City Hall is looking to prohibit month-to-month leases in residential areas to curb the growing market for corporate housing in Santa Monica.
City Council discussed at its Dec. 18 meeting how to prevent landlords from converting permanent housing into what is commonly referred to as corporate housing, a moniker Council abandoned in favor of the phrase “medium-term rentals.” Santa Monica landlords have been renting units, particularly rent-controlled units, to tenants staying between one month and one year because they can charge them higher rates. The practice is chipping away at the city’s housing stock, councilmembers said.
“Council’s concerns were precipitated by recent practices that appear to attempt to divide existing rent-controlled housing units, resulting in illegal increases in allowable density but not meeting the definition of corporate housing,” the staff report said.
Council asked City staff to develop an interim zoning ordinance defining medium-term rentals as a commercial use prohibited in the city’s residential zones. The motion introduced by Councilmember Kevin McKeown also asked staff to consider requiring landlords to lease apartments only to natural persons for a minimum of 12 months.
In addition, staff will recommend increased fines and penalties for medium-term rentals and research how to control the advertisement of medium-term rentals.
Councilmembers agreed that the existing definition and citywide ban on corporate housing is easy for landlords to get around. Units that host individuals with a permanent address elsewhere for temporary stays of more than 30 days is considered corporate housing under the city’s current rules, as long as it has at least two amenities such as maid service or fully furnished units.
That means landlords can simply provide just one of the amenities specified in the code and continue to operate medium-term rentals.
“Code Enforcement has to go out and see if linens are being provided, and that’s pretty hard to prove,” said Councilmember Ted Winterer.
Winterer said a new medium-term housing ordinance will be necessary to protect the city’s permanent housing stock, but he believes it could exempt commercial zones to provide places for visiting educators and people visiting hospitals to stay without putting pressure on residential districts.
Councilmembers also agreed that the city would need to strongly enforce a new ordinance. If the fines are too low, some medium-term rental operators may see them as the cost of doing business, not a deterrent, McKeown said. Mayor Gleam Davis raised the possibility of allocating additional resources to enforcement, which the City had to do to properly enforce its ban on vacation rentals.
McKeown said the city also put significant effort into controlling advertisements for vacation rentals and he wants to apply that approach to medium-term rentals. He said he still sees advertisements for corporate housing even though new corporate housing was banned in 2004.
Council heard testimony from residents and representatives from the Rent Control Board and Planning Commission that landlords are dividing up rent controlled units to convert them to medium-term rentals and threatening residents with eviction under the Ellis Act in order to do so.
Earlier this year, tenants at 421-427 San Vicente Boulevard took buyouts after being threatened with eviction. The owner remodeled the units and began renting them at inflated prices for a maximum of six months.
Tenants at 1238 and 1242 10th Street also took buyouts or were evicted under the Ellis Act two years ago when Neil Shekhter, the owner of NMS Properties, purchased the building. The rent-controlled building reopened this summer with renovated, subdivided units leased on a short-term basis.
Staff will research Council’s proposals and seek input from the Rent Control Board, Planning Commission and Housing Commission before returning to Council with an ordinance.