Dana Point’s Measure T - Residents' David vs. Airbnb's Goliath

A classic David and Goliath story is playing out in beautiful Dana Point, where residents walked door to door gathering over 2,500 signatures to qualify a ballot initiative to restrict short term vacation rentals (STRs) in residential neighborhoods. Proponents of Measure T, led by Principal and long time community advocate Betty Hill of Residents Who Care About Dana Point, a grass roots PAC supported by thousands of residents and funded by less than $6,000 to date for this campaign, is facing a PAC called Residents against Measure T - Don’t Risk Dana Point backed by Principal Miriam Rupke, owner of a Vacation Rental Management Company and a local STR owner. According to FPPC reports, the Measure T opponents have amassed a war chest of almost $100,000, including 40% from AirBnb and management company interests, and the remainder from less than 60 LLCs and individual STR owners.

So, what has the AirBnb “Goliath" so riled up over a 50% reduction in STRs in a small city? Just follow the money. In 2014, the City “grandfathered” STRs following a citizen referendum that had overturned the city’s permissive STR ordinance. For the last decade, a small group of investors has enjoyed a steady stream of income with little to no competition. Measure T threatens investor profits because it insists on treating all permit applicants equally after prioritizing the least impactful STR types. Applications will be taken each March 1st, and permits will be allotted first to those applying for STR permit types with the lowest potential repercussions for residents (home stays, temporary rentals of primary homes, duplexes and multifamily units). A lottery system is then used to fairly award additional permits if the number of applications exceeds the remaining permits available. It’s basically the end of special privileges for an elite group of investors.

According to Dana Point’s Annual Financial Report, Transient Occupancy Tax (a 10% tax levied on hotels) earned the city about $17 Million in 2023 (almost 1/3 of total revenue), including $700,000 (4% of annual hotel revenue) from STRs. If STR owners are paying TOT honestly (the City collects it on the honor system), this means about $7 million in annual income to STR investors is at stake. Measure T proponents suspect this could be grossly understated. A provision of T requires hosting platforms including AirBnb to collect TOT at the source, reducing the City’s administrative costs and ensuring that all taxes due are remitted .

Retired federal prosecutor and Dana Point resident, Mark Zanides put it like this: “Opponents claim Measure T will put Dana Point at “risk” and result in a drastic cut in city services. These claims are false. In fact, while T would reduce the number of STR owners, the taxes reduced will be offset by increased tax collections, since Measure T requires the platforms to collect the taxes, which is how vast majority of cities with STR programs and does not rely on voluntary self-reporting by STR operators. The real risk to Dana Point is the continued commercialization of our residential neighborhoods. Measure T will protect our neighborhoods at a modest cost.“

Measure T seeks to put the question of STRs in the hands of those who are most impacted - residents - including the neighbors of permitted short term rentals, some of whom have endured revolving 2 – 29 day rentals next door for years while STR investors cash in from rights bestowed on them by the City Council. Under Measure T, any increase in the saturation rate of STRs must be approved by voters.

In addition to halving the number of STRs citywide - to 1% of housing units in the Coastal Zone and .5% in the Non Coastal Zone, Measure T keeps all the current City regulations governing advertising, permitting, supervision and noise, parking and other nuisances in place. According to Betty Hill, “ Measure T retains all the current regulations and actually enhances some of them. Permits go to Dana Point resident homeowners first and Measure T prioritizes rental types that have the least impact on neighbors. All valid permits must be listed on the city website, so neighbors can quickly verify whether vacation rental activity next door is legal.”

Proponents believe they represent thousands of Dana Point residents, in contrast to the tiny AirBnb-backed group of investors. They are confident that most HOA residents are supportive of Measure T, since most live in communities where STRs are banned, and understand why STRs, whether they are well run or not, are an incompatible use in residential neighborhoods. Non-HOA neighborhoods, hardest hit by the clustering of STRs in certain areas, are even more supportive. According to Ms. Hill “Most people understand that even a well-run mini-hotel next door still represents a steady flow of strangers. Transient “neighbors” are on vacation all the time and can create nuisances that just don’t sit well with families trying to quietly enjoy their private homes. Given a choice, few people would volunteer to have a full time vacation rental next door”.

Faced with this serious threat, the elite investor group is fighting back hard, with funding capable of outspending residents 17 to 1. What does AirBnb and investor money buy? Signs. Lots of very large, expensive signs that have proliferated all over town, and even outside Dana Point boundaries, causing one social media commenter to muse, “they can’t be real residents, they don’t even realize they’re placing signs in other cities!” Most of the “No on T” signs are located in public easements (illegally), on vacant lots or in front of the few businesses which perhaps fear losing tourist dollars more than they fear angering locals. The modest “Yes on T” signs are generally located in the front yards of residents’ homes.

The other thing $100,000 buys is YouTube ads and flyers that, in the opinion of proponents, serve to obfuscate the issues and confuse voters. The latest NO on T flyer claims that Measure T will “spread party houses”, presumably because unlike the special group of grandfathered investors, new investors won’t follow the rules. Never mind that there will be 50% fewer STRs for code enforcement to monitor and that all the existing regulations are retained and/or strengthened. The most perplexing claim is that “Measure T risks losing long-term rentals, reducing the availability of housing for full time residents.” Huh? Doesn’t 50% fewer STRs mean that Measure T actually helps preserve available housing, spelling relief in a city plagued by extremely low housing stock and a serious issue with housing its many hotel workers?

The investors also claim that reducing permitted STRs will lead to more illegal operators. And yet, Measure T prohibits platforms from advertising STRs in Dana Point unless the ad exhibits a valid city permit number.

Social media heated up recently over investors’ claims that “Dana Point’s financial stability will be threatened by reducing city revenue for essential services.” Dana Point is one of the most financially stable cities on the coast, with fully funded reserves, substantial annual surpluses and the highest per capita spending on police services of all OCSD cities. While the approximately $700,000 annual STR revenue may decline with 50% fewer STRs, one could argue that it may actually stay the same. STRs will enjoy 50% less competition and potentially almost 100% occupancy, and TOT could actually increase due to more accurate and perhaps more honest reporting. City costs of administering the program should reasonably be expected to decline by about 50%.

The bottom line is that Dana Point is a city that claims to have the highest ratio of tourist accommodations on the coast – 58 units per 1,000 residents according to the City, expected to rise to 67 per 1,000 with several new hotels on the way. Will tourism suffer with fewer STRs? Not likely. Will AirBnb and well funded “No on T” investors confuse enough “Yes for Less” voters to defeat a popular grassroots initiative? Time will tell. Stay tuned to see who prevails in November – Residents’ David or Airbnb’s Goliath?