What is a Vacation Rental, Anyway?

Part 1 in a Series on Palm Springs Vacation Rentals

This is our house in Palm Springs. It’s also a vacation rental… but what does that actually mean? Let’s find out!

[Updated Feb 16, 2018 with info about City of Palm Springs impact study on vacation rentals.]

With an initiative measure that would prohibit the “vacation rental of single family residences in the city” of Palm Springs currently in the process of signature verification, you can be sure that residents, homeowners, visitors and others with an interest in Palm Springs will be hearing a lot more about vacation rentals in the coming months.

(As just one example: The City of Palm Springs has published a long-awaited impact report about how banning vacation rentals would affect the City in terms of fiscal, economic, tourism and other factors.)

I thought that now would be a good time to build on some of my previous writings about vacation rentals with the goal of educating interested parties about both the history and current state of vacation rentals in the City of Palm Springs.

Why Should We Better Understand Vacation Rental Rules?

First, the expanded budget and enforcement capabilities of the City’s Vacation Rental Compliance Department have lead to an increase in enforcement actions — some of which seem to have caught at least a few homeowners off-guard with respect to some of the more unusual ways that the vacation rental ordinance might apply to them. (More on this topic in the second article in this series.)

Secondly: Whether you’re generally in favor of vacation rentals, generally against them, have no firm opinion, or have no idea what all the fuss is about, if you vote in the City of Palm Springs there’s a good chance that you’re going to have the opportunity to vote for or against this initiative. Whichever way it goes, the outcome of that vote will have far-reaching effects, which I’m not going to belabor here. You’ll surely be hearing a lot of detail around that.

If this measure comes to ballot it will, in fact, be the first time that a city electorate has been asked to vote on a ban of this nature. While similar restrictions have been enacted in other US municipalities, none have been enacted by popular vote, but by city councils and other representatives.

In most cases, such restrictions (or the decision to regulate short-term rentals in other ways) have been decided upon after an enormous amount of research and deliberation. So we have the responsibility to not make decisions about short-term rental regulations lightly or without a solid understanding of the facts.

So, let’s start with the most basic of basics…

What is a “Vacation Rental,” Anyway?

In other places, what we in Palm Springs traditionally call “vacation rentals” are known by a variety of names. When people talk about “vacation rentals” (VRs), “short-term rentals” (STRs), “vacation home rentals” (VHRs) and similar terms, they are generally referring to the same thing: a place that offers short-term accommodations to guests in a residence (like one’s house, or one’s condominium). It can also refer to the activity of offering such accommodations.

By “short-term” we mean periods that are typically less than those that would establish legal residency (or tenancy) in the dwelling. In most places, this is generally a period of less than a month. (Becoming a tenant confers special rights that most of us are familiar with, at least in the colloquial sense.)

Those visitors who stay in a vacation rental might be referred to as simply “guests,” “vacation rental guests,” “short-term renters,” or “occupants.”

The term “vacation rental” is actually a bit old-fashioned and pre-dates — by many years — the rise of online services such as Airbnb, VRBO (which stands for “Vacation Rental by Owner”), HomeAway, TripAdvisor Vacation Rentals and similar sites that help short-term renters find, compare, and connect with providers of short-term residential accommodations.

In recent years, it’s become common for some — including media outlets and people who live in places where short-term rentals are a relatively new phenomenon — to refer to short-term rentals as “VRBOs” or “Airbnbs.” For the most part, these terms are synonymous with “vacation rental.”

Since Palm Springs has long been a resort destination and a place with a high percentage of part-time residents (and part-time occupied homes), the activity of “vacation renting” (whether for short-term or seasonal stays) is a long established, traditional activity which was essentially unregulated for decades. It has been a legally-recognized and regulated activity in Palm Springs for nearly 10 years.

This helps to explain (1) why “vacation rental” has come to be the preferred/traditional term for short-term rentals here and (2) how Palm Springs came to be one of the first municipalities in the US to adopt formal regulations around short-term rental activity. (For more on that, see the next article in this series, “The Basics of Vacation Rental Regulations in Palm Springs”).

How Does the City of Palm Springs Define Vacation Rentals?

The activity of offering short-term residential accommodations in Palm Springs has been regulated since 2008. These regulations (which have evolved substantially over time) are commonly referred to as the City’s “Vacation Rental Ordinance.” The current version of this ordinance (enforcement of which began on April 16, 2017) is Ordinance No. 1918 (which is section 5.25 of the Palm Springs Municipal Code).

Ordinance 1918 defines the term “vacation rental” this way:

“Vacation Rental” means a single-family dwelling, or any portion thereof, utilized for occupancy for dwelling, lodging, or sleeping purposes without the Owner being present for a period of twenty-eight (28) consecutive days or less, other than ongoing month-to-month tenancy granted to the same renter for the same unit, occupancy of a time-share basis, or a condominium hotel as defined in Section 91.00.10 of this Code.
The term “vacation rental” is synonymous with “short term rental” and “transient use” and does not include homesharing.

So, short-term rentals here in Palm Springs are defined as guest stays of less than 28 days, where the owner of the home is not present. Such stays are governed by the rules set out in the Vacation Rental Ordinance, and the core requirements for and restrictions around vacation rentals are the subject of the next article in this series.

The most important thing to note is that, to offer short-term stays in Palm Springs, one needs to first obtain a permit. This permit is known as the “Vacation Rental Registration Certificate” and it is renewed annually. The current cost of such permits is $900 per year. To even advertise a residential property as being available for short-term stays without first obtaining a permit is prohibited.

First-time permit applicants are also required to obtain a permit to collect the City’s Transient Occupancy Tax — also known as “TOT” — (unless their property management agency collects and remits that tax for them), at a one-time cost of $25.

Vacation rental permit holders collect and remit the City’s transient occupancy tax (currently 11.5%) on all paid short-term stays. They do this each and every month. Even in months when the vacation rental operator has no short-term rental revenue (either because the home was unrented, occupied by the owner, or rented by a long-term tenant), permit holders are required to submit a TOT return.

As with the requirement for a permit, vacation rental permit holders have been responsible for collecting and remitting TOT since the first version of the Vacation Rental Ordinance, adopted in 2008.

Aside: The astute reader may have noticed that the definition of a vacation rental quoted above says nothing about compensation. That is, it would seem to apply to any situation where a property is transiently occupied, regardless of who the guest is and whether or not they are paying for the stay. I explore this a bit more in the next article in this series.

Long-term Stays/Rentals and “Seasonal Rentals”

Stays (or rentals) of longer than 28 days are what are known as “long-term” stays and these are governed not by Ordinance 1918, but by the state and federal laws governing rental housing, tenancy, residency and all of that stuff. As any landlord will tell you, all of that can be pretty complex.

It’s worth noting that some, but not all, Palm Springs vacation rental owners also make their properties available for long-term rental. The risks, responsibilities and legalities of long-term renting are very different from those involved in short-term renting and, as a result, those that do offer long-term accommodations may only entertain such stays from guests who are unlikely to try and establish permanent tenancy. (For example, so-called “snowbirds” who desire a seasonal stay after which they will return to the Great White North.)

The vast majority of vacation rental permits are held by owners of homes that are used as what you might call “second homes,” “seasonal homes,” or “vacation homes” (and, in some cases, the permitted home is actually the owner’s primary residence) and the owners use the homes themselves either seasonally, or at least occasionally throughout the year, and enjoy the flexibility afforded by short-term rentals.

When a vacation home is rented for a period of longer than 28 days this is sometimes called a “monthly” or “seasonal” rental. These are not legal terms. Such stays are, legally, no different from any other form of long-term rental occupancy.

The important point is that, when occupied in this manner, the “vacation rental” regulations of Ordinance 1918 do not apply. (Nor do they apply when the owner of the home is in residence.) At these times, the home is not (currently) in use as a vacation rental and the occupants are not “guests”, but residents.

What is Homesharing?

You might have noticed the term “homesharing” in the excerpt of Ordinance 1918 that I posted above. Homesharing is another type of short-term rental activity. It differs from “vacation renting” in that the owner is present during the guest stay. The rules around homesharing are defined in Ordinance 1918, but are in some ways distinct from vacation renting.

Here’s how homesharing is defined in the Palm Springs Vacation Rental Ordinance:

“Homesharing” means an activity whereby the Owner hosts visitors in the Owner’s home, for compensation, for periods of twenty-eight (28) consecutive days or less, while the Owner lives on-site and in the home, throughout the visitor’s stay.

So, homesharing is when one rents a room in one’s home to a short-term guest. (You might think of it as the short-term version of “renting a room” or “taking in a boarder,” to use another old-fashioned term.) As with vacation rentals, the homesharing rules set out in Ordinance 1918 apply if the renter is staying for 28 days or less. If the renter is staying for longer, long-term rental rules would apply.

Unlike vacation rental rules (which have been in place since 2008), the regulation of homesharing is new: Prior to the adoption of Ordinance 1918, homesharing actually fell into a legal “grey area” in Palm Springs. The activity was neither expressly prohibited, nor allowed.

Ordinance 1918 legally recognizes the activity of homesharing and sets out rules for it. As with vacation rentals, homeshare providers must first have a permit, known as a “Homesharing Registration Certificate” and abide by certain operating standards. Homesharing permits are also renewed annually and the current cost for such a permit is $225 per year. Like vacation rental permit holders, homeshare permit holders much also collect and remit Transient Occupancy Tax.

While “taking in a boarder” isn’t anything new, the idea of homesharing has been popularized in recent years by the rise of the Airbnb service, which started, conceptually, as a way to connect short-term guests with “hosts” who who could offer a spare room as an alternative to other forms of short-term accommodations.

In Palm Springs, the number of “vacation rental” accommodations far outnumbers “homesharing” (owner-in-residence) type accommodations. While the requirement that vacation rental operators must have a permit is pretty widely understood in Palm Springs, the requirement that homeshare providers must have a permit is less well known.

However, just as the City’s Vacation Rental Compliance Department actively enforces the registration requirement for vacation rentals, they actively enforce the registration requirement for homeshares as well. The newness of this requirement has tripped up a good number of otherwise well-intentioned homesharers who have been cited and fined for “failure to register” since enforcement of Ordinance 1918 began.

For Further Reading

Now that we understand what vacation rentals are, we might want to understand more about how they are regulated. That’s the topic of the next article in this series:

As other articles in this series are released, I’ll link to them here. Other articles in this series:

As other articles in this series are published, I’ll link to them here.

BTW: If you have specific questions or suggestions for future topics in this series, please share them in the comments! Additionally, if you found this article useful, do express your appreciation by giving it a “clap.” (This is the Medium version of a “like.” Yes, I find the term funny as well.)

About the Author: Or, “Who are you and why do you do this?”

My wife and I are part-time Palm Springs residents who offer our Palm Springs home as a registered vacation rental (City of Palm Springs ID #1234) when we are not able to enjoy it ourselves. We developed our love for the city, people, and unique architecture of Palm Springs over the course of more than 10 years visiting the city — usually staying in vacation rentals (even from the time before the original 2008 ordinance)! We love the time we spend in Palm Springs and sharing our home with visitors — who we hope develop a similar passion for all things Palm Springs.

With respect to vacation rentals, I feel that many issues are not well understood and are prone to distortion by folks with radical opinions (either “pro” or “con”). As an independent owner/operator of a Palm Springs vacation rental, I’ve been active in trying to help shape our City’s short-term rental policies in sensible ways and in educating other homeowners, residents and guests about compliance requirements. When we rent our home, we do it with a great deal of respect and consideration for our neighbors and think that others should do the same (for the most part, they do).

Palm Springs has an amazing tradition of vacation rental hospitality and I believe that most in the City want to keep that alive in a way that benefits all residents. But neighbors should make up their own minds as to what are the right approaches, based on all the information we can gather.

I’m a member of Vacation Rental Owners & Neighbors of Palm Springs (“VRON-PS,” http://vronps.org), an organization representing vacation rental and homesharing permit holders in Palm Springs. This organization shares my commitment to advocating for responsible vacation rental ownership and I highly recommend that other permit holders join and support this group.

(It should be noted that any opinions expressed here are my own and are not necessarily shared nor endorsed by VRON or any other organization.)