CITY HALL — The saga of Santa Monica’s lone, would-be bed and breakfast continues.

The City Council on Tuesday night declined to give the owner of a seaside cottage the right to rent the property out to vacationers during half of the year, sending the proposal back to the Planning Commission for further review.

At issue is whether the owners of a landmarked cottage at 2219 Ocean Ave., which is in a residential zone, should be allowed to earn income from offering the property as a short-term rental.

A City Hall ordinance geared toward keeping commercial activity out of residential areas bars apartment owners from renting their units out for periods of less than a month. But the Planning Commission in December made an exception to that rule for the Ocean Avenue cottage, granting owners John and Donna Heidt a “conditional use permit,” or CUP, to operate as a bed and breakfast — the only type of short-term rental property permitted in residential zones.

The plan for the property all along, though, was to run it more like a time-share, with no live-in host and no complimentary breakfast. The designation was allowed under City Hall code, which defines a bed and breakfast simply as a multi-unit building with at least four rooms and only one kitchen that is available for short-term stays.

While the commission’s action would have allowed the property to operate legally, it also prompted an appeal to the council from an upset neighbor, Scott Spell, who said the panel’s decision amounted to an “end run” around a policy meant to preserve residential neighborhoods.

“The result is a gaping loophole in the city’s ban on short-term rental housing that’s been opened,” Spell said. “We’re calling this a bed and breakfast but that’s clearly not what it is … . It’s just a ruse to get around the law as it currently exists.”

The council stopped short of granting Spell’s appeal, but several members indicated they were unwilling to allow the property owners to get away with calling the cottage a “bed and breakfast” if they weren’t planning on having a full-time host live in the house to manage guests.

The Heidts, who live in Westwood, have been using the cottage as a second home, staying there about two weeks per month and previously rented it out to vacationers.

The case has sparked passions among historic preservationists and neighborhood activists.

Michael Feinstein, an Ocean Park resident and former mayor, said allowing the cottage owners to rent the property out for a week at a time amounts to an abuse of City Hall’s law meant to protect housing from conversion into commercial space.

“Granting this CUP would establish a horrible precedent for our city,” he said. “It would incentivize people to come into the city, buy landmark properties, claim they can’t afford them and then ask for a CUP to convert them.”

Others who live near the cottage complained that it has become a nuisance, with late-night parties taking place there because there’s no on-site manager to lay down the law. The Heidts were required to provide supervision of the property for four hours per day under the CUP the Planning Commission issued.

The Heidts and those who support the use of the cottage as a bed and breakfast have argued that allowing it to be used at least occasionally as an income-generating property is crucial to funding its renovation and upkeep, and is an important way of encouraging others to purchase and restore landmarked buildings in the city.

Nina Fresco, a landmarks commissioner, told the council on Tuesday that it’s appropriate to give the cottage’s owners “excellent but reasonable benefits” in exchange for being good keepers of a historic building.

“All owners of landmarks should benefit equally as they are all stewarding Santa Monica cultural resources on our behalf.”

Historic preservationists have praised the restoration work the couple put into the previously dilapidated structure, and last year the Santa Monica Conservancy gave the property an award.

Council member Gleam Davis and Mayor Pro Tem Pam O’Connor supported granting the Heidts permission to rent the cottage out with slight adjustments to operating procedures. But the rest of the council members present for the vote indicated that bigger changes to how the property is handled would be needed for it to win a bed and breakfast designation.

“I always thought or believed that a bed and breakfast meant you’d have kind of a cute room and some kind of a breakfast,” said Councilman Bob Holbrook. “And this doesn’t feel like that to me.”

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