A Growing Market in Need of Attention
The last two years have proven that the tourism and rental industries have shifted permanently. While short-term rentals spiked during pandemic-related shutdowns at hotels, with many travelers and short-term renters seeking more personal spaces, they continue to be a disruptor to the hotel and lodging sectors.
Silicon Valley thrives on technology, innovation, and even disruption. So, it would only follow that when short-term rental growth hit the area, those three cornerstones of the tech industry would come together to ensure that short-term rentals didn’t negatively affect communities.
According to Associate Planner Avery Stark, for the City of Milpitas, CA, on the fringes of San Jose and a progressive community for Silicon Valley, that shift started even earlier than the pandemic
“About a year before the pandemic was when we began the conversation of short-term rentals and the impacts they were having, particularly on our residential neighborhoods,” he said.
Stark noted that the larger homes in the area, whether related to the growth of short-term employees in nearby Silicon Valley companies or other factors, were starting to have an impact on community safety.
“We had several, we’ll call them bad actors, that became party homes,” said Stark. “Some residents had grown increasingly concerned about just the general influx of these homes that just didn’t seem like anyone lived in them.”
Until the adoption of an ordinance in July 2020, Milpitas had not allowed short-term rentals. With hotels the primary driver of tourism revenue for the city, as is the case for many cities, staff knew that Milpitas was missing out on revenue from short-term rentals and set out to create ordinances and a program to meet this growing area.
A Digital Solution for a Digital Community
True to the Silicon Valley spirit, staff knew that a digital-first mindset was needed to not only create ordinances that would be enforceable but also build a system that would make it easy for STR owners to file permits and staff to monitor. As Planning staff took demos from various companies, Stark said that Granicus stood out because they immediately saw the needs of his city’s needs and the ways that Granicus’ Host Compliance Solution could help manage growth.
“We were missing out on short-term rentals because we didn’t know how many we had,” said Stark. “Granicus came in with a demo that allowed us to go into the portal and see current listings and rental units, what they provide, and even a little bit of upfront work that showed they were dedicated to understanding our city.”
Stark recalled that the demo showed 415 individual units listed that showed almost half of the listings as unhosted despite the need for a little data cleanup.
“That was the main concern for our council and the community,” said Stark. “We don’t want to have unhosted stays.”
Armed with that data, Stark along with other Planning staff were able to have conversations with the City Council and Planning Commission around data-driven ordinance creation.
“We went from limited knowledge about our short-term rental situation to, now, understanding how many units we have, what people are renting them for, what revenue they are generating for themselves, and what level of TOT revenue we should be collecting,” said Stark. “Host compliance was crucial for our success because we didn’t have anything at the beginning.”
While Granicus worked to build the compliance system, Stark focused on the other central element of his new system: community and staff engagement.
Building from the ground up allowed Stark to work with Granicus in implementing a system that met the needs of his department while putting convenience and transparency front and center. The city’s traditional permitting system required in-person office visits and submission of paper forms. But Stark saw the benefit of online and mobile registration, allowing easy upload of documents from any location.
“That was a workflow created during implementation that worked well,” said Stark. “And even for tricky applications, we’ve been able to give submitters instructions and tools that make it easier for them to show us the things we need to see in the application. It makes the review process so smoother.”
“We needed a kick in the behind to get us to it,” reflected Stark. “A lot of people thought we’d still have to print everything out and hand-deliver it. We had to educate staff about the workflows and the uploading process.” “I don’t want the paper,” he added with a laugh.
“It has no intrinsic value to me. I don’t want to manage paper, store paper, or file it. So, the digital route was the best, and the pandemic pushed us in other ways to make that happen, just from a government side.”
Getting the community to adapt to these new changes took some proactive steps on Stark’s part. As the Granicus system went into place, Stark made short videos and created community workshops showing how to take advantage of the new digital process. By working with groups and applying feedback, Stark created a group of videos that took the guesswork out of compliance and answered common questions.
“Just being able to have someone pay online, upload everything, do a review, communicate by sending them an email and then uploading those documents made the ability to approve those that wanted to do it simple,” said Stark. “That was the biggest selling point for us when we started was, we just wanted to keep it simple for everyone.”
Paving a Road for Future Growth
With a new ordinance and a new system for tracking compliance in place, Stark’s team set out to see results. The impact, according to Stark, was almost immediate.
“It took care of a lot of people who wanted to do unhosted rentals when we don’t allow that,” he said. “We saw 200 of them drop off right off the bat.”
Stark added that the presence of the new ordinance, combined with the increased community awareness and digital compliance tools, had a significant role in that change. But perhaps an even bigger change was the increased awareness across departments at City Hall.
“During implementation, I think the hard part was getting all the staff on board,” said Stark. “There were a lot of cooks in the kitchen for implementation, and a lot of people wanted to make sure how we received funds was going to be successful. Working with Granicus, we made sure that it had all the right coding information when that first permit payment landed in our accounts. That created a lot of confidence.”
That confidence also extends to compliance enforcement letters that Stark sends to new or existing rental operators operating out of compliance. Stark said that while 1-2% of the new units that come online weekly require a compliance notice, upwards of 75% of those sent letters to resolve their issues online before a second notice is sent.
“The community engagement helped make sure people knew what to do and that it’s simple to be compliant,” Stark said. “So that’s the time commitment they have to think about. If you can commit to setting up an Airbnb profile and renting out your home, you can commit 15 minutes to go online, get licensed, and pay your permit. It’s just as easy.”
The digital solution to host compliance makes it just as easy for staff, as well, said Stark. Not only in processing applications but in staying on top of tracking non-compliant listings.
“We can see what’s happening,” he said. “If you change that listing from 15 days to 12 days, I know the next day. And I’m giving you the best heads up I can. It’s in your best interest to get the permit and comply. It’s mainly about safety. That’s really what I had to stress the community. It’s about safety. It’s about ensuring that emergency responders can provide service if someone’s visiting our city and there’s an accident or an emergency.”
With a continued focus on easily managed systems and positive engagement, Stark hopes the groundwork has been laid for an ordinance program that will grow comfortably alongside the STR market in Milpitas.
And like any good Silicon Valley innovation, the digital backbone is something that Stark knows he can depend on to support future growth.
“Without Granicus, we had no idea that we even had this many rentals and where they are,” he said. “I wouldn’t be able to send them letters. I wouldn’t be able to communicate with them. As we began discussing with The Planning Commission and the City Council, we had your team’s knowledge and best practices. When I did my first community meeting, there was no doubt about how it would work, its functionality, or its limitations.”
For now, though, the immediate impacts of Milpitas’ digital transition are also felt at numerous touchpoints in the short-term rental permit and compliance process.
“It shows that we can transition to online platforms and make those things work,” said Stark. “I stress with government staff that this solves so many pain-points we normally run into with paperwork, signatures, payments, checks, cash compliance. I can go through the list. We’d normally have to do that ourselves on top of it.”
