Citrus Heights proposes licensing, enforcing 12% tax on Airbnb’s

Sentinel staff report–
The City of Citrus Heights is currently considering a draft ordinance targeted at regulating and ensuring the collection of occupancy taxes from owners of short-term rental properties in the city.

Short-term rentals, as defined in the ordinance under consideration, include units or rooms rented out for a period of 30 days or less, often arranged through a service like Airbnb or VRBO. The city currently does not require a general business license for home rentals, but would require one to be obtained annually if the dwelling or room is being rented out on a short-term basis.

The cost of a general business license in Citrus Heights is currently just over $100, with annual renewals charged at around $80.

An associated 12% “Transient Occupancy Tax,” or TOT, is already required to be paid by hotels and any short-term rental, but the city estimates it is losing out on about $75,000 in tax revenue each year, without a current way of tracking short-term rentals.

According to a staff report during a City Council study session on short-term rentals in September of last year, a licensing requirement would help ensure collection of the tax by letting the city know where the rentals are located. The draft ordinance includes a provision allowing for a short-term business license to be revoked for failure to remit the tax.

The proposed ordinance allows for short-term rentals in a wide range of homes, townhomes and condos, but specifically excludes newer accessory dwelling units and low-income housing from being used as STR’s.

“Accessory dwelling units constructed after January 1, 2021, inclusionary housing units, or other income-restricted housing units are prohibited from being used as a short-term rental,” the draft ordinance reads.

Proposed regulations are relatively short, but impose a cap on the number of guests allowed, and specify that the rental can’t have an adverse affect on the neighborhood:

• Short-term rentals shall not be used by more than two guests per bedroom plus two additional guests between the hours of 10:00 p.m. and 7:00 a.m.
• Short-term rentals shall not adversely affect the residential character of the neighborhood nor shall the use generate noise, vibration, glare, odors, or other effects that unreasonably interfere with any person’s reasonable enjoyment of his or her residence. To this effect, the short-term rental activity shall comply with all provisions of the City of Citrus Heights Municipal Code.
• No person shall advertise any short-term rental without an issued short-term rental business license.
• The host shall fully comply with all the requirements of Chapter 86 (Transient Occupancy Tax) and any successor sections.

Are there any Airbnb’s in Citrus Heights?
According to figures cited in the city’s study session last year, there were around 70 short-term rentals in the city in 2021, up from about 60 the prior year.

Do other cities require licensing for short-term rentals?
Associate City Planner Alison Bermudez told the council in September that licenses for short-term rentals were required by the cities of Sacramento, Elk Grove, Rocklin and Roseville, but she said Rancho Cordova and Folsom did not require licenses.

Are short-term rentals a problem?
A police spokesman told the City Council during last year’s study session that there were 11 calls associated with short-term rentals, from January to early September of 2021. He said multiple calls were regarding the same address, with four considered “public safety” issues where an arrest was made at one and a large party dispersed at another.

Several council members commented on the number of calls being relatively low, but expressed differing opinions on whether future action was needed.

“I definitely believe we need something in place before something really bad happens,” said then-mayor Steve Miller, referencing a deadly shooting at an Airbnb in the Bay Area several years ago. “You know, if that happened here and we did nothing, I think we’d have a lot of questions to answer.”

Councilman Bret Daniels noted that Citrus Heights police receive “about 75,000” calls a year and said 11 calls for short-term rentals seemed insignificant. He also noted that with 70 short-term rentals compared to about 15,000 rental units in the city it seemed “like we’re a solution looking for a problem.”

“I don’t see a problem yet — I don’t want to say we need to wait ’til we have a serious problem, but I don’t even see a problem, based on the numbers,” said Daniels. “Eleven calls, with at least one property accounting for several of those calls, compared to 75,000 other calls, it seems like our energy might be better spent focusing somewhere else.

Daniels also said existing mechanisms allow for police to deal with “problem child” situations where rental owners have recurring issues, and said regulations and taxes would raise prices and contribute to the rising cost of housing — and potentially eliminate an option for homeless to obtain short-term housing.

Councilwoman Jeannie Bruins said she didn’t think Airbnb’s are being rented out to homeless people, but said such rentals are being used for homeowners to supplement their income and should therefore be required to have a business license to do so. She also advocated for limited regulations, calling for “baby steps.”

“I’d see three things to me that seem reasonable: a license, TOT, and the maximum number of guests that can stay so you don’t have 14 people camping out in a two-bedroom house,” said Bruins.

A tentative timeline posted on the city’s website lists March 24 as the date for a public hearing and a vote on adopting the proposed regulations, followed by regulations becoming effecting on May 14, 2022. Those interested in sending comments directly to the City Council members can do so by emailing citycouncil@citrusheights.net.

The draft ordinance can be viewed in full on the city’s website. (click here)