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Whatcom County and the New Sharing Economy

By Tani SutleyOn Dec 09, 2014

This article is by guest writer Tani Sutley. Tani’s family has owned property on the north shore of Lake Whatcom for over 60 years.

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Home Rentals Take on New Meaning

Within the Lake Whatcom Watershed there are now fourteen vacation rental homes for transient accommodations. These homes, and almost one hundred others, are listed online as vacation rentals in Bellingham and Whatcom County.

We all accept having neighbors who purchase a home and live in it or rent it to someone who lives and works in the area. That’s normal for residential neighborhoods. It’s always been that way and we know the person who lives next door. Zoning rules for residential homes are easy enough to understand. Title 20 zoning definitions say one single-family dwelling is a residential unit for residents, not transients or visitors:

20.97.346 Residential unit. “Residential unit” means a family dwelling unit intended for long-term human habitation and occupancy by a resident family. (Ord. 87-12, 1987; Ord. 87-11, 1987).
20.97.347 Resident. “Resident” means one who lives and usually works in the vicinity; not a visitor or transient. (Ord. 87-12, 1987; Ord. 87-11, 1987).

For our family, and many others in Whatcom County who have expressed concern, we want the law to stay the way it is for single-family dwellings: residential.

Maybe, as a community we need vacation rentals somewhere to satisfy the wishes of travelers to live in a house as part of their vacation. However, if we allow them everywhere around the lake, regardless of the business intensification and cumulative impacts, we will have resort uses without the proper development standards required. All commercial developments require public water and sewer. Then there is the cost of the fecal bacteria and phosphorus removal from the lake we all will be paying for in taxes beginning next year. This should also concern all those taxpayers in the city of Bellingham. Further, accessory use does not require a permit and assumes the owner will limit home occupancy to the bedroom limit on their septic system and that their well water or water drawn from the lake is safe for public use. Then there is an issue of liability insurance. Most homeowner policies do not cover commercial activity in the home.

Amendments to Residential Zoning

Now Whatcom County planning staff is considering adding amendments to our existing laws that will change who is living next door. Under the zoning amendment proposal all residential neighborhoods and all of Lake Whatcom will include the commercial use of homes for transient and tourist uses with no permit required. Proposed staff amendments PLN2014-00020 will be reviewed on December 11, 2014. It includes vacation rentals for less than 30 days as accessory zoning, meaning customarily incidental to the main residential use. Examples of such a radical change of residential use are not to be found within the American Planning Association’s previous reviews of accessory uses. In fact, case law has assigned “customarily incidental” to mean a commonly, habitually, and by long practice as reasonably associated with the primary use. (Page 17-6.)

Non-owner occupied vacation rentals to transient guests does not appear to be customarily incidental. One example that fits the customary incidental definition is the occasional garage sale conducted at a home to sell unwanted items.

Why would the County Council and planning and development services think this is a good idea? It combines commercial uses of property with residential uses. It allows business operations supported by online credit card booking services but does not separate full time primary use from the restrictive accessory definition.

What is Incidental and Subordinate?

Lincoln City, Oregon (page 52) is of the opinion that accessory use limited to a 30 day rental per year for transients is minor and therefore incidental and subordinate based on the following case:

“In 1985, just a few years before the 1989 adoption of the VRD regulations, the Land Use Board of Appeals upheld the City of Beaverton’s interpretation of the terms “incidental and subordinate” in Leonetti Furniture Manufacturing Co. v. City of Beaverton, 13 or LUBA 59 (1985). Leonetti was selling his industrial property to Costco. Costco argued that their wholesale use was permitted in the Industrial zone and that their retail sales were allowed as an accessory use. Costco’s actual retail sales were about 40-49% of their wholesale sales. Costco argued the terms “incidental and subordinate” can only mean just less than one-half, and therefore their accessory retail use was allowed. Beaverton rejected this interpretation. Using the definition of the terms and the purposes of the zone, Beaverton found that accessory use was a use that was “extremely minor in nature compared to the main permitted use.” LUBA similarly turned to the purposes of the Code and acknowledged that Beaverton’s interpretation was reasonable and consistent with the City’s Development Code. Costco’s interpretation, that it could only mean “just less than one-half” was rejected.”

For our neighborhood, the problems of having tourists renting homes for two or more days was first noticed on Lake Whatcom in 2013, when several homes became available full time as business operations. None of these owners told the neighbors about the new businesses they had started nor provided any mitigation for the impacts of such intense development of the property. All were occupied all summer and most of the fall with frequently changing renters.

Several homeowners spoke to the County Council about vacation rentals. At the time, some of the council members expressed concern about allowing vacation rentals in the Lake Whatcom Watershed, especially for those homes without public water and sewer. Some expressed concern about phosphorus and fecal bacteria.

The Department of Ecology has placed the Lake Whatcom reservoir on a watch list: “Lake Whatcom, the main source of drinking water for the city of Bellingham and other communities around the lake, is suffering from low levels of oxygen. The root cause of the problem: increased levels of phosphorous and fecal bacteria entering the lake.”

Stormwater runoff from developed areas increases the amount of phosphorus entering the lake beyond natural, healthy levels. The excess phosphorus adds to the lake’s algae bloom problems, requiring more treatment to make the water safe for drinking. It also decreases the lake’s overall health.

Public Hearing Proposal for Vacation Rentals

A hearing was held on September 16, 2014 on regulation options for vacation rentals in the county. At the hearing five options were considered as Agenda Bill 2014-295.
1. Permitted outright as a single-family dwelling. Allow rentals of any duration in residential zones without conditions.
2. Permitted with performance standards. Allow vacation rentals as a permitted use in all rural and residential zones, subject to conditions.
3. Permitted in specified locations, with performance standards. Same as 2 but permitted only in certain zones or geographic areas.
4. Permitted with registration. Same as 2 or 3 but with licensing or registration requirements.
5. Prohibition. Vacation rentals are not permitted uses in any residential zones.

Previously expressed concerns for Lake Whatcom by council members did not result in excluding the shorelines of the lake or any location exclusion. The minutes record that the council members supported option two for vacation rentals in all rural and residential zones. Council members Ken Mann and Sam Crawford thought permitted use was unnecessary and accessory use was substituted. Lake Whatcom was not discussed although Council member Pete Kremen expressed “the use should not be allowed in the Lake Whatcom Watershed.” Planning Director Sam Ryan also expressed concern at the public hearing and said she “is more concerned about facilities that act more as hotels than as residences.” Council member Rud Brown expressed concern about the safety of the buildings.

Planning Work Session Scheduled for December 11, 2014

On December 11, 2014 at the Planning Commission office a work session is scheduled to begin reviewing the wishes of the council to allow vacation rentals everywhere. They will review the planning department’s draft of PLN 2014-00020.

Agenda Bill 2014-295 and the planning department’s PLN 2014-00020 Vacation Rental Amendment do not address any special provisions for the protection of Lake Whatcom as a reservoir of public water. It assumes vacation rentals to tourists and transients are the same as rentals for over 30 days when multiple ordinances and supporting definitions have separated the two uses since Ordinance 1987-011 and for Bed and Breakfast since Ordinance 1985-055.

Planning Director Sam Ryan’s previously expressed concern that a home does not act as a hotel was not addressed.

Homeowners, under this proposal, who have a permitted accessory dwelling unit or apartment unit would be able to live in one while renting the other to transients or tourists. This change will completely ignore the purpose for which ADU permitting was established in the first place, which was to increase the available units for affordable housing. Many homes advertised in our area are over $500 per night. The profit motive is clear. Renting your home to tourists for four (4) nights will yield the same as renting your home for over a month to a resident as a reasonable and affordable monthly rent. Ordinance 1994-002 established accessory dwelling unit permits to increase affordable housing for residents of Whatcom County. This new ordinance proposal rejects that goal in favor of creating profits for owners and investors for transient rentals.

The New Sharing Economy

At the heart of all these changes is a nationwide movement to conduct business without getting the necessary permits, inspections, insurance and state environmental reviews. They call it “sharing” but most just call it illegal business activities. That fight is just beginning in Portland, Oregon with Uber, a ride share business model.

As with many of the “sharing community” business models now existing as publicly traded businesses, liability insurance was not discussed in the county proposal. Traditional homeowners insurance will not cover regular commercial activity in a home. In fact, commercial insurance costs are usually well over $2000 per year, if you can find an insurance company willing to insure a home for vacation rentals. The New York Times recently covered this issue in, A Liability Risk for Airbnb Hosts. “One thing came through loud and clear from the handful of companies that did not dodge my inquiries entirely: Most homeowner’s and renter’s insurance policies do not cover regular commercial activity in the home.”

It is my opinion that Transient Vacation Rentals do not belong in the watershed. Owners can continue to rent long term to residents, rent a home for the entire summer to one single family, or reside in the home themselves. Perhaps these uses are not as profitable as transient short-term rentals but they are non-the-less economically viable uses and they would not adversely affect the surrounding residential uses or present rural character of the watershed. Hotel uses should be confined to urban growth areas, resort commercial and the tourist commercial areas with proper permitting.

I urge those who live in residential neighborhoods and want to keep it that way to call Gary Davis at Planning and Development for information on the proposed changes or write to the Planning Commission with concerns.

About Tani Sutley

Contributor • Member since Dec 09, 2014

Comments by Readers

Mike Rostron

Dec 09, 2014

Great article, with some very good points raised. The fact is, the city council and planning department would like to do away with single family zoning entirely, but they know there is some resistance from homeowners who don’t actually look at their homes as primarily a way to generate income, so instead of addressing it directly, they are simply redefining what can be built and what activities will be permitted in single family zoned neighborhoods. Soon, they will be single family in name only.

This bias can clearly be seen in the way the city is spinning the results of the Comprehensive Plan Review Plan Update Survey. They trumpet the statistic that 75% of those polled seem to favor more infill, but some 25% are against it or don’t care, and this from a sample that in no neighborhood equals 10% of the residents. In fact many neighborhoods responded at less than 3% of the population, and quite a few at less than 1%. A similar poll of residents in currently zoned single family neighborhoods would have far different and more nuanced results.
http://www.cob.org/documents/planning/comprehensive-plan/2016-survey-results.pdf

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Scott Wicklund

Dec 13, 2014

Once these uses are codified and allowed, foreign investors will be eligible for recovery of lost revenue from Whatcom County in the event such uses were outlawed.  The various “free trade” agreements allowed an arbitrator to award damages to injured investors.  Just a commodity, move along, nothing to see….

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Tani Sutley

Dec 14, 2014

Update:  A Public Hearing is scheduled at the Planning Commission on January 8, 2014 on vacation rental amendments.
http://www.co.whatcom.wa.us/pds/pc/schedule.jsp

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Ryan M. Ferris

Jan 03, 2015

This is a fascinating issue.  I will be interested to see how the County Council digests this one. I will indicate the obvious: Homeowner’s insurance that won’t cover AirBNB and community concerns about revolving tourists essentially using residences as hotel rooms could effectively prohibit that growing section of tourist activity in Whatcom County. This conflict is happening across the world now - just google ‘AirBNB legal challenges’ to see world cities in quandry about AirBNB. 

I love this conflict because of the players: hotels (losing income), cities (losing regulated hotel taxes but not sales tax!), stable communities (losing stability and peace and quiet) vs. professionals, travelers, tourists who want flexibility and freedom. Not to mention property owners who want to take advantage of their investments. It’s definitely has the air of new economy vs. the state, untaxed vs. taxed, unregulated vs. regulated, millenials vs. ???

I don’t have an opinion on this as a Marxist. However, it is a fascinating issue. Strangely, I think I might find myself favoring the ‘property rightista’ or libertarian, anti-regulation type on this one! Why regulate or discourage a commercial activity that is fundamentally low impact (no new smokestacks), encourages tourism and economic activity, and probably helps prevent foreclosures from home owners who are having trouble making heady North Shore payments. I will have to admit, AirBNB isn’t happening in my neighborhood (to my knowledge) and I doubt if it did if it would prove more onerous than most rental units anyway; but then I don’t own a home on the North Shore.

Not so strangely, at least four new hotels are either up and running in my North Bellingham neighborhood or under construction. And they are not housing refugees from Afghanistan. It would be interesting to know what percentage of AirBNB customers are Canadian and what percentage of LaQuinta, Marriot, and Hilton(under construction) patronage is expected to be Canadian. This would be less of a concern if tourism and travel weren’t the bread and butter of Whatcom County’s in store retail sales economy. I love the new hotel that’s being built directly across from the mall. Very subtle…. To get some idea of how important short term travel and tourism is to Whatcom County, try these documents:

http://www.cob.org/documents/planning/boards-commissions/tourism/be-inspired-marketing-plan.pdf

http://www.bellingham.org/membership/whatcom-county-travel-impacts/

Here’s some quotes from the second link. All you North Shore residents up in arms about this should read the last two bullet points to understand what Whatcom County Council may be up against in drafting new legislation to cover AirBNB. It’s worth noting that AirBNB has spread faster and become an economic impact on many, many cities all over the world faster than it can be regulated or understood. And that is a hallmark of “new economy” power and invention: creating value from untapped markets.

“Whatcom County Travel Impacts
In 2013, the direct county-wide traveler spending reached $573.9 million –Whatcom County ranks 5th in the state in terms of visitor spending revenues.
The Bellingham-Whatcom County Visitor Industry supported 6,110 jobs in 2013 – generating local earnings in excess of $128 million.
Visitors to Whatcom County contributed $8.2 million in local (city and county) taxes in 2013. They also generated $24.8 million in state tax receipts during the same time period.
Persons staying in commercial lodging (hotel, motel, B&B, etc) account for slightly over 60% of all visitor spending – with an average of $343 per day.
Approximately 40% of traveler overnights to Whatcom County are spent with family & friends – with an average of $84 per day.
If every resident household in Whatcom County encouraged one additional overnight visitor this year, it would generate 205 additional local jobs!
If every resident household in Whatcom County encouraged one additional overnight visitor this year, it would pump an additional $15.7 million into our local economy!”

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