SPON appeals “director’s determination” that allows converting hotel rooms to residential use

By SARA HALL

A local group recently appealed a determination that allows the city to approve the conversion of up to approximately a third of the rooms at certain hotels into residential units, with conditions. 

Still Protecting Our Newport (aka Stop Polluting Our Newport), a nonprofit public education organization, filed an appeal on May 14 to the Planning Commission of a “director’s determination” regarding conversion of certain hotel rooms into new residential use.

In the group’s appeal, SPON does not oppose or support the conversion of hotel rooms to dwelling units in general, but objects specifically to the process, which organization officials argue would essentially allow “a staff person to effectively amend the city’s general plan ahead of the larger update to meet RHNA [Regional Housing Needs Allocation] that is in progress, and improperly avoid the Greenlight tracking required by our voter-enacted city charter.” 

According to the May 6 Planning Commission staff report on the matter, the community development director issued a determination on April 30 that residential uses are allowable as an “accessory use” to resort hotels under certain parameters. 

The director’s determination stems from goals of the recently adopted (on the March 9 consent calendar) council policy K-4, “Reducing the Barriers to the Creation of Housing” that include “interpreting ambiguities” in the city’s general plan, as well as other local regulating plans and code, to allow hotels and motels located outside of the California Coastal Commission appeal jurisdiction to convert up to 30 percent of their approved hotel rooms into residential units on a one-for-one basis. 

This interpretation would allow for residential units to be deemed an accessory use to the principal use of a hotel and find it consistent with the hotel’s underlying planning or zoning designations, the May 6 staff report explains. 

Following the eligibility requirements, four resort hotels would qualify for the interpretation, two in Newport Center and two in the airport area. 

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Photos by Sara Hall

Newport Center includes two hotels that would qualify for the director’s determination

Reviewing both the May 6 staff report and the director’s determination documents, there was no discussion about the number of approved hotel rooms in the four resort hotels that could be converted into dwelling units upon the director’s determination, SPON President Bruce Bartram wrote in an email to Stu News Newport on Thursday. Nor was there any discussion concerning the potential application of the Greenlight measure (city charter section 423) in either document.

Greenlight forces a public vote if a proposed new development adds in excess of 100 peak-hour auto trips or 100 dwelling units or 40,000 square feet of floor space and requires amending the city’s general plan.

The determination would allow 30 percent of the “approved rooms” at four resort hotels to be regarded as allocations for permanent residential units that can be substituted for an equal number of hotel rooms, and which can be built either within the hotel structure or separately, Bartram explained. 

While the determination does not explain what “approved hotel rooms” are, Bartram noted that the current general plan limit for the two hotels in Newport Center is believed to be 827 rooms, and 820 for the airport area hotels. 

Doing the math, that equals to about 250 or so dwelling units in each area.

“At any rate, it is SPON’s position that had the City Council enacted this policy and/or interpretation [by the normal process] it may require a general plan amendment,” Bartram said. “This, in turn, would have required a determination whether the voter approval requirements of Greenlight/charter section 423 would be triggered.”

There is a proper procedure for accomplishing the conversion of hotel rooms to dwelling units, which may require a general plan amendment, but even if it does, the process must be followed, SPON officials wrote in a May 14 statement. SPON believes the city’s charter should be adhered to and the adopted general plan be the guiding document for city actions, the message reads.

“In short, SPON believes the city is attempting, whether intentionally or not, an end run around the Greenlight voter approval requirements,” Bartram said. 

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Council policy K-4 is meant to reduce the barriers to the creation of housing

Although Community Development Director Seimone Jurjis said at the March 9 council meeting that he doesn’t view the policy as circumventing Greenlight.

“This policy sets the tone that you’re encouraging housing,” Jurjis. It does not waive any code requirements and projects will still go to the Planning Commission or council, he added.

At the May 6 Planning Commission meeting, Jurjis reiterated his conclusion with regards to Greenlight. It only applies to general plan amendments, which this is not, he said.

“This does not trigger section 423 (Greenlight),” Jurjis said. “This is strictly recognizing a land use. Residential can be part, as an accessory use, to resort hotel.”

Jurjis said the determination was placed on the May 6 Planning Commission agenda in order to be transparent.

Considering the big challenges the city is currently facing, including planning for the RHNA and dealing with the COVID-19 pandemic, council is looking to help support the local hotel industry, Jurjis said. 

“They’re looking at the low hanging fruit, what can we do to support our hotel industry?” Jurjis said. “With regards to COVID, the travel and hotel industry have been affected, and that’s no surprise to anybody.”

While local travel and tourism are coming back, international travel will likely take a few years, Jurjis said. Group travel and conventions are also expected to take time, while business travel is “a big question mark,” he added. Some hotels are looking to “reposition” themselves as they plan going forward. This determination is an effort to help with that.

Council policy K-4 directs city staff to “develop, modify as necessary, and aggressively implement various strategies and action plans that are designed to accelerate housing production consistent with the policy, including encouraging and incentivizing the development of mixed-use hotels,” according to the staff report. 

“Mixed-use hotels are an established trend in the hospitality industry that incorporate hotel-branded residential units as an accessory use located within a resort hotel complex where residents enjoy access to the full range of services, facilities, and amenities provided by the hotel operator or brand,” staff explain in the report. “These hotel residential uses cannot exist without the hotel’s services, facilities, and amenities.”

There are a number of issues they need to consider, Jurjis said, including ensuring it doesn’t increase the number of trip counts, and, if there is a loss of Transient Occupancy Tax revenue, if it can be made up with property tax.

Commissioner Mark Rosene asked about the one-to-one basis, questioning if the hotel could make the converted residential unit larger. The hotel could do that, Jurjis confirmed, as the city is not looking at the floor area. 

“A large unit doesn’t necessarily mean you have more people, from a residential standpoint, it just doesn’t,” Jurjis said. 

It’s more important to consider the trips and make sure the conversion to a residential unit will not create more trips.

It is tied to room count, Jurjis said, but it isn’t just a conversion of an existing hotel unit.

“If a hotel would like to demolish and rebuild hotel units, this interpretation does that also,” Jurjis said.

The residential units could be sold or leased, but not timeshares, Jurjis added.

The only speaker during the May 6 Planning Commission meeting was city watchdog Jim Mosher. There are a number of problems with this interpretation, he said during the meeting – including how to determine what are “resort qualities,” which is listed as an eligibility requirement.

He’s also concerned that it’s not just a hotel room becoming a residence, but it could be a luxury residence built in a hotel or the hotel demolishing just under a third of its units and constructing a residential building on site.

“All of this, seems to me, inconsistent with Greenlight. It seems to me inconsistent with our current general plan. And it seems to me inconsistent with history,” Mosher said. 

In the current general plan, most hotel allotments are contained in the land use element, he pointed out. Within that section, the table “anomaly locations” specifies the maximum and, in some cases, minimum number of hotels rooms and residences permitted on any parcel within the designation or as otherwise specified.

“The two (hotel rooms and residences) are not, never were equivalent or interchangeable,” Mosher said.

This new policy, K-4, was only announced a few days before the council meeting and is inconsistent with the longstanding policy A-18, which does not allow the credit or conversion of hotel rooms into residences without Greenlight tracking for them, he said.

“This seems to me a slight of hand,” Mosher said. “A general plan amendment, a totally different interpretation of our general plan from what we’ve ever had, without claiming it’s a general plan amendment and is totally inconsistent with all of those previous decisions.”

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Council approved policy K-4 on March 9

Residential uses would be permitted as an accessory use to hotels subject to the following:

–Applicable only to resort hotels, a self-contained destination that provides for all travel accommodation needs in one location, including but not limited to restaurants, bars, shopping and recreational facilities.

–Must be located outside the appeal area identified in California Public Resources Code Section 30603(a) as generally depicted on the Post-LCP Certification Permit and Appeal Jurisdiction Map.

–Approved hotel rooms may be converted to residential units but only on a one-for-one basis.

–The residential use shall at all times be accessory to the hotel use, and the residential units shall comprise no more than 30 percent of the approved hotel rooms.

–The residential units may be located within a repurposed hotel or in a new residential structure.

–A property owner that desires to have an accessory residential use at their hotel shall process a conditional use permit and coastal development permit (if applicable). In reviewing said permits, the review authority shall ensure adequate parking is provided to accommodate the residential units through surplus parking, shared parking, or the adoption of a parking management plan.

–Potential impacts to public access, affordable housing and the loss of transient occupancy tax must be mitigated by entering into a development agreement with the city or by some other means deemed appropriate.

There are currently 22 hotels in the city, of which 10 would qualify as a resort hotel. Of those, just one is located in the coastal zone, but completely outside the CCC appeal jurisdiction area, and three hotels are located outside the coastal zone. Therefore, this interpretation would apply to the following four resort hotel properties in the city: Renaissance Newport Beach at 4500 MacArthur Blvd.; Fashion Island Hotel at 690 Newport Center Drive; Hyatt Regency John Wayne Airport at 4545 MacArthur Blvd.; and Newport Beach Marriot at 900 Newport Center Drive.     

According to the city’s case log and planning activities, the appeal hearing is scheduled for June 3.