a seasoned real estate investor or a first-time vacation rental owner, it is essential to stay informed about the ever-evolving landscape of regulations and ordinances. Consulting with a great Santa Cruz real estate professional, city and county planning departments, and legal advisors can provide invaluable insights and ensure compliance with all applicable laws and guidelines.
This information is believed to be accurate as of June 26, 2024 however none of it should be considered authoritative.
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