HOAs located within California’s coastal zone should be cautious in banning short-term rentals. This action may be considered a change in the intensity of use and an impact to the public’s availability to access the coast.  In other words, an HOA's action on regulating short-term rentals is considered “development” pursuant to the California Coastal Act.

On October 22, 2018, San Diego’s City Council voted to repeal the City’s short-term vacation rental (“STR”) ordinance, thus thrusting the City back into its original zoning ordinance – pre-STR regulation.  But it appears we are back to square one on whether the City’s original zoning ordinance allows or prohibits STRs.  There are arguments on both sides as to whether this reversal and return to the original ordinance allows for STRs.  

This brings up a broader conversation statewide.

For Homeowner’s Associations ("HOA") – if you are located in the coastal zone and have already banned Vacation Rentals or Short Term Rentals (STR) (or considering a ban), your ban may be unenforceable and future bans may not be allowed.  As per a California Appellate Court ruling, “the decision to ban or regulate [short term rentals] must be made by [a] City and [the California] Coastal Commission, not a homeowners association.”[1]

In Greenfield v. Mandalay Shores Community Assn.,the court held that “STRs may not be regulated by private actors where it affects the intensity of use or access to single-family residences in a coastal zone.”  The Mandalay Shores Community Association, a mutual benefit corporation (Mandalay HOA) is located in Oxnard, CA, has approximately 1,400 single-family residences (SFRs) and is situated within the coastal zone.[2]  Like San Diego’s original zoning ordinance, Oxnard’s zoning ordinance was silent on STRs which brings up the age-old question, “Are STRs even allowed?”  One may determine no under the adage “prohibition by omission” while others may find an allowance on the basis that a city’s zoning ordinance implements its police power and if a city wants to regulate STRs, amend the code.  In the case of Oxnard, the City historically treated STRs as a residential activity as did the Mandalay HOA.  On a parallel track, Oxnard was ramping up to draft an STR ordinance to lay out standards for the licensing and operation of STRs and the Mandalay HOA adopted a resolution banning STRs.

And a lawsuit was filed.

The California Court of Appeals found that Mandalay HOA’s STR ban was “development” under the Coastal Act.[3]  In coming to this determination, the Court noted the fact that STRs were common in the Mandalay HOA prior to the ban. By enacting the ban, the intensity of use and the public’s ability to access single-family residences (i.e., overnight accommodations) was changed in the coastal-zone. In short, the HOA’s ban was rendered an impact to coastal resources and the Court granted a preliminary injunction staying enforcement of the Mandalay HOA’s ban.

Mandalay HOA was not allowed to enforce the ban since it was considered “development” under the Coastal Act.

A couple weeks prior to the Greenfield decision, a federal court, in an unpublished opinion, Homeaway.com, Inc. v. City of Santa Monica, found the City of Santa Monica’s ordinance prohibiting STRs for 30 days or less was not “development” under the Coastal Act.[4] Similar to the question for San Diego and Oxnard on whether a zoning ordinance that is silent on STRs prohibits or allows them, a similar question was raised in the Homeaway.com case. Homeaway.com argued Santa Monica’s original ordinance marked an abrupt change in the law because the City never directly banned STRs.  Santa Monica, on the other hand, argued that the City’s ordinance reaffirmed a longstanding prohibition on STRs based on a permissive zoning scheme where if the use is not listed, it is prohibited (“prohibition by omission”).[5] The court found this to be a close issue that could benefit from further briefing.[6] In other words, the court did not issue an opinion because it was too close to call, and later when the matter came back to the court, the federal law issues were dismissed favoring the City.  It is important to note that this opinion is not persuasive on California courts. Not only is it unpublished, it is also a federal district court opinion that is not binding on a California state court.  

Though unpublished, the Homeaway.com case sheds some light on the complexity of the question posed to San Diego and every other jurisdiction with a zoning code silent on STRs – prohibited or allowed?  

For San Diego, leadership appears divided on the question of whether the original zoning ordinance allows for STRs. For example, in 2017, the City Attorney opined that “Short-term vacation rentals are not specifically defined, expressly permitted, or listed in any of the zone use categories, including residential or commercial.”[7]  The split in opinions on the San Diego City Council was aired at the October 22, 2018 Council meeting where Council Member Sherman suggested that under the original ordinance, STRs are not illegal: “If you're talking about enforcing, the code is saying that short-termrentals are illegal. That's just different than what I believe the code says and wehave. Differing attorneyopinions on what the Codesays. … until there's some kind of legal action to show that whatthe law is, it's just opinion.”  But Council President Pro Tem Bry opined that STRs are not permitted: “Like all other California coastal cities, San Diego usesa permissive zoning scheme. Ifthe use isn't listed it isnot permitted. Our current lawis a de facto ban.”[8]

While not binding on San Diego’s Fourth Appellate District, the Greenfield opinion from the Second Appellate District is persuasive.  Therefore, HOAs located in the coastal zone should be cautious in banning or regulating STRs out of a concern that this will be considered a change in the intensity of use and an impact to the public’s availability to access the coast. In other words, “development” pursuant to the California Coastal Act which equals a no-go for an HOA.

By Stephanie V.F. Smith.  Stephanie is a land use and CEQA attorney with Grid Legal and is based in San Diego.  All opinions in this article are solely the opinion of the author and should not be taken as legal advice.  

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[1]Greenfield v. Mandalay Shores Community Assn. (2018) 21 Cal.App.5th 896, 831.

[2]Id.

[3]Id.See alsoCalifornia Coastal Act of 1976, Pub. Resources Code §30600(a); 30106.

[4]Homeaway.com, Inc. v. City of Santa Monica (C.D. Cal. Mar. 9, 2018, No. 2:16-cv-06641-ODW (AFM)) 2018 U.S. Dist. LEXIS 40198, at *12-13.

[5]Id.*4, n. 1

[6]Id. at *12.

[7]See Memorandum dated March 17, 2017 from San Diego City Attorney, Mara Elliot, http://docs.sandiego.gov/memooflaw/MS-2017-5.pdf

[8]See Transcript from October 22, 2018 City Council Meeting, http://sandiego.granicus.com/TranscriptViewer.php?view_id=3&clip_id=7540

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