Last year, as the city discussed new rules regulating short-term rentals in Los Angeles, it became clear to local lawmakers that considerations for such activity are different when discussing people’s rental of space in their primary residences, rentals of second (a.k.a. “vacation”) homes that are occupied only part-time by their owners, and rentals of properties owned only as investments and never occupied by their owners.
So during the discussions of regulating short-term rentals, which took three years from the start of serious conversations to the passage of L.A.’s first such ordinance last December, local lawmakers decided to create different rules for each of those categories of properties, with the goal of keeping as many housing units as possible available for long-term rentals by local residents and preserving the neighborhood character of residential neighborhoods…while still allowing some individuals in certain circumstances to earn income from properties they own, within a reasonable set of regulations that would bring some tax and fee revenue to the city, and provide an enforcement mechanism as well.
The first step, taken pretty early in that discussion process, was to continue prohibiting short-term rentals in units never occupied by their owners. This helped guarantee that individuals and companies wouldn’t take units off the long-term rental market and convert them to short-term rentals, reducing the number of units (and especially affordable units) available to the local housing market.
The next step was passage of the first short-term rentals ordinance, which went into effect on July 1, 2019, with enforcement beginning November 1, allowing short term rentals (with some notable exceptions) in people’s primary residences only.
But that still left open the question of second/vacation homes – units that the owner occupies at least 30 days per year, but might then want to rent out at other times. And that proposed ordinance is now making its way through city channels, and had a big discussion and vote at the December 19 meeting of the City Planning Commission.
The Initial Proposal
At the beginning of last week’s meeting, Phyllis Nathanson, senior city planner at the LA Department of City Planning, presented the details of the current draft of the proposed ordinance. The proposed provisions would:
- Require all vacation rental owners to register their units with the city…and require that rental platforms such as AirBnB and VRBO advertise only units with valid registration numbers.
- Allow owners to register and rent only one unit, and only for a maximum of 30 days per year.
- Require that owners stay in the unit at least 30 days per year (to distinguish vacation units from units held purely as investments).
- Prohibit short-term rentals in rent-stabilized units, ADUs, and units from which tenants had been evicted under the Ellis Act in the last seven years.
- Cap the number of vacation units that could be rented, city-wide, at 3,625, which is approximately .25% of the city’s total number of rental units.
- Also limit the number of vacation units that could be rented in any single census tract to .25% of the total number of units in that tract. (This is intended to spread out vacation rentals across the city, rather than have them clustered in certain popular areas such as Venice and the Hollywood Hills.)
- Limit the number of licensed vacation rentals to one per building in small (1-4 unit) buildings, and to 5%, or a maximum of 10 units, in large (5 or more unit) buildings. (To prevent entire buildings from becoming vacation rentals.)
- Allow only one group of renters at a time per unit, and allow only two people per room to stay overnight.
- Prohibit amplified sound equipment after 10 p.m.
- Prohibit gatherings of more than 8 people in outside spaces in the evening.
- Prohibit outside smoking in high fire risk areas.
- Require that owners provide all guests with required code of conduct information.
According to Nathanson, the City has a responsibility to ensure an adequate supply of long-term housing for its residents, especially during the current housing and affordability crisis…and housing city residents should be prioritized over short-term housing for non-residents. Also, according to Nathanson, it’s important to preserve affordability…and a study by Harvard University found that even just a 1% decrease in the number of housing units available in a city can increase overall rents by .2%. So limiting the number of short-term rental units helps to keep overall housing prices down.
The Planning Department’s recommended limits on vacation rentals, Nathanson said, are based on best practices from other cities…many of which don’t allow such rentals at all. Technically, she said, this has always been the case in Los Angeles, even though there has always been a certain amount of such (illegal) activity, which has grown as new technology platforms such as AirBnB, and the new sharing economy have come into vogue.
Public Comments
Interestingly, in more than two hours of public comments on the vacation rental issue, almost 100% of the speakers opposed the proposed ordinance. (The only exceptions were neutral comments from a few speakers from the corporate short-term housing industry, who simply asked that they be part of the discussions moving forward.)
But there was extreme polarity within the opposition, with one group of speakers – mostly owners of vacation rental properties – vehemently opposed to any regulations on such rental activities…and the other group of speakers, mostly housing advocates and representatives of hotel workers, arguing that all such rentals are harmful to the overall housing and labor market, and that all should continue to remain illegal under city law. (In other words, one group opposed the proposed ordinance on the grounds that it was too strict, and the other group opposed it on the grounds that it could never be strict enough.)
More specifically, one owner of a vacation home in Venice called the proposed measures “Draconian,” and another – a 68-year-old writer who owns a housing unit that he uses occasionally as office space and then rents out when he’s not working – said property owners “need to be able to use our properties in ways that benefit us.”
And on the other side, a representative of one tenants’ rights group recounted how one of her clients finally found an affordable apartment, after a long search, when someone converted a full-time AirBnB unit back to long-term rentals after the first new short-term rental ordinance went into effect. And another speaker said it was “absurd” that in the face of the current housing crisis the city is discussing what amount to loopholes for people lucky enough to afford ownership of two homes.
Commission Discussion
After the public comments, the seven commissioners present weighed in with questions and comments aimed at finding a balance between allowing and regulating rental activity that can be beneficial to individual owners, and the need for the city to retain and protect as much long-term housing as possible for its residents. And all generally agreed with Commission President Samantha Millman, who said, “There is no one root cause and no one solution” to the city’s housing problems.
Millman focused the discussion on the four major provisions of the proposed regulations, including the overall cap on units, the concentration of units in geographic areas, the number of rental days allowed, and the number of units allowed in specific buildings.
In further discussion, commissioner Vahid Khorsand strongly supported the new regulations, noting that technology has sprinted ahead of city policies in this area, and saying we need to catch up and start regulating this kind of short-term rental activity. Khorsand also suggested that the number of units allowed be increased from 1/4 of one percent of the city’s total to 1% (or to about 15,000 units), which is how many city officials estimate are now operating illegally. Limiting the number to less than that, and figuring out which units to allow or disallow, Khorsand said, would get “messy,” which isn’t the goal.
Commissioner Dana Perlman disagreed, however, nothing that just because many people are doing something illegal doesn’t mean that we should legalize the activity. He said we should ask instead, “What is this doing to help our housing crisis? Is this helping in any way, shape or form?” And, he said, “The evidence we heard is to the contrary.” Also, Perlman contended, the city should wait and see how supply and demand for short term rentals is affected by the new laws pertaining to rentals in owners’ primary residences, which are just getting started, before allowing additional units onto the market via vacation homes. “Let’s give that a chance to breathe and see if there’s a need for more,” he said.
Commissioners Caroline Choe and HelenLeung both argued that the sharing economy seems to be here to stay, and that because it’s become part of many people’s income streams, we should find a way to regulate and support it rather than ignoring it.
And Commissioner Karen Mack agreed that “we live in a society where the way people make money is changing.” “I get that,” she said, “and we need to figure it out fast because the robots are coming.” But although Mack said she’s sympathetic to those concerns, she said she’s even more concerned about the fact that people are living on the streets in tents in our current 47-degree weather. “Our challenge as a city is to get those people housed,” Mack said, concluding that she couldn’t in good conscience support the current proposal until it fully addresses the issues of ensuring that as many full-time housing units as possible are preserved.
Revised Proposal
After the discussions, Millman offered a set of amendments to the Planning Department’s proposal, including:
- Capping the number of vacation units available for short-term rentals at 1% of the city’s availble units, and 1% in each geographic area (using Community Plan areas instead of census tracts).
- Limiting the number of rental days per year to 90 (instead of 30).
- Requiring the space between units to be 250 feet per block face.
- Asking the Planning Department to study other kinds of documentation (besides just a signed affadavit) the city can use to verify second/vacation home vs. investment property status. (For example, allow only properties owned by individuals or family trusts, and not LLCs.)
- Asking the Planning Department to study the feasability of allocating a significant portion of the fees and taxes collected from short-term rentals of vacation properties to supportive and affordable housing funds.
Khorsand seconded the amended motion, and it passed by a vote of 5 in favor and 2 (Mack and Perlman) opposed. The proposal will now be forwarded to the City Council Planning and Land Use Management (PLUM) committee for further discussion and action.
