With the moratorium in place and a new ordinance about to come into force, once the moratorium is lifted, it will be more difficult to find properties that will qualify to be eligible for a vacation rental permit. Even the coastal area that used to be a free for all will require a business license which will likely have certain property limitations attached to it. From my perspective, the more complex it gets, the more people rely on the information I provide and the advice I can give to navigate the ever increasing complexities. However, it does feel like a constant game of wacamole to keep finding high performing properties.
Hardly a day goes by without me being asked where I would look to try to find a property that will work once the moratorium is lifted so I thought I would create a blog post which could serve as a guide to finding a vacation rental now, that will be eligible for a permit in a Post Moratorium world!
The first question I always ask people is what their goals are because this will also inform the search because it is very different looking for a property as a pure play investment when you aren't emotionally invested in it vs a property that you can enjoy but which will also be vacation rentable. (See here for a separate blog which covers this in more detail). For example, some people have a preference for a home that feels like it is in wine country versus a cabin in the woods that you get with a lot of the more affordable vacation rentals in the Russian River. With a median house price in Sonoma County of $779,000, up 7% on the previous year, the budget plays a big part. Once I understand the budget, the style of vacation rental and any personal geographic preferences, I can begin to start thinking about zoning, exclusion zones, fire perimeters, HOAs and all the other rules we need to consider to determine if a property will work.
In addition to the purchase price, another key factor is the forecast income. There is clearly a correlation between the purchase price of a property and the forecast income. One measure of this is to look at the ratio of the median home price in a particular area compared to the forecast gross income as determined by a tool such as AirDNA. This is the analysis I completed in putting together the vacation rental index which is covered in this blog post.
I am not going to go through all of the rules in this post because I have covered them in another post where I created an “Eight Step Guide To Finding A Vacation Rental”. This graphic is a simple flow chart that takes you through all the different rules.
If we take these rules and overlay them onto a map of the County we can start to see the best areas to look for a vacation rental. However, there is one more factor that we need to consider which is the current density of vacation rentals in any one area. For example, we know that the county is going to put in place a “vacation rental cap” in certain areas to prevent the density of vacation rentals going over a certain level. These caps will be a mixture of 10% and 5% caps. If we take Guerneville for example, the last data that was available from the county showed that Guerneville was already at 11% so if a 10% cap was brought in (which it will be), then it would require 1% of homes that are currently operating as a vacation rental to be sold before a single permit would be made available.
As part of putting this blog post together, I sat down with Lindsary Darrimon from Specialized Permitting to discuss where we both see the opportunities for purchasing a home that would be eligible to apply for a vacation rental permit once the ban gets lifted.
By looking at some of the key areas of Sonoma County and taking into account the current vacation rental density, the overriding zonings in a particular area as well as the current exclusion zones, we have tried to give an overview of each area and give it a rating from 0 to 5 on the best places to purchase a property in advance of next year in the knowledge that it would be eligible to apply for a vacation rental permit once the moratorium expires. (0 is steer clear at all cost and 5 is a sure fire bet)
The Russian River is the area that has been worst affected by the new vacation rental ordinance because of the double whammy of removing the eligibility of R1 zoned properties and the imposition of a vacation rental cap which is below the current vacation rental density. Because of this, a lot of properties that were in the most popular vacation destinations along the river such as Guerneville, Monte Rio and Rio Nido will now be likely ineligible to apply for a permit. Not only are a lot of these properties zoned R1 but the area also has a high density of vacation rentals with current densities of Guernville at 11%, Monte Rio at 13% and Rio Nido at 5%.
It is possible to drill down further by looking at some of the data provided by the county that shows the vacation rental density in some very specific neighborhoods. As you can see from the graphic above areas such as Neely Road are running at 26% and around the Northwood golf club they are at 18%.
1840 Austin Creek Road, Cazadero (See listing)
If you are looking for something in the Russian River, then the best areas to look are going to be east towards Forestville and west towards Cazadero which are at 3.9% and 7% density respectively. While there are plenty of properties in these areas that are zoned R1 there are enough properties that have other zonings that make it realistic to find one that will work. That being said, in this area, there are other “gotchas” around septic systems and parking that you need to what for, but these are all relatively easy to navigate.
Overall Rating: 3
Of all the places in Sonoma County, this is the area that currently has some of the best opportunities because many of the properties have the correct underlying zoning (not R1, R2 or LIA) and it has not been impacted by wildfires so is not subject to a moratorium within a fire perimeter area. There are so many great towns in this area such as Sebastopol, Occidental and Graton which are all getting more popular and so make a good location for a vacation rental. The other good thing about this area is that that the vacation rental density is still relatively low with Sebastopol at 1.7% Graton 2.4% and Occidental 2.2%.
11020 Peaks Pike Road, Sebastopol (Sold $1.66m)
If you are looking for a place that feels like wine country but close to amenities then one of my favorite areas is north west of Sebastopol towards Green Valley Road, Harrison Grade and those areas. There have been some amazing places out here. If you are looking for something that feels more like ranch land then south of Sebastopol you will find properties that feel more like they are in farm country. If the Redwoods is your thing, then looking further west towards Occidental is a great area particularly as the town of Occidental feels on the up and up.
Overall Rating: 5
This is by far the best area to be looking at right now with no limitations on being able to operate a vacation rental. However, it is worth noting that there will be a requirement to have a business licence (full details of the licence requirements can be found here). When the license was first discussed there was no mention of the license including restrictions that relate to the zoning and land use of the property but it now sounds like there is a move to prevent secondary structures from being operated as part of the vacation rental license once the license is introduced.
Overall Rating: 5
To all intents and purposes, all of these cities are a no go area. Either, as is the case with Sonoma and Healdsburg, because they are entirely banned or else they have a limit on the number of days per year which in the case of Petaluma is 90 days and Sebastopol is 30 days.
There are a VERY small number of properties close to the central commercial district for which it is possible to get a use permit issued by the city. However, these very rarely come on the market and are often bought by insiders.
Overall Rating: 0
Fitch Mountain is an interesting one. The whole of Fitch Mountain is currently an exclusion zone but as part of introducing the new ordinance they will be lifting the exclusion zones and instead will introduce a cap. I suspect that Fitch Mountain will be ruled out because the current density of homes that were grandfathered in when the original exclusion zone was put in place is likely to be at or very close to a new cap that is introduced. If they remove the exclusion zone and put in a 10% cap there could be a small window of opportunity in Fitch Mountain given the current density is at 8%. If this was an option this could be a very lucrative spot for a vacation rental because of its proximity to Healdsburg.
Overall Rating: 1
If you are looking for a vacation rental with easy access to amenities around Healdsburg your options are somewhat limited because so many of the more rural properties are zoned LIA which does not allow for vacation rentals. There is an option to run a Farmstay but that requires some element of farming (olives, grapes, kitchen garden) to take place on the land and also requires the host serves food. Rural properties do exist but they are typically over $2m and in certain areas such as Alexander Valley Road and Chalk Hill Road. Rather than a more rural property on multiple acres, the other option is to find a property that has a rural zoning but in a slightly higher density area outside of the city limits.
15572 Pozzan Road, Healdsburg (Sold For $1.95m)
There are three primary areas where you are most likely to find a rural..ish style property: to the west of the city just off Kinley Road, heading north on Chiquita Road (just outside the city limits) and then also on the southern end of Dry Creek Road including the roads that run off it including Pozzan and Norton Roads.
Overall Rating: 4
A popular area for vacation rentals has always been Glen Ellen and Kenwood. There is currently an exclusion zone in place in this area which may potentially be lifted to be replaced with a cap. However according to the latest data, Kenwood is currently running at 13% and Glen Ellen at 14% so if they put in place a cap of 10%, it would still prohibit new vacation rentals in the short term.
However there is a corridor along Hwy 12 which is not in the Vacation rental exclusion zone that is a popular area for vacation rentals. This is also an area where there is a fire perimeter in place preventing new vacation rental permits being issued for the last few years, so once this perimeter is lifted it could open up some opportunities along this corridor depending on whether or not they introduce a cap.
Overall Rating: 3
In the same way that it is hard to find properties near Healdsburg City, the same is true for properties near Sonoma City. One area that is a good area is south of Sonoma around the Napa Road stretching down towards Schellville. This has the advantage that it is near to the amenities of Sonoma but is also a short drive to Napa valley for people looking to experience Napa wines. This is definitely a good area to consider
17333 Gehricke road, Sonoma (For Sale: $3.695m)
Another couple of areas in and around Sonoma are the more southern sections of Arnold Drive, north/north East of Sonoma City in Mission Highlands (this has an HOA but is one of the few that allows vacation rentals) and also up and around Gehricke Road. The one thing I have concerns about here is, if they decide to prevent vacation rentals where there is only single track ingress and egress to a property in the event of fire, this may rule out some of these properties that have limited access due to the width of the roads.
Overall rating: 4
Over the past few months, both Windsor and Santa Rosa city have issued Moratoria so both of these places are also in a holding pattern with Windsor’s moratorium being in place until the end of the year while Santa Rosa is not due to lift their moratorium until the summer of 2023. The future rules for both Windsor and Santa Rosa are very much dependent on the results of local elections and the attitude of the elected officials. For Windsor, I think they are most likely to introduce a 1000ft rule or hopefully a 300ft rule given the relative size of the town compared to Santa Rosa
Overall Rating: 2 (Santa Rosa) and 4 (Windsor) Both require the outcome of the current review in place before purchasing
Immediately north east of Santa Rosa are a number of areas that have been impacted by fires in 2017, 2018 and 2020. The most likely scenario here is that they lift the fire perimeter moratorium but introduce a cap in some of the higher density vacation rental areas. That being said, there are a huge number of properties in this area and the latest data showed that the Santa Rosa area (City + rural) had a density of 0.3% so while it is hard to make a purchase prior to the moratorium being lifted in these areas it could be a great area for some higher end, new built homes that would make a perfect vacation rental.
Overall rating: 3
It probably all sounds a bit overwhelming but rest assured it will be possible to find a property that will be vacation rentable in the area you want as long as your budget matches your ambitions. There is no question that with so much uncertainty there are definitely opportunities for buyers who are looking to purchase a place and carry the cost while, either, you enjoy it yourself or undertake a renovation project that will take you through to the lifting of the moratorium. There will likely be window when the final ordinance, business licence and caps are finalized but before the county has the systems in place to be able to manage the implementation of the rules. In my mind, this will be the perfect time to purchase a property that is in one of the areas where there is currently uncertainty around exactly where the perimeter of the cap area will fall.
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