PLUM Discussion on Short-Term Rentals Continues…But No Vote Yet

On Tuesday, October 24, the City Council Planning and Land Use Management Committee held yet another public hearing on a potential new city ordinance to govern short-term rentals (stays of less than 30 days) in the city.  It’s a topic that has created a lot of heated discussion over the last couple of years, pitting online rental platforms such as AirBnB, and the people who use them, against neighbors who are upset by the loss of both affordable long-term housing units and neighbors to short-term rental conversions, along with the sometimes poor behavior of short-term rental customers.

As PLUM Chair Jose Huizar announced at the beginning of Tuesday’s hearing, however, no vote was scheduled this week, and the session – while it did include an hour of public comment on all aspects of the ordinance – was called mainly for the committee to discuss several particular points of the proposed ordinance on which they still have questions, or requests for more information from various city agencies.

In his introduction Tuesday, Huizar noted that the goals of the ordinance are tricky, and balance several important considerations:  protecting the city’s housing supply (particularly affordable housing), protecting neighborhood quality of life, making sure rental hosts and platforms contribute their fair share to city coffers, and also making sure that “good” short-term rental hosts, who do follow the rules and whose rental activity is not disruptive, are not punished by any new rules.

To open the discussion, Planning Department representative Matt Glesne reported on one kind of information requested by PLUM committee members at the last city hearing on short term rentals: current statistics about the activity in Los Angeles.  Glesne reported that during September and October 2017, there were 23,000 unique listings for short-term rentals in the city, and 69% of those listings were for full homes (not just renting a room or bed in a home or apartment where others are also in residence).  Also, of the 23,000 listings, 11,400 are rented more than 90 days per year.  About 6,000 of the units are used more than 180 days per year.  Glesne noted that the total number of short-term rental units represents less than 1% of the city’s total housing…but he said the growth in short-term rentals – up 35% last year – is a cause for concern, as is the concentration of short-term rentals (and the conversion of full-time rental units) in certain neighborhoods, such as Venice and Hollywood, popular with tourists.  Finally, Glesne also noted that 55% of current AirBnB rental listings are in multi-family properties, many of which are probably rent-stabilized (a.k.a. RSO) units.  Also, because AirBnB reports that only 7% of its listings are in RSOs, there seems to be a significant gap in the reporting of that measure.

Based on these statistics, Glesne said there are three parts of the currently proposed ordinance that take on particular significance:

• A requirement that people be allowed to use only their primary residence for short-term rentals, and that they must be able to prove that they live in the unit at least six months (180 days) of the year. This he said, has been a key to successfully controlling short-term rental activity in other cities.  Also, 84% of current hosts in Los Angeles fall into this category already, so effects on current rental hosts should be minimal.
• A 180-day cap on short term rentals at any one property, which would help limit the negative effects of short-term rentals on neighbors and neighborhoods, and help reduce the conversion of regular rental units into short-term rentals.
• A total prohibition of short-term rental activity in rent-controlled (RSO) units.  Rent-controlled units are usually found in older buildings, which also tend to have lower, more affordable rents.  Prohibiting conversion or use of these units for short-term rentals would help preserve the city’s affordable housing stock.

Glesne also recommended that the city make it as easy as possible for rental hosts to register their properties for rental activity (another key provision of the currently proposed ordinance), to ensure compliance and make enforcement easier down the line.  There should also be no fees to register short-term rental units, he said, so there would be no financial barrier to hosts at any economic level.  And 10% of the Transient Occupant Tax collected on each rental should be designated to help pay for administration and enforcement by the city.

Finally, Glesne noted that the current draft of the ordinance does not address second homes or vacation homes, many of which owners purchase expecting to rent them out when they’re not using them themselves.

In committee discussion of the report and current draft of the ordinance, Committee Member Bob Blumenfield noted that while the 10,000 housing units lost to short-term rentals so far are a small percentage of the city’s total housing, it costs about $300,000 to replace each single unit of affordable housing that is lost, so the cost of these losses is significant.   Blumenfield also asked about whether or not Accessory Dwelling Units and guest houses are covered in the current draft, and Glesne explained that in the current draft, hosts could rent space in ADUs, but only if the ADU is their primary residence.  Homeowners would not be allowed to live in a main house on a property and use an ADU exclusively for short-term rentals.

Glesne also noted that tenants (whether in ADUs or other kinds of rental units) would have to get their landlord’s permission before registering their unit for short-term rental activity.  Committee Member Mitch Englander asked if the city could create a blanket “opt out” registry for landlords, which could be kept on file for reference when tenants applied to register short-term rental spaces, and Glesne said that could probably be built into the city’s registration protocol.

Blumenfeld further requested that the City Attorney’s office provide information about lawsuits other cities may be fighting over short term rentals, to better understand the current legal issues and how they’re playing out in other places.

And finally, on the question of whether or not second/vacation homes should be included in the new ordinance, Blumenfield suggested that there could be some sort of Conditional Use Permit process for that kind of property (or for any property where the owner wants to host short-term rentals for more than 180 days per year), to allow the community a chance to weigh in during the registration/application process.  Another committee member also suggested that there should be a limit on the number of non-primary-residence units a host could legally register, to prevent people from buying up units and converting them to short-term rentals.

There were also several other questions raised by committee members.

First, would the ordinance include specific penalties for violations?

Glesne said specific penalties are not usually included in ordinance text, although there can be language requiring penalties, a chance to rectify violations before levying penalties, and escalating fees for both hosts who exceed rental caps and platforms that accept ads from non-compliant hosts.

Could the cap be on the number of rental stays per year, instead of the number of days rented…to encourage longer stays?

Glesne said he’s only seen one city that tried that kind of limit, but did not provide any further information.

Another committee member asked whether, if hosts were required to verify “under penalty of perjury” that the unit they are renting is their primary residence, could the cap on number of days allowed be removed altogether…but Glesne did not directly answer that question.

Finally, on the question of fees, one committee member suggested that a fee (passed on to renters) of $4 per rental day be collected by the rental platforms, and dedicated to the city’s Affordable Housing Trust.  Such a fee, he suggested, could add up to as much as $10 million per year.  In addition, Englander said he would also like the city to study the possibility of sending some of the fee money to the city’s General Fund, to help fund police and fire services.

Finally, City Council Member Paul Koretz, although not a member of the Committee, spoke during the comment period of Tuesday’s hearing, to express his concerns about short term rentals’ effects on the city’s housing, and to urge that:

• short-term rentals be limited to hosts’ primary residences
• “primary residence” be defined as at least 11 (not six) months per year
• if an 11-month host residency is required, the cap on rental days could be lifted
• if only a 6-month residency is required, then cap on rental days should be set at 90 days instead of 180
• there should be no short-term rentals allowed in RSO units
• there should be escalating fines and penalties for continued/escalating violations
• platforms should be pushed to cooperate without “giving away the store” to them in return for that cooperation
• there should be special restrictions – such as no smoking – for short-term rentals in areas with high fire risks

After the committee discussion and public comment, Huizar instructed the Planning Department and City Attorney’s office to report back with some new options for a standard rental platform agreement, fee structures, whether or not an “opt-out” database could be created for landlords, options for special registration or permitting for hosts that want to rent their spaces for more than 180 days per year, vacation home rentals, corporate housing rentals, splitting fee revenues with the city’s General Fund, and the results of ongoing court cases in other cities.  He noted that the topic will be scheduled for further committee discussion in another few weeks.