A majority of supervisors back ban on short-term rentals in residential areas to thwart a lawsuit.

With county coffers in mind, a 3-2 majority of the Monterey County Supervisors on Jan. 6 voted to create a short-term rental ordinance that would ban them in unincorporated residential areas while allowing them in commercial areas and within agricultural operations. The move comes in the wake of a lawsuit filed by Monterey County Vacation Rental Alliance against the county over its STR ordinance, which was passed in 2024.

In December, the county announced it was suspending enforcement on two provisions of the ordinance based on claims in the MCVRA lawsuit that the ordinance violates clauses of the U.S. and California constitutions. One provision states that only resident property owners can pursue homestays, where owners remain in the home. The other is that only natural persons, rather than corporations or entities, may engage in commercial rentals. The lawsuit argues that non-residents are being treated differently, and corporations are discriminated against in cases of all STRs.

“We are concerned that there is the potential, because of the way the lawsuit is written, there will be millions and millions and millions of dollars on behalf of [MCVRA] we would have to pay in damages. That would come out of the general fund,” Supervisor Kate Daniels said. She suggested there were bigger corporate interests behind the lawsuit: “This really feels like it’s something bigger than all of you and we have to be prudent.”

Daniels and others expressed frustration that the STR ordinance they spent more than a decade crafting, striving to balance the needs of residents with protection of housing and resources, was now at risk of being derailed by litigation, but they saw no choice but to protect the county from further risk.

Supervisors Luis Alejo and Chris Lopez did not support the motion. Alejo favored only dropping enforcement of the two contested provisions and opposed a ban.

The lawsuit is ongoing – the next hearing is scheduled for Feb. 20.