Commission Delays Vote on "Mini-hotels"

By Mark McGuigan
Staff Writer

Sept. 4 -- They could be nudging out long-term housing and depriving the City of much needed bed taxes, but defining the nature of the "mini-hotels" cropping up across Santa Monica left the Planning Commission stumped Wednesday night.

After grappling with an issue that has baffled City officials for nearly three years, the commission voted unanimously to stave off for two weeks any decision to amend the definition of short-term rental housing in the Zoning Ordinance.

Before making a final decision, the commission requested more information on how the short-term rentals -- which would be restricted to the Downtown and to commercial areas -- might impact housing and potential hotel revenues.

“In effect what we’re doing here is approving mini-hotels,” Planning Commissioner Jay P. Johnson said. “Personally I’m just not convinced, at least without some additional community input, that this is as big a step we want to take right now.”

Rented on a month-to-month basis by large corporations and well-to-do vacationers, short-term rental housing offers all the commodities of a $350-a-night luxury hotel room but without the 12 percent Transient Occupancy Tax that adds millions to city coffers every year.

According to the report issued to Planning Commissioners, the fully-furnished rooms provide “similarities to housing,” but also incorporate commercial luxuries such as “maid service, health club and recreation facilities, business centers, meeting rooms and valet service that are not characteristic of residential use.”

“The main difference between this and a hotel from the City’s point of view besides the potential for abuse is that on a hotel room we collect a Transit Occupancy Tax, on a short term rental we do not,” said Mayor Pro Tem Kevin McKeown

“So it is in the interest of the community at large to collect that tax if the property is being used as a hotel,” he said.

But what makes a hotel a hotel? This question has left City officials scrambling for a concise definition.

A 27-page report prepared by City staff, defines short-term rental housing as “a property designed for use by individuals who will reside on the property for a minimum stay of at least 30 days but who otherwise intend their occupancy to be temporary.”

The omission of a maximum stay was of some concern to Commissioner Arlene Hopkins who requested that such a provision be included in the new ordinance to prevent short-term housing from being “occupied for years” by the same individual.

The report notes that such occupants “are less likely to participate in civic, neighborhood and community affairs” and their presence, according to some commissioners, could result in an abuse of rent control laws.

“There has been a number of cases in the past where there’s been use of structures outside and in violation of rent control laws,” Commissioner Johnson said. “As a result, there was a lot of conflict over the issue and I think it would be very useful to get rent control board input on that.”

Issues of potential abuse dominated the forty-minute debate Wednesday evening. In trying to allay fears that construction of short-term rental housing would not suddenly proliferate in areas where it was allowed, Planning Manager Jay Trevino outlined how the current designation of existing property would prevent such a scenario.

“An apartment building in one of the five commercial zones would not be allowed to be converted into a short term rental housing project,” Planning Manager Jay Trevino assured commissioners. “That’s precisely what this ordinance proposes to make clear.”

But Commissioner Johnson expressed concerns that some of the more unscrupulous developers in the city would work to find ways around these current designations.

“These guys stay up late at night thinking ways around that,” he said. “It’s a good point if it was only clean and clear.”

The clarity of the ordinance blurs when the topic of potential abuse arises, particularly in defining how it would prevent currently designated properties from being used outside of their assigned function.

“There’s a distinction between land use designation abuse and whether someone’s in business for that use,” Trevino said. “For example, if someone operates a grocery store one year and next year it turns into some other use, from our perspective its still a commercial retail use.”

“It doesn’t morph into something else just because they went out of business,” he said.

However, when asked how such a property would be treated if it were demolished and then rebuilt, City officials conceded that such a move would open a property to re-designation.

“If I was a developer that’s what I’d do,” Commissioner Johnson said. “I’d run out and look for the smallest multi-family structures I could find in these districts, buy them, tear them down and apply for a new construction to build short-term housing.”

In calling for a two-week postponement of the vote, Commissioner Hopkins requested that staff address a number of concerns before any decision on amending the Zoning Ordinance is made. Among the suggestions staff was asked to explore are the following:

• That the Rent Control Board weighs in on the proposed amendment.
  
• That a list of existing, non-conforming, grand-fathered short term housing properties be made available so that commissioners “know what that universe is and have it clearly defined.”
  
• That officials clarify whether a means exists to apply a user fee or a tax to this new property use and define a maximum length of stay to prevent residential units from being occupied for years by the same individual.
  
• That requiring a CUP for short-term rental housing be considered.
  
• That district parameters be more clearly defined beyond the current designation of Bayside Commercial District, Downtown Commercial District, Downtown Overlay District, Highway Commercial District and Boulevard Commercial District.
  
• That any property that might be put at risk by this ordinance through purchase and demolition be identified.