###

In a split vote at last night’s meeting, the Eureka City Council narrowly approved a permit application for five vacation rental units in a converted Victorian on J Street, overturning a previous decision by the Eureka Planning Commission to limit the number of short-term rentals on the parcel to three units, with two long-term rentals.

The action passed in a 3-2 vote, with councilmembers Leslie Castellano and Kati Moulton dissenting. Both Castellano and Moulton sided with the planning commission, arguing that vacation rentals (Airbnb, Vrbo, etc.) eat into the city’s limited housing supply.

The applicants, Kathleen Stanton and Chris Morse, have been operating the five-unit vacation rental at 1120 J Street for the past two years. The couple submitted a permit application to the city in 2024, but planning staff deemed it incomplete due to an inadequate site plan and a zoning issue on the property.

“The appellants [Stanton and Morse] did not reply to the incomplete letter sent by planning staff. Therefore, [the permit application] expired,” assistant city planner Taylor Rayburn explained at last night’s meeting. “Since then, the vacation rentals have operated without a permit, though it is unclear if the appellants continued to operate the rentals following their appeal of the planning commission’s decision.”

Addressing the council, Stanton explained that she misunderstood the city’s permitting process for vacation rentals when she first applied, and was unaware she was operating without a permit until December 2025. She added that she had not booked any stays at the J Street property since the June 10 planning commission meeting.

“In 2024, we paid the fee, we filled out the application with our property manager, and that’s all you have to do in Arcata,” Stanton said, adding that she and her husband operate a vacation rental in Arcata as well. “Then we came to the City of Eureka, and found that it wasn’t just simple like that. You have, like, five different departments that review your application. … I got a letter from [the] planning [department] … and I just put it in the file, and I completely forgot about it. I didn’t think that that letter meant that we would never be permitted.”

The couple discovered their vacation rental wasn’t permitted ten months later when they received another letter from the city.

“That was news to us,” she said. “[After that], we worked really closely, very intensely with staff for about three months, and spent $35,000 to take the art studio and make it into a legal residential unit, and … came up with a plan to pay back the TOT [transient occupancy tax] as well. We got everything in compliance under the old ordinance, and staff said ‘You’re good to go!’ and that’s what went before the planning commission.”

Stanton said she understood the city’s concerns about the “intensity” of five vacation rentals operating on a single property, but she didn’t see how operating three short-term units was all that different. 

“The report … does not clearly articulate why three are considered acceptable, while five are not,” she said. “What changes when you go from three vacation rentals to five?”

A little earlier in the discussion, Rayburn noted that, according to the city’s General Plan, dwelling units smaller than 500 square feet are “considered affordable-by-design.” That means, at least two of the units on the J Street property fall under the affordable housing designation.

“Therefore, the project as proposed would remove two to three affordable housing units from the market in conflict with policy H-5.3,” Rayburn said.

Stanton’s attorney, Chris Hamer, disputed this point and accused staff of using the section of code to justify the planning commission’s finding that permitting all five units would limit the availability of small, low-cost housing units in the city.

“It just applies to affordable housing, and it only states that the city should support the retention of existing affordable rental housing where feasible and encourage the replacement of lost units,” Hamer said. “They pulled this ‘affordable-by-design’ definition out of … policy H-1.16 that just states that builders should be encouraged to build smaller units.”

Another issue brought up by the planning commission was the number of people allowed on the premises. Stanton said she would be willing to reduce the number from 22 to 12 adults.

Moulton | Screenshot

During the council’s discussion, Councilmember Moulton asked how many vacation rentals are currently operating in the city. Caitlin Castellano, deputy director of development services, estimated that vacation rentals account for about 1.5% of the city’s housing stock.

“I don’t know what the actual percentage is in other jurisdictions, but I’ve looked at a bunch of example caps, and they’re usually set at like 4% or 5% unless you’re talking about like Carmel or Lake Tahoe, where it’s a much higher percentage,” Development Services Director Cristin Kenyon added.

Councilmember Castellano asked if staff had seen an uptick in vacation rental applications in the city. Staff said growth has been “pretty steady” over the years, estimating that the city receives around 10 applications annually.

Councilmember G. Mario Fernandez, who appeared via Zoom, asked about the timing of the application and if it was submitted before the city implemented the new zoning code earlier this year, which increased restrictions on vacation rentals. 

Castellano, the staffer, confirmed that the final application was submitted and approved just a few days before the ordinance took effect.

Two people spoke during the public comment portion of the meeting. One resident expressed concerns about parking on J Street but said he didn’t necessarily have a problem with a vacation rental operating on the property. Another spoke in favor of the proposal and praised the owners’ work in renovating the property.

As the discussion approached the one-hour mark, Councilmember Scott Bauer made a motion to approve the permit application as originally proposed with all five vacation rental units. He added a condition to limit the number of people staying on the property to 12 adults. Councilmember Fernandez offered a second.

Councilmember Castellano said she wouldn’t support the motion, underscoring the need for affordable housing options. She claimed that the applicants “have spoken against affordable housing in Arcata,” but didn’t provide any additional context. 

Castellano | Screenshot

“We have a social agreement to ensure that the lives of all people in our communities are filled with opportunity,” Castellano said. “That’s why I’m here on council is to fulfill that social agreement, which means that I’m going to continue to support options for people who live here.”

“I just want to say I also really appreciate the work you’ve done in terms of restoration and rehabilitation of properties and the care you put in your properties,” she added. “I think that you’re doing a good job as landlords and … I really respect your work in the community.”

Councilmember Moulton took a similar stance, emphasizing that “any housing is more housing,” even if it doesn’t fall under the “low-income” bracket.

“One of the issues is that people are underhoused [or] people are overhoused [or] people are in the wrong place because there are not enough places available,” she said. “If you make an expensive apartment available, a different apartment will open up. … Any housing added adds affordable housing, and it doesn’t really matter what the price of the actual housing is.”

Councilmembers Bauer and Fernandez both felt the applicants had navigated the process in good faith and worked with staff to resolve the issues with their application. Bauer felt it would be “unfair to change things midstream,” and reiterated that the number of vacation rentals operating in the city is under 2%.

Bauer | Screenshot

“We do need all kinds of housing, and we’re doing our best to build affordable housing,” he said. “I don’t think this one house is going to change [that]. I’m not trying to be flippant or anything; I just think this is an appropriate action to take.”

But before voting, Councilmember Castellano made a substitute motion to uphold the planning commission’s ruling, which was seconded by Moulton. With Councilmember Renee Contreras-DeLoach absent, the vote tied 2-2.

Before breaking the tie, Mayor Kim Bergel asked staff if the application was processed before the new zoning rules took effect, if the city would have the authority to pull the permit if there were any issues down the line and if the TOT payment plan was in place. Staff confirmed all three points and Bergel voted against the substitute motion.

The first motion passed in a 3-2 vote, with Castellano and Moulton dissenting.