Higher taxes for homes
with transient rental permit
CLARIFICATION: This article should have made it clear that the higher tax rates are for the buildings which are used as transient rentals not the entire property.
posted 03/09/05
Property owners with transient rental permits may be surprised to learn their tax bills will be higher. San Juan County Assessor Paul Dossett said buildings which are used as transient rentals will be assessed 15 percent higher than similar buildings without a permit. In addition, all of the personal property in the transient rental properites is subject to personal property tax.
Transient rentals, renting out a property for periods of less than 30 days, is a commercial activity according to the state Dept. of Revenue. Information about the more than 280 transient rental permits issued by the county Community Development and Planning Department, has been sent to the DOR. The state will send out information to the permit holders informing them of their tax liabilities.
Personal property used in a commercial activity is taxed at the same rate as real estate. Unlike real estate, personal property is not assessed by the tax assessor. Instead it is self-reported. If a transient rental permit holder does not submit a report, the assessor is authorized to estimate the tax due.
Besides the increased real estate tax and the personal property tax, transient rentals are subject to sales and hotel/motel tax.
Property in San Juan County is reassessed every three years. The county is broken into thirds, with one third assessed each year. This year, property on Orcas, Waldron, Obstruction, Wasp and Sucia islands will reevaluated.
Dossett said the 15 percent figure is consistent with recent sales. He will continue to monitor sale prices and will adjust the appraisals up or down accordingly.
PREVIOUS STORIES
Transient rental permitting headed to court
By Sharon Kivisto
posted 12/29/04
Should the county approve conditional use permits (CUP) for transient rentals in neighborhoods with covenants, conditions, and restrictions (CC&Rs) that forbid them? Attorney Paul Brain plans to take the issue to court. His mother, Doris Brain, filed an appeal of the San Juan County Hearing Examiner's approval of a CUP for Leslie Ray in the Vusario subdivision.
The Board of County Commissioners denied the appeal and upheld the hearing examiner's decision Dec. 28, 2004. The hearing examiner made several errors in approving the permit, according to Brain. One of the errors occurred when the hearing examiner did not consider the CC&Rs when determining if the use was compatible to others in the area. Since the CC&Rs in the Vusario subdivision do not allow for transient rentals, the use would be incompatible, he said. "The county can't fail to recognize CC&Rs without eviscerating the right of the homeowners," he said.
Renting out a home as a vacation rental is not considered a commercial use in San Juan County and is allowed in residential areas. Homeowners must obtain a conditional use permit (CUP) from the county. The county does not consider CC&Rs
when it issues the permits.
Commissioner Darcie Nielsen said the decision to allow transient rentals in residential zoning was done consciously by the county. The goal was to encourage small-scale tourism and discourage mega-resorts.
Brain will take the case to court. "No appellate court has ruled whether CC&Rs have to be taken into consideration," he said.
Commissioner John Evans said, "The advice given to the county up to this time has been the county doesn't have the ability to enforce the CC&Rs. They are enforceable by property owners." He also noted just because a permit allows a transient rental, that doesn't mean the CC&Rs allow it.
Transient rental rules tweaked
posted 11/08/02
New rules regarding accessory dwelling units (guesthouses) and transient rentals involve siting, management, water availability, and semantics. From now on transient rentals will be called vacation rentals and property owners who rent them out will be required to provide a contact number that is available 24 hours a day. The number does not have to be local.
ADUs on community water systems must have water availability equal to 1/3 of a residential unit. The current rules did not have a separate water availability requirement for ADUs. Commissioner John Evans asked, "Are we going to create problems by going this route for group B water systems?"
San Juan County Environmental Health Manager Mark Tompkins said, "I don’t think so, except for the Group Bs that have 10 (subscribers) and they all want to add ADUS. If they go over 15, they go to Class A." He said most of the Class B systems in that situation have been built to Class A standards. The commissioners all agreed to the water requirement.
Commissioners Darcie Nielsen and Rhea Miller favored the addition of a siting requirement for ADUs. A portion of the ADU must be within 100 feet of the main residence unless there are environmental or site specific reasons making it undesireable to do so. Evans was opposed to the requirement.
The commissioners did not want to place a limit on the number of ADUs. Instead they agreed the permit center and assessor's office would track the numbers. The permit center and the planning department would annually monitor the cumulative percentage of residentially developed parcels in rural and resource lands that have ADUs. When and if the number meets or exceeds 25 percent, the planning department would conduct additional environmental analysis.
The commissioners agreed to language changes to fix an anomaly. Evans said under the current rules if a person wanted to rent out an ADU, there had to be a permanent resident or lessee in the main house. The commissioners agreed they did not want to allow both the main house and the ADU to be rented as vacation rentals. But they did want to clarify wording, so a homeowner who just used the residence part-time could rent out the ADU. Senior Planner Rick Rutz said it could be rewritten to say the residence must be occupied by the owner or long term lessee or the unit must remain unrented.
The board briefly considered ways to limit the number of transient rentals in any one neighborhood. At Nielsen's suggestion, wording similar to the Town of Mendocino, California regulations was discussed. That municipality limits the ratio of owner occupied or long-term rentasl to transient rentals to 13:1. Rutz pointed out there are 52 distinct neighborhoods in the county where the rules could apply. The size ranges from seven to more than 250. Treating them all as one unit could end up with neighborhoods that are all transient rentals. If they were treated separately it would become an administrative burden he said.
Evans said, "There are so many things that can go wrong with trying to go down this approach. Someone could say: I’m going to get permits and never use them just to keep them out of the neighborhoods." Both Nielsen and Miller said they were concerned about saturation of neighborhoods but the solution was not workable.
The BOCC plan to adopt the changes to the Unified Development Code at their Dec. 3, 2002 meeting. Before the current moratorium on ADU construction is lifted the Growth Management Hearings Board has to find the new regulations put the county in compliance with the Growth Management Act.
BOCC agrees to minor changes in transient rentals
posted 10/21/02
San Juan County Commissioners turned down most of the planning department recommendations regarding guesthouses during a worksession Tuesday, October 15, 2002. They agreed to two changes in transient rental regulations. "
This issue probably splits people 50/50 more than any other issue," said Commissioner Rhea Miller.
In July 1999, October 2000 and in November 2001, the Western Washington Growth Management Hearings Board decided the county's policies and regulations regarding guesthouses failed to comply with the Growth Management Act. The county hired a consultant to compile facts and statistics about accessory dwelling units in San Juan County.
The impacts on density of allowing an ADU on every parcel in San Juan County was one of the issues to be addressed. Under current rules, ADUs are limited to not more than 1,000 square feet and must share water and sewer systems with the main house. Rentals of the ADUs are allowed if the main house is used by the owner or a long-term leasee.
Possible changes in regulations regarding short-term (transient) rentals of residences were considered by the BOCC at the same time they reviewed ADUs. Several residents had asked for the transient rental regulations to be revised.
TRANSIENT RENTALS
Short-term rentals of homes is allowed in the county. Several residents had requested changes be made in the regulations ranging from an outright ban to more stringent permits. Several spoke out about the impact the practice has on their neighborhoods.
Steve Hopkins said allowing homes to be rented out nightly is a commercial use not residential. "Random groups of people moving in and out of neighborhoods is not a residential use," he said. "Residents of Shaw and Waldron ban transient rentals. Why can't Lopez, Orcas and San Juan Islands have the same protection?" In his neighborhood of 65 homes, nine are used as transient rentals. "The argument is made that homeowners should have the right to short term rent to offset cost of their homes" he said. "Eight (of the nine) are owned by off-island investors. These are investor driven schemes. Place the needs of the neighborhoods above the needs of investors"
Sarah Crosby of Friday Harbor favored the short-term rentals of homes. "The term transient rental is perjorative," she said. There are conditions put on the transient rental permits, she said. "One of the advantages of short term rentals is the efficient use of housing stock," she said. "Space isn’t always available in hotels." Another advantage is by giving people opportunities to rent houses for vacations in the San Juans it prevents them from going to the time and expense of building their own vacation home."
Bob Gamble compared transient rentals to Bed and Breakfasts which are banned in rural residential land designations. " People are having B&Bs without food service," he said. "The unsupervised overnight rentals can destroy the neighborhood. It has the potential that we will have entire neighborhoods which are a dispersed hotel." He said property owners should have their property rights protected. He favored allowing 30-day rentals and saying no to transient rentals in rural residential zones.
" We don't have an easy solution," Commissioner Rhea Miller said. "On the East Coast there are islands where almost all of the housing is taken by investors. People are taking the long view, more and more are investing in houses for income." She understood the concerns of residents who have the "fear of never knowing who is next door when you are on small lots."
Commissioner John Evans said, "In some cases, transient rentals are beneficial, in other cases they are detrimental."
The planning department staff recommended " Owners of transient rentals must file with the
Administrator the name of a person or of a licensed, professional property manager who will
be accountable for the compliance of the rental with laws, regulations, and permit conditions
if the owner or lessee is not physically present." be added to the current regulations. The other change recommended was: "The owner or lessee of the short-term rental shall provide notice to the tenants regarding
their responsibility not to trespass on private property or to create disturbance. If there is an
easement that provides access to the shoreline, this shall be indicated on a map or the
easement shall be marked; if there is no access, this shall be indicated together with a
warning not to trespass."
The county commissioners agreed to the two changes. Commissioner Darcie Nielsen and John Evans want the term transient rentals be dropped in favor of vacation rentals.
Commissioners won't revisit transient rentals now
By Matt Pranger
posted 02/02/00
County commissioners will not be considering changes to transient rental regulations before the scheduled county Comprehensive Plan review.
"We can't keep dragging this plan back and forth like an old rug and not expect it to unravel," Commissioner John Evans said of the Comp Plan, revised 13 months ago. "We've got to let it settle."
Before about 35 islanders Feb. 1, 2000, commissioners Darcie Nielsen and Rhea Miller also spoke against adjusting transient rental provisions at this time. However, they agreed the issue should be readdressed as part of the regular Comp Plan review.
Noting most complaints about transient rentals came from islanders residing on small lots, Nielsen said, "We do need to revisit the standards, especially in Rural Residential, and especially in lots one acre and less."
Islanders from several neighborhoods recently urged the commissioners to adopt a moratorium on all future Provisional Use permits.
"We have opened the flood gates of transient rental with the new UDC," Dylan Stephens of San Juan Island's Eagle Cove wrote in a letter to commissioners. vIt is time to push the flood gates closer together before it is too late."
Stephens added that transient rentals "will quickly erode the rural character in every area of this county." He contended transient rentals have a greater impact than bed & breakfast inns because an owner does not have to be on the property.
"Transient rent is higher than monthly or yearly rent and consequently is more appealing to those who want to maximize profit at the expense of the rural character of the neighborhood," Stephens wrote.
Transient rentals are seen as an investment to pay mortgages, thus an inducement for some people to purchase property without living in the islands, he claimed. "If this trend continues, this use will drive up property values and therefore taxes," Stephens wrote.
He requested a study be performed to determine how many Provisional Use permits have been issued to transient rentals that were in violation under old rules. He also requested the county's Uniform Development Code clearly define whether a transient rental is residential or commercial so appropriate standards could be applied.
"I would like to see stricter standards for transient rental so as not to burden the rural areas, and so as to encourage monthly rental over transient rental," Stephens requested.
John Dunning, owner of Windermere Real Estate, spoke on the transient rental issue as a concerned citizens, a representative of some homeowners who were unable to attend the Feb. 1, 2000 commissioners' meeting.
"Our agency represents a small group of homeowners in the vacation rental of their homes," Dunning said. "I am not here to advocate intrusive or irresponsible vacation rental activity. I am here to advocate responsible, well-administered and responsive to neighbor concerns, family vacation rental activity."
Dunning disputed newspaper reports that renting transient housing was increasing. "There is no expansion of vacation rental activity going on! Due to the permit application process and posting of properties, homes that have been rented for years are just now coming to the attention of neighbors," he said. "The fact is that the complexity of the permit application process has discouraged some owners of homes that were in rental activity over the last few years, such that some of them have dropped out of activity."
He also disputed that people were buying transient rentals as investments. "There are no vacation rental homes on these islands that are a good financial investment, due solely to their vacation rental use. Most vacation rental homes, by their nature, are in the shoreline area, have values far exceeding any possible rental value, and unless used by their owners part of the year, make no financial sense. These same homes would make even less sense as long-term rentals and would undoubtedly never end up in this activity."
Nearly all vacation rental homes are occupied by families who come to the islands "not to make whoopi, but to enjoy the peace and serenity that we all cherish," Dunning said.
Dunning also cautioned commissioners about tinkering with property rights. "The right to rent one's home is a critical personal property right," he said. "The vacation rental permit process already modifies each owner's right to rent their home and receive economic value from their home. We need to tread very lightly with regard to property owner rights, and that includes the rights of both of those who object to vacation rentals and those who want to use the home for vacation rentals."
In a related issue, county Prosecuting Attorney Randy Gaylord said the county is not responsible for enforcing neighborhoods' covenants. When the county wants to restrict land use, it uses the Comp Plan, UDC and other processes, Gaylord said.
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