County Council debate on vacation rental caps picks up speed ahead of May deadline

A long-term cap on the number of vacation rental permits allowed in San Juan County came a step closer to reality at the County Council meeting this past Tuesday, March 8, as the Council took up debate on the recommendations proposed by the County Planning Commission.

Representatives from the County’s Community Development department outlined the Commission’s conclusions, which center on a county-wide cap of 650 vacation rental permits. Of those 650 permits, 229 would be allotted to San Juan Island, with 334 for Orcas Island, 85 for Lopez Island, and two for the outer islands. Those numbers match the number of compliant permits as of July 31, 2021 – the last day of the month that the Commission began discussing the issue of permit caps.

The Commission’s recommendations differ substantially from the guidance provided to them by the County Council the month prior, in June 2021. That guidance called for more than 1,100 permits, including roughly 500 permits each on San Juan and Orcas. It did not specify a precise number for Lopez, but advocated allocating more than the 130 permits that had been issued there at the time.

Resolving that difference is the most pressing consideration for the Council as it works to finalize a revised vacation rental permit ordinance by the May 2022 deadline it set for itself in December of last year.

“We are all in agreement that we’re putting caps in,” Councilmember Cindy Wolf of District 2 (Orcas Island) said after the meeting. “We’ve negotiated that caps will be concrete. Now we’ll look at all of the available facts and arguments to decide what would be a reasonable cap for the district we live in. I don’t think there’s anything else up for discussion at this point.”

The complexity of that discussion was clear at the March 8 meeting.

“I’m just wondering how Council gave the direction to be at [1,130 permits] and we end up with something vastly different,” said Councilmember Jamie Stephens of District 3 (Lopez Island). “Why is it so much different when we gave specific directions?”

“I believe it was at the September meeting, the Planning Commission originally recommended 413 as the number of permits, and that was based on active and compliant permits,” as opposed to the total number of issued permits, Wolf explained. “The justification there was because that is when the community felt pain to the point that they started to complain.”

David Williams, Community Development Director, then outlined how the Commission settled on 650 permits as their recommended cap – and how long it would take for the number of issued permits to fall to that level.

“The Commission came up with that number,” Williams said. “It was far more arbitrary than the original number. I don’t know if they were just trying to split the difference between what the Council direction had originally been versus their 413. But if that number was to be adopted – 650 permits – we would have to wait for attrition to bring down the legal, lawful number of vacation rentals. We would have to lose somewhere between 200 and 400 before we could issue another vacation rental permit. It’s going to be years to get down to that number.”

Williams also pointed out the challenge of using a permit-holder’s self-reported active status as a metric for setting a cap number. “Active could be they rented a bedroom for one night, or they rented the house for 300 days, and they are very different impacts.”

The discussion that followed between Wolf and Stephens highlighted the nature of the negotiation that still lies ahead of the Council:

Wolf: “I think it is important to keep in mind that with 413 self-reported active and compliant vacation rentals, we were hearing an outcry from the community, so that would be my advocacy for that lower number. You don’t really need to go into the weeds too far if that’s where you started to hear them yell. We are charged within the [San Juan County Comprehensive Plan] with using the levers that we have to create market conditions that create housing at all different income levels, so I think it is our responsibility to look at that mechanism and weigh that into our decision about what percentage of our housing stock we really want to have be available as vacation rentals.”

Stephens: “A place like this where the average home is going at around $750,000 – a $750,000 house is not going to turn into an affordable rental. It might turn into a long-term rental, but it’s not going to turn into an affordable long-term rental. And I would tend to agree with some of the [public comments from vacation rental owners] that said, ‘I’m not ever going into long-term rentals.’”

Wolf: “The question also would be that ‘missing middle’, because part of what that charge is in the [Comprehensive] Plan is not about affordable long-term rentals – it’s about housing provided for all different incomes. So for instance, our people in the County who are engineers, who are skilled workers, who are living at far above a wage that would qualify for subsidized housing but cannot afford a house at market value right now – in part because we are driving those housing prices up to the point where a one-bedroom-one-bathroom on Orcas can’t be touched for under $550,000.”

Stephens: “We know that in those specific 700 homes that have a vacation rental permit, that price is being driven up a little. But for the rest of the housing stock in San Juan County, it’s just being driven up. It has nothing to do with vacation rentals.”

Wolf: “If we don’t regulate, if we don’t put caps in, we are continuing to allow for that incentive to speculate and to use those properties as investment properties rather than as owner-occupied housing.”

Stephens: “That doesn’t fly either. I understand if it’s the real world and we’re over in Skagit County, but here 40 percent of our houses aren’t occupied.”

Wolf: “Once upon a time I sat across from you on a ferry, before I was on Council, and we talked about housing, and we talked about the fact that shifting 40 houses makes a difference in a place like this. And so if you have a lever that allows you to shift even 40 houses into a price bracket where middle incomes can afford them, I think you should use that.”

The Council debate on March 9 did not touch on cap numbers for San Juan Island until the very end of the discussion, after Wolf referenced the 413-permit limit originally proposed by the Planning Commission.

“I would agree with that for Orcas,” said Councilmember Christine Minney of District 1 (San Juan Island). “But that is very much not my experience here.”

Stephens voiced the same sentiment. “I’ve not really heard it on San Juan – to take this much of a draconian cut when we set it at 500 and we didn’t have any complaints.”

Wolf then noted to the Council that, “when you’re considering where you want to put that number for San Juan – that number does not include all of your planned resort vacation rentals. So that’s 229 permits [as recommended by the Planning Commission], plus whatever’s going on at Roche Harbor.”

Beyond rental caps, the Council will also have to consider the Community Development department’s guidance to remove language from the draft ordinance that ties limits on vacation rentals to the five-year period after the ordinance is adopted. At last Tuesday’s meeting, County Planner Sophia Cassam noted that the department found that requirement “to be unnecessary because the Council can decide to re-evaluate or review the caps at any point in time.”

Going forward, the Council is required to discuss the draft of the revised vacation rental ordinance at least two more times. They must also hold a public hearing on the matter. A final decision on the ordinance will not occur until after that hearing.

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