Editor’s Note: This story was originally printed on Aug. 27. It is reprinted here as art of our year end coverage.
By Kate Cagle
The units come with flat screen televisions, modern furniture, dishes and towels. Kitchens are optional. In some cases, a housekeeper comes by to keep things tidy.
Officials say it’s no coincidence that hundreds of apartments in Santa Monica sound more like hotel rooms, as landlords realize corporate rentals get around the city’s strict anti-AirBnb ordinance while taking advantage of incentives meant to build housing to solve a statewide shortage of affordable places to live.
“It’s really amazing. The blatant abuse of these residential units for use, really, as a hotel,” said Chair Amy Anderson at a recent Planning Commission meeting.
The trend is pervasive, with approximately 39 apartment buildings in downtown Santa Monica advertising at least some units for corporate or vacation travelers looking to rent here for just over 31 days – the threshold for a “short-term rental.” The city’s strict AirBnb ordinance requires a host present for any stay shorter than that, a tactic to preserve precious rental units in a beachside town with skyrocketing property values, a booming tourist industry and a sophisticated workforce.
“It seems to be a hybrid of Airbnb and corporate housing that’s being used to move hundreds, if not thousands, of units off the market,” City Councilmember Sue Himmelrich said. She and Councilman Kevin McKeown have urged city staff to look at ways to close loopholes and update outdated laws that define corporate housing as apartments with offices, pools or similar amenities.
“The goal is to get them to stop doing this so (renters) can have neighbors again,” said former Planning Commissioner Jennifer Kennedy, who also urged staff to address the issue.
Renting an apartment to a corporation is not illegal. Neither are month-to-month leases. The Rent Control Board only recently made moves to define a tenant as a “human being.” It’s just one way officials are suddenly trying to close the revolving door of month-to-month leases in traditional housing.
The spread of corporate rentals is particularly concerning to rent control tenants because landlords can charge significantly more for short term stays in furnished units. Residents at 421-427 San Vicente Boulevard said their owner approached them with buyout offers about six months ago. Six tenants took five-figure buyouts, worried they could otherwise face eviction under the Ellis Act, tenant Gary Hudson told the City Council recently.
Hudson said the units were promptly remodeled, furnished and stocked with pots, pans and other basic necessities. They are now advertised on Apartmentfinder.com for “32 days to 6 months” lease terms.
“Amazing for Summer vacation or for corporate needs,” the advertisement said. “Wifi, internet, TV package and all utilities included in price.”
An 830 square foot one bedroom, one bath apartment there is currently advertised for $2,995 a month online.
The Daily Press reached out to TMB Associates, the property management company, for comment but did not hear back as of press time. The banana tree lined courtyard now balances the interests of long term tenants seeking peace and quiet near the ocean and visitors in town for a quick trip.
“There’s no code of conduct,” Hudson said of vacationers who leave trash outside their doors and throw parties. “If you were in a hotel, you would be kicked out of a hotel.”
City officials were stunned this summer when another rent control building reopened after massive remodeling with subdivided units. The majority of long-term tenants at 1238 and 1242 Tenth Street took buyouts when Neil Shekhter, the owner of NMS Properties, purchased the building and began upgrading the aging units two years ago. (The units are now owned by WS Communities, a spin-off of NMS.)
Sources who have toured the property tell the Daily Press the apartments, now as small as 206 square feet, are leased separately on a short-term basis.
“How can you legally turn a rent controlled apartment into a hotel in front of everybody’s eyes?” long-term Tenth Street tenant Gert Basson asked the City Council. Basson said the property managers and construction crew harassed long term tenants to get them to take buyouts and leave. He resisted and has been living outside of his apartment on a relocation order for nearly two years.
Planning Manager Jing Yeo said apartments in Santa Monica must be at least 375 square feet and have a bathroom and a kitchen. The Tenth Street property is now under investigation by Code Enforcement.
“They did appropriately get building permits and the plans show that they were dwelling units,” Yeo said. “It appears that some partitions, or what have you, were added after the fact.”
Companies affiliated with Shehkter and WS Communities have submitted plans to potentially subdivide units in two other rent controlled buildings, according to sources within City Hall who requested anonymity because the issue is under investigation.
“There’s a lesson there of how that person got around the system,” said Planning Commissioner Mario Fonda-Bernardi. “(They) found a little rabbit hole…and drove a truck through it.”
The apartments on Tenth Street are managed by My Suite, LLC, a relatively new company managed by Shekhter’s son, Adam, according to business records from the Secretary of State. The same company manages four other buildings here, including Pacifico at 1445 9th Street, which is also under rent control, and two downtown NMS properties.
“MySuite, an NMS Company, has a job posting on ZipRecruiter that says they have 400 plus units under construction and 2,500 plus units under development,” Kennedy said. “They call these ‘turnkey living solutions’ for vacation rental or a place that feels like home from day one. Only the very wealthy can afford turnkey living solutions.”
With dozens of apartments in the pipeline all over town, Kennedy hopes the city can close loopholes or amend development agreements to ban corporate rentals in new housing, particularly at Lincoln and Colorado.
“I’m specifically concerned that one company that’s already doing this around town will be doing it at one of those sites,” Kennedy said.