City Council Will Consider Allowing Short-Term Rentals Where Owner or Tenant Is Present

The West Hollywood City Council will consider on Monday whether to amend the city’s strict ban on short-term rentals to allow them in homes where the owner is present and to impose the city’s hotel room tax on those rentals.

Allowing that practice, called “hosted home sharing,” would address the concerns of some residents who have testified before the council that they depend on the revenue they get from renting out spare rooms to visitors. It also would address the concerns of other residents who complain that travelers staying in homes where the owner or tenant is away make too much noise or otherwise disturb their neighbors.

The city’s Department of Public Works, whose Code Compliance Division enforces the ban on short-term rentals, recommends the change for a two-year period, after which its impact would be analyzed to decide whether to make it permanent. In a report to the City Council, Public Works recommends the following:

— Home sharing be allowed only for units that serve as the host’s primary residence. The host must live at the residence for at least 270 days per year.

— Hosts must occupy the residence during the guests’ stay and be able to respond in person within one hour of being contacted by city staffers or a law enforcement officer.

— Someone wanting to rent out a room in a condo or apartment must get permission from the property owner or the condo homeowners association. “Staff recommends allowing the applicants to self-certify that they have obtained the requisite permission. Requiring an applicant to submit a notarized document can be time-consuming and may deter participation.”

— Hosts be required to obtain a license or permit, renewable yearly, at a fee low enough to encourage participation in the program. The license could be revoked after two or more noise complaints.

— The host pay the same room tax as do hotels.

— Advertisements for rooms include a city license or permit number and the rooms must meet some minimum safety standards and include smoke and carbon dioxide detectors and a fire extinguisher.

— Hosts keep a log of all guests, dates of their stays and the rents paid by the guests for a period of three years. These logs should be made available to the city for inspection upon request.

— Hosts be held accountable for the actions of their guests and liable for all costs associated with the enforcement of the code.

— The number of people allowed to occupy a hosted apartment or house be limited to two people per bedroom and an additional two people. Thus a studio apartment could have only two occupants and a one-bedroom could house no more than four.

The ban on unhosted short-term rentals, which would be continued, is designed to prevent owners of housing from taking it off the city’s already small residential market and thus contributing to rising rents. That ban also is intended to restrict competition with local hotels by unlicensed property owners who don’t pay the hotel room occupancy text or necessarily meet the safety requirements of hotels.

In its report, Public Works defines the three types of short-term rentals (STRs), two of which typically lack on-site hosts.

“First, there are the vacation rentals,” the report explains. “Vacation rentals are listings for units that are used almost exclusively for short term rentals. The unit is not a primary residence for a long term tenant. These are the types of listings that generally cause the most consternation for neighbors, local hotels, and governments.

“The other type of STR listing is Home Sharing. These listings are for units or parts of units that serve as the primary residence for a long term tenant. Under the Home Sharing category, there are two subcategories; Hosted Home Sharing and Unhosted Home Sharing. Unhosted Home Sharing occurs when a host rents their primary residence to guests but does not occupy the residence during the guests’ stay. These listings are generally for the whole unit, where the guest has the entire dwelling unit to themselves. Hosted home sharing is where the primary resident occupies the dwelling at the same time as the STR guest.”

The City Council passed an ordinance in 2015 to make clear that all rentals for fewer than 31 days are illegal. The city’s short-term rental ordinance also bans advertising such rentals on sites like Airbnb.

Despite that, the short-term rental market has continued to grow in West Hollywood. A study conducted for the city by Host Compliance, a firm that monitors online short-term rentals, says that as of March 2017 there were 1,012 short-term rentals available in West Hollywood. The city has roughly 24,500 housing units. That number was compiled by reviewing the 15 most frequently used short-term rental websites such as Airbnb, TripAdvisor and VRBO.

The study showed growth from May 2015 through March 2017 in the number of unhosted short-term rentals, which made up the majority of all short-term rentals. There was relatively little growth during that period of private rentals, in which a host rented out a private room in his or her apartment, or shared rentals, in which the guest shares a room with another person. “The difference between the two is like renting a bedroom versus renting a couch,” says the Public Works report.

The report cites a 2015 analysis by the L.A. Alliance for the New Economy, a group that lobbies for short-term rentals, that says WeHo ranked No. 6 on Airbnb’s list of top revenue-generating neighborhoods in greater Los Angeles. “An estimated $7 million in revenue was generated by STRs in West Hollywood in the past 12 months,” the report said, noting that about 86% of that revenue came from rentals of entire apartment or houses.

Public Works estimates 27% of short-term rentals generate almost 77% of all short-term rental revenue. “As of March 2017, this 27% of hosts are estimated to have generated $5.3 million in revenue out of the total estimated revenue of $6.96 million in the entire city,” the report says. “This is a substantial incentive for someone to convert long-term rental units into permanent short term listings.”

The advantage to a property owner of renting out an entire apartment or house is clear. “It only takes 81 days of whole unit short term rental use to generate the same amount of revenue as what a rent-stabilized tenant would bring in (over the course of a year),” the Public Works report says. “It takes, on average, 166 days to do the same (when) compared to a market rate tenant.”

The report says the nightly rates for STR listings have remained relatively stable, with the average for a whole unit about $180 a night. That average includes one-bedroom units at an average of $140 a night and two-bedroom listings at about $220 a night. “With West Hollywood nightly hotel rates averaging $262.00 in 2016 and $271.00 in 2017, it is clear that whole unit STR listings can easily undercut local hotels,” the report says.

It notes that applying the hotel room tax, which is 12.5%, would generate about $135,000 that could be used to pay for website scanning services that can identify illicit short-term rentals.

That service would be important, given the difficulty faced by Code Enforcement in identifying local short-term rentals on websites. There are a lot of those sites, and most make it difficult to determine where a property actually is located.

The report says that as of March 15, the city had received 272 online complaints about short-term rentals, several of which were for the same address and all of which were about unhosted rentals. “From the complaints received, staff has generated 191 cases and issued warnings for all of them. (Twenty seven) of these cases have been closed, either for compliance or because staff was unable to substantiate the complaint. (Twenty nine) citations have been issued for a total of $21,513.50. Of this amount, the city has collected $18,743.00, an 87% collection rate.

The City Council will consider the proposal at its meeting on Monday at the City Council Chambers, 625 N. San Vicente Blvd. south of Santa Monica. The first part of this Monday’s meeting, from 6 p.m. to 7:30 p.m., is focused on the city’s community development plan work plan. The ordinary meeting will begin at 7:30 p.m. Parking is free, with a ticket validated in the lobby, in the five-story structure behind he Council Chambers.