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The Facts

Density of vacation rentals in Morro Bay

  • The world today is quickly becoming a sharing economy in many different areas: home sharing, ride sharing, car sharing.

  • Many larger urban areas are becoming overrun with hosted and non-hosted vacation rentals. This is not the case in Morro Bay.

  • There are 6466 housing units in Morro Bay and approximately 19% of them are second homes (approximately 1250 living units)

  • Morro Bay has currently capped the number of vacation rental licenses at 250 and per data collected from the city in summer of 2019, only 153 of those homes were “active”, defined as those paying more than $500 in TOT (indicating they collected $5000 or more in rents in the previous year).

  • This means that only 4% of all the housing units in Morro Bay hold STR business licenses and only 2.5% of all housing units have an active vacation rental.

  • 120 of the licensed STRs are managed by professional property managers.

  • In the city urgency moratorium document from 2016 that implemented the 250 cap, it was stated that the city believed there were as many as 100 illegal rentals already in operation!

Conclusion:  Morro Bay does not have too many licensed vacation rentals, and the city of Morro Bay has been aware of the illegal rentals for 3+ years and only recently began efforts to regulate the illegal VRs.

Density of Morro Bay Vacation

Economic Value Short Term Vacation Rentals bring to Morro Bay

  • Short Term Vacation Rentals (STRs) paid over $552,000 in Transient Occupancy Tax to the City of Morro Bay for the 2018-19 fiscal year.

  • STR guests contribute another $500,000 in sales tax to the city and county each year through spending during their visit.

  • Morro Bay recently voted to assess all STRs an additional 3% to contribute to the Morro Bay Tourism Business Improvement District.  This money will be spent to promote tourism for the city and sponsor events and activities that will attract visitors to the city. 

  • STRs have paid a 1% assessment to the San Luis Obispo County Tourism Marketing District for the last 5 years and this assessment amount will soon go up to 1.5%

  • All STRs pay a business license fee each year to the city of Morro Bay.  It is predicted that this fee will go up tremendously in the near future to cover costs associated with enforcing VR regulations and identifying and shutting down illegal STRs in the city. 

Nuisances caused by Vacation Rentals

  • There are many anecdotal stories about wild parties and out-of-control VR guests, and many of them are probably true. Yet the city has not provided an easy way for neighbors to know who to report the problem to. The city has also never provided an easy way to check if a home is a licensed vacation rental.

  • Share Morro Bay has provided the only location the public can look up an address to see if the home is a licensed vacation rental. You can view that list here.

  • The city has recently hired a company, Host Compliance, to identify illegal vacation rentals (advertising a place for rent but does not have a VR license) and within 1 month, 30 were identified.

  • In Morro Bay city council meetings and community forums, when the question of how many nuisance complaints have been verified with the city and a citation issued, the response was zero.

  • Those arguing to ban short term rentals claim they create extra neighborhood nuisances, such as excessive noise and parking problems, but there’s no evidence to back this up. In fact, a research study conducted by The California Economic Forecast, analyzing nuisance reports across the counties of Santa Barbara, Ventura and San Luis Obispo, said:

“We found no statistically significant difference between the nuisance complaint rate
for short term rentals and all other homes.”

  • The report also concludes:

“The negative allegations aimed at short term rentals could not be substantiated by the statistical evidence.”


Vacation Rentals Negatively Impact Long Term Housing inventory

  • The nay-sayers also claim that short term vacation rentals affect long term housing supplies, but this is also false. Another research study, analyzing short term rentals across Santa Barbara county, said:

“We did not find that the supply of housing was significantly affected by the incidence of short-term rentals.”  

  • This study also stated:

“Very few homes are used as short term rentals full-time and would not be converted to long-term housing under any short term rental ban.”

  • The large majority of homes/condos offered as vacation rentals in Morro Bay are owned by owners that spend part of the year here or visit the area frequently and many of those owners plan to eventually retire here. Therefore, even if they could not operate it as a STR, they would not make it available as a long-term rental.

  • Many of the STRs in Morro Bay are worth over a million dollars and if offered as a long-term rental, would rent for a price that most people in the county could not afford because of the low incomes earned here.

  • Many cities who have outlawed STRs completely now have large numbers of illegal rentals being advertised on VRBO, Homeaway, Airbnb and other OTAs. Yet without regulations to govern these rentals, there is no enforcement mechanism in place to deal with them. These homes did not get converted to long-term rentals – they just operate illegally as STRs!

Read more on density and the arguments regarding Vacation Rentals in Morro Bay

Read about how the current situation unfolded and the history on STRs in Morro Bay

Learn about the common terms for Vacation Rentals and how they are defined

Browse our files data base for studies, publications, and more information on STRs

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