On May 6, 2025, the Brea City Council conducted a workshop to review the City of Brea's budget for Fiscal Years 2025-26 and 2026-27. As part of the budget workshop, the City Council directed the evaluation of certain programs, including the "consideration of short-term rentals and other business opportunities" (Attachment B). Currently, Chapter 20.71 ("Short-Term Residential Rentals") of the Brea City Code (BCC) prohibits residential short-term rentals in the City.

On June 17, 2025, the Brea City Council adopted the annual budgets for Fiscal Years 2025-26 and 2026-27, which included setting their Top Priorities and Projects for those years. Included in the City Council's Top Priorities and Projects is for City staff to "identify creative ways to enhance City revenues and reduce costs".

In June 2025, City staff also reviewed the Orange County Grand Jury report entitled "Long-Term Solutions to Short-Term Rentals", which consists of findings and recommendations pertaining to municipal short-term rental policies. Specifically, the Orange County Grand Jury identified major, upcoming events happening in the Southern California region, such as the 2026 FIFA World Cup and the 2028 Olympic and Paralympic Games, which are expected to generate additional tourism to the region and an increasing demand for lodging in Brea. City staff is also aware of development projects in nearby cities, such as DisneylandForward and the OC Vibe, that are also anticipated to increase local tourism. The Orange County Grand Jury therefore recommended that the City of Brea review and update its ordinance(s) in anticipation of the upcoming major events by December 31, 2025. In response to the Orange County Grand Jury's recommendations, as well as the City Council's prior direction, staff conducted a review of BCC Chapter 20.71 to reassess the City's prohibition of short-term rentals.

On July 15, 2025, staff presented their assessment of and recommendation for the consideration of a short-term rental program intended to update BCC Chapter 20.71 to the Brea City Council at a Study Session Meeting (Attachment C). Staff shared six prospective policies for a short-term rental program, each with varying license caps and regulations. Ultimately, staff recommended the policy option with a limited license availability and comprehensive regulations to establish a well-managed program. The regulations proposed that participants in the short-term rental program must submit and pay for an application, pass a home inspection, and pay Transient Occupancy Tax (TOT). The regulations also set host and guest requirements and identified ineligible units. City Council discussed additional program regulations and directed staff to develop guidelines for a limited, regulated, short-term rental pilot program with a limited number of licenses and operational standards targeting potential noise and parking impacts. Additionally, the City Council also requested that staff notify homeowner associations (HOAs) and hotel operators in Brea of the proposed short-term rental pilot program to establish stakeholder awareness and feedback.

On August 19, 2025, City staff prepared a letter containing a brief questionnaire for the HOAs within the City (Attachment D). The letter identified the City's intent to review and possibly introduce a limited, regulated, short-term rental pilot program and requested that the HOAs share any feedback on the proposed changes. Staff received three responses opposing an amendment to BCC Chapter 20.71 (Attachment E). The responses expressed concerns about potential impacts on neighborhoods, specifically noise and parking. As such, City staff amended the proposed guidelines to require HOA authorization of a short-term rental property before issuing any short-term rental license to a property owner. As part of the outreach process, a prominent hotel operator indicated no concerns related to allowing short-term rentals in the City of Brea.

At the September 16, 2025 City Council Study Session Meeting, staff presented a draft proposal for the limited, regulated, short-term rental pilot program (Attachment F). The draft proposal incorporated prior City Council feedback related to license and program availability, approval procedures, and revocation criteria. Notable provisions included setting a horizon date for the pilot program of December 31, 2029; requiring an application process with a home inspection for building and fire code compliance; and stringent enforcement mechanisms to deter violations. To mitigate noise and parking impacts, the proposal indicated a limit to the number of daytime and overnight guests based on the number of bedrooms on the property and designating on-site parking only. During the Study Session Meeting, the City Council requested that staff establish geographic boundaries to guide license distribution and expressed support for a lottery-based allocation system to ensure fairness. With this additional feedback, the City Council directed staff to prepare a final version of the ordinance for review and consideration.

The following sections provide a summary of the proposed limited, regulated, short-term rental pilot program and the provisions of proposed Ordinance No. 1270, which, if approved, would be codified in BCC Chapter 5.32 (Attachment A) and supersede BCC Chapter 20.71. The ordinance establishes standards, regulations, and operational requirements to ensure that short-term rentals operate in a manner that protects the health, safety, and welfare of Brea residents, businesses, and visitors.

Following the first reading of Ordinance No. 1270 at the December 16, 2025 City Council Meeting, staff has made targeted revisions to clarify the Transient Occupancy Tax (TOT) collection. Revisions were made to Sections 5.32.060, 5.32.070, and 5.32.120 to outline requirements for hosting platforms that process bookings and payments to collect and remit TOT on behalf of short-term rental operators (Attachment I).

The next section outlines key program regulations and operational requirements for property owners under the proposed short-term rental program.

Program Regulations

• The proposed short-term rental program outlines the initiative as a limited-term pilot program, expiring on December 31, 2029, unless otherwise extended or modified by the City Council.
• To manage community impacts, the total number of licensed short-term rentals will be capped at one hundred (100), allocated as follows: twenty-five (25) in the Northwest sector of the City of Brea, fifty (50) in the Southwest sector, and twenty-five (25) in the East sector (Attachment G). This approach will promote equitable distribution throughout the City.
• Only property owners (no renters) are eligible for the program. Property owners may hold no more than two (2) short-term rental licenses, based on the number of dwelling units on the property, as shown in Table 5.32.040. C.1.

Table 5.32.040. C.1 SHORT-TERM RENTAL PERMIT ISSUANCE
Number of Units Per Property	Maximum Number of Short-Term Rental Permits
Up to 49	1
50 or more	2

• The proposed short-term rental program would prohibit short-term rentals in accessory dwelling units (ADUs) and junior accessory dwelling units (JADUs), affordable housing units under the City's proprietorship, and recreational vehicles.
• Property owners intending to operate a short-term rental must submit an application containing all the requested information.
• License holders whose licenses have been revoked during their participation in the pilot program are ineligible to reapply for the remaining duration of the program.
• Property owners located within an HOA community would be required to obtain HOA approval prior to obtaining a license to operate a short-term rental.
• Property owners seeking a short-term rental license must obtain a business license and meet the City's insurance requirements.
• The property would be subject to a building, fire, and health and safety inspection prior to license approval.
• The property must have adequate on-site parking available, as overnight street parking for occupants of the short-term rental is prohibited.

Operational Requirements for License Holders

License holders must comply with all applicable local and State laws and are responsible for preventing disturbances to the community. Operational requirements include, but are not limited to:

• Restricting outdoor activity and noise between 10:00 p.m. and 7:00 a.m., and displaying the required postage for outdoor activity
• Displaying the short-term rental license number assigned by the City in rental listing advertisements
• Preserving the property's residential character
• Properly storing trash containers
• Complying with the City's TOT requirements
• Ensuring a minimum renter age of 25 years
• Maintaining renter records and providing them to the City upon request
• Designating a 24-hour contact person required to respond to guest and City inquiries
• Requiring a two-night consecutive stay, minimum, per renter
• Requiring the renter to complete and acknowledge the City's Good Neighbor Policy and occupant rules prior to check-in
• The proposed overnight occupancy will be limited to the number of bedrooms in the dwelling unit, as depicted in Table 5.32.050. C.1. Guests under twelve (12) years of age are excluded from the maximum occupancy limits.

 

The estimated annual revenue impact on the General Fund (110) associated with the adoption of Ordinance No. 1270 is approximately $507,340.

The proposed application fee will be introduced as a separate resolution for City Council consideration and adoption at the City Council Meeting scheduled for January 20, 2026.