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City of Capitola: Vacation Rentals Ordinance (November 2021)

Nestled on the coast of Monterey Bay, the City of Capitola is a popular tourist destination due to its sandy beaches, local fishing wharf, and trendy shopping and restaurants. The City of Capitola has been impacted by an increase in tourism along the Central Coast, and property owners are pursuing the opportunity to transition their homes into vacation rentals. Before jumping in, however, residents need to familiarize themselves with the City of Capitola’s rules and regulations regarding new and existing vacation homes. Here’s a brief summary!

Can I apply for a short-term rental in the City of Capitola?

The City of Capitola regulates vacation rentals under Capitola Municipal Code Section 17.160.030, which outlines the rules and regulations surrounding residential short-term rentals in the city.

According to city code, a vacation rental, also known as a short-term rental or transient rental, “is a residential home or portion of a home that is rented for [fewer] than 30 days.” Unfortunately, an accessory dwelling unit (ADU) cannot be used as a vacation rental. 

For those wondering whether their home can be a vacation rental, the answer depends on the location of the property.

The City of Capitola permits vacation rentals in a specific area known as the Vacation Rental Use (VRU) overlay district. “This area consists of the Capitola Village, Riverview Avenue as far north as city hall, as far west as Cliff Drive, as far east as Monterey Avenue, and as far south as Capitola Beach.” (See the image below.)

If a property falls within this area, it may be operated as a vacation rental. Any home outside of the VRU area is not permitted to be a vacation rental. Homes outside the district are authorized only for long-term rental, or rental for more than 30 nights.

How can I obtain a vacation rental permit?

Every vacation rental is also required to have a permit, and applying for a vacation rental permit in the City of Capitola is a two-step process: Applicants must submit both a Transient Rental Application and a Business License Application to the city. Once the Transient Rental Application has been submitted, Planning Staff review it for completeness and compliance with zoning and parking regulations. Upon approval by Planning, the Finance Department issues a Transient Rental Occupancy Certification. If approved, the Business License Application is processed and issued, and the applicant is subject to the associated tax. The Transient Rental Occupancy Certification remains valid so long as the Business License remains active and is renewed annually. In addition, the Transient Occupancy Tax Monthly Report must be submitted monthly, including months with no occupancy.

What can I expect once I’ve been approved?

If approved, the property owner is permitted or required to do the following:

  • The property owner is permitted to advertise the vacation rental using a maximum of one sign per structure, not to exceed twelve inches by twelve inches in size.
  • The property owner must post the vacation rental permit in a visible location within each unit.
  • Vacation rental properties must meet parking standards: One parking space is required per unit. Parking may be on site or within the Beach and Village Parking Lots (1 or 2) with proof of permit, if eligible. The on-site parking space must be maintained for exclusive use by guests during their stay.
  • The property owner must designate a person who has the authority to control the property and represent the owner. This individual must be available at all reasonable times to receive and act on complaints about the activities of the tenants.

It is important to note that once a property owner has a permit, they do not have the right to a renewed permit. According to city code, “If there is a history of the permit holder or tenants violating the permit’s conditions, the permit may be revoked … After a permit is revoked, the permit holder may reapply for a new permit one year after the revocation. The community development director may deny an application based on previous code enforcement issues. A decision by the community development director is appealable to the planning commission.”

Can I market my vacation rental online?

Yes! However, vacation rentals marketed online must include the vacation rental permit number in the first line of the posting. 

For further questions regarding vacation rentals in the City of Capitola, contact the Community Development Department via phone at (831) 475-7300.

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