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Council Takes Steps to Curb 'Medium-Term Rentals'


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December 19, 2018 --The City Council Tuesday night took initial steps to curb "short-term rentals," formerly known as corporate rentals, which City officials say are eroding Santa Monica's rent-controlled housing.

The Council unanimously directed staff to draft an ordinance that could, among other things, restrict lessees to individuals and not corporations and require leases to be a minimum of 12 months.

The proposed law -- which would only apply to units in residential zones -- also could raise the fines and penalties for violators, impose a tax on units that are vacant and bar advertising of the units.

"We could end up adopting some and not others," said Councilmember Kevin McKeown, who authored the motion. "This is only the beginning of what we need to do."

The proposed ordinance comes in the midst of what staff calls "rapidly intensifying market pressures" that "if allowed will erode the stock of true residential units."

This can take place when existing rent-controlled units are subdivided and/or leased as temporary housing for less than one year at a much higher monthly rental than typical annual leases, staff said.

In addition, newly constructed market-rate units that include furnishings and amenities are sometimes advertised through corporate housing websites, staff said.

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While the City's homesharing ordinance bars "vacation rentals" of more than 31 days, “corporate housing” does not fall into this category.

The term is typically used to describe "furnished dwelling units rented out to individuals on a temporary basis as an alternative to traditional hotels or extended stays," staff said.

Instead, staff suggested a better term would be "medium-term rentals," since the tenants staying in the units may not be associated with any corporation.

While the City prohibits corporate housing in all zoning districts in Santa Monica, staff said, "enforcement of this prohibition remains a challenge."

To enforce the law, the City "must prove that the housing is intended for persons who reside elsewhere and that two or more of the listed amenities are being offered."

In crafting the new ordinance, Council asked staff to make "enforceability" a top priority.

During its discussion, the Council acknowledged there could be a place in the City for medium-term rentals given the existing market for corporate rentals.

Council members said they would be open to allowing such rentals in commercial zones but did not include such a provision their direction to staff.

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