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SR 10-25-2022 11B City Council Report City Council Meeting: October 25, 2022 Agenda Item: 11.B 1 of 7 To: Mayor and City Council From: David Martin, Director, Administration Subject: Adoption of a Resolution to Establish a Home-Share Legalization Program Recommended Action Staff recommends that City Council: 1. Adopt findings set forth in “Environmental Analysis” determining the adoption of a resolution to establish a home-share legalization program is exempt under the California Environmental Quality Act; and 2. Adopt a resolution establishing a home-share legalization program to authorize issuance of temporary, conditional home-share permits pending amendments to the City’s home-share regulations. Summary On June 8, 2021, City Council directed staff to return with proposed amendments to Santa Monica Municipal Code Chapter 6.20, the City’s home-sharing ordinance, to allow the home-sharing of detached accessory buildings located more than six feet from the main building occupied by the host. Amendments to Santa Monica Municipal Code (SMMC) Section 9.21.020, Accessory Structures, are also necessary for consistency with Council direction. As those amendments are still pending, this report presents a special home-share legalization program that would allow Council to authorize previously permitted home-share operators to receive a temporary, conditional permit to resume operations pending updates to the home-share ordinance, as long as the proposed home-share units do not have any outstanding unpermitted work. 11.B Packet Pg. 1071 2 of 7 Background On May 12, 2015, Council adopted Ordinance 2484 (CCS) to clarify the long-standing prohibition of vacation rentals and to allow and impose regulations on home-sharing. On January 24, 2017, Council adopted Ordinance 2535 (CCS) to amend the home- sharing ordinance to clarify certain definitions and, in response to portions of the ordinance challenged by home-sharing platforms, to limit the obligations imposed on those platforms. On June 27, 2017, Council adopted Ordinance 2547 (CCS), to amend the Home-Sharing Ordinance to treat accessory dwelling units (“ADUs”) that received building permits on or after March 31, 2017, as separate dwelling units for the purpose of defining home-sharing activity. On September 24, 2019, Council adopted Ordinance 2616 (CCS), to further amend the Home-Sharing Ordinance to strengthen regulation of home-sharing and vacation rentals. As reflected in the recitals to each of the ordinances, Council’s intent in permitting regulated home-sharing while prohibiting vacation rentals was to strike a balance: allowing residents to supplement their income through home-sharing and providing home-share visitors with potentially more affordable accommodations, while deterring landlords from evading rent control laws, evicting tenants, and converting residential units into de facto hostels or hotels, thus removing needed permanent housing from the market while at the same time changing the character of and undermining community ties in residential neighborhoods. In the course of continuing to update the home-share ordinance to address the ways in which property owners have attempted to circumvent the law and take advantage of loopholes, some homeowners who previously had approved home-share permits were inadvertently caught in the changing regulations without a viable pathway to come into compliance. Discussion Requirements and Definitions in Home-Sharing Ordinance Council’s direction to staff was in response to complaints from some homeowners that their home-share permits were denied upon renewal due to changes in City regulations 11.B Packet Pg. 1072 3 of 7 or because the permit was previously erroneously issued. These denials were based on provisions in Santa Monica Municipal Code (SMMC) Chapter 6.20, Home-Sharing and Vacation Rentals, that were added in 2017 and 2019 in response to illegal home-share operations occurring in the city and to include more stringent rules and regulations for a home-share permit including but not limited to the following requirements: 1) Home-share must be in a dwelling unit that is the primary residence of the host 2) The host must live on-site in the dwelling unit through the visitors’ stay The home-share ordinance defines a “dwelling unit” as “one or more rooms designed, occupied, or intended for occupancy as separate living quarters, with full cooking, sleeping, and bathroom facilities for the exclusive use of a single household.” Accessory buildings, defined in SMMC Section 9.52.020.0290 as a “detached building located on the same parcel as the principal building, which is incidental and subordinate to the principal building in terms of both size and use” may be considered part of the main building – and eligible for home-sharing – if it is located within six feet of the main building or connected to it by a fully enclosed space [see SMMC Section 9.21.020(A)]. Therefore, detached accessory buildings more than six feet from the main building cannot be home-shared. An accessory dwelling unit (ADU) is defined in SMMC Section 9.31.025 as an “attached or detached residential dwelling unit that provides complete independent living facilities…and that is located on a parcel with a proposed or existing primary single-unit or multi-unit dwelling. An ADU shall contain a kitchen and full bathroom separate from the primary dwelling(s) and accessible only to the inhabitants of the ADU…” The home- share ordinance considers an ADU that received its building permit after March 31, 2017, to be a separate dwelling unit, and, therefore, only eligible for home-sharing by the long-term resident of the ADU (meaning that the ADU must be the primary residence of the host). Long-term residents of the single-unit dwelling onsite are not eligible to home-share an ADU that received its permit after March 31, 2017. That prohibition added by Ordinance Number 2547 (CCS), took effect on July 27, 2017, and the home-share ordinance reflects this prohibition. 11.B Packet Pg. 1073 4 of 7 Reasons for Denial of Home-Share Permits Since September 2020, there have been approximately 16 denials for renewal of home- share permits for properties that were previously approved for home-share. The denials of home-share permits generally fell into the following categories: 1) Home-share proposed in ADUs permitted after March 31, 2017, that were not the host’s primary residence; 2) Home-share proposed in detached accessory buildings that are more than 6 feet from the primary residence and therefore ineligible because they are neither ADUs nor considered part of the primary residence; and 3) Home-share proposed in accessory buildings that were never permitted or were permitted for another use of the accessory building, such as a playroom, office, or rumpus room but were never permitted for overnight occupancy as a bedroom or a dwelling unit. The City also previously required that accessory structures permitted for this purposes had to record a deed restriction that prohibited use of the accessory structure for a rent room or sleeping quarters. In a handful of cases, homeowners had obtained a building permit for the appropriate use of the accessory building but did not receive final inspection approval. For unpermitted accessory buildings, if homeowners were to correct the permitting violations, but the accessory building is more than 6 feet from the primary residence, then the accessory building could not be eligible for home-share according to the home- share regulations. If homeowners wanted to then convert the accessory building into a “new” accessory dwelling unit, obtaining permits to legalize their accessory dwelling unit would result in a building permit issued after March 31, 2017, thus also making the ADU ineligible for home-share. In this way, the existing home-share regulations do not provide a pathway for these detached structures to be home-shared going forward, even though they were previously permitted by the City for home-share. Proposed Temporary Home-Share Legalization Program In response to Council’s direction, staff proposes a two-pronged approach that would create a pathway for residents that were previously permitted for home-share to legalize 11.B Packet Pg. 1074 5 of 7 their home-share units and provide temporary relief pending permanent ordinance updates. To address the zoning restrictions that would be prevent the home-share of detached accessory buildings, amendments to the home-share ordinance would be necessary to not require that accessory buildings be located within 6 feet of the primary residence. Essentially, the accessory buildings would be considered another bedroom of the primary residence and would need to be permitted as such. Further, the eligibility date for permitted ADUs to be home-shared (i.e., March 31, 2017) would need to be changed to allow newly legalized home-share units to be eligible for home-share. Proposed amendments to the home-share ordinance and the zoning ordinance related to accessory structures will be brought forward with the Housing Element implementation redlines anticipated for February 2023. In the interim, staff has heard from at least 3 home-share applicants of their interest in resuming operations in time for the 2022 holiday season. Pending the preparation of amendments to the home-share ordinance, staff proposes that Council authorize a temporary home-share legalization program that would allow the issuance of temporary, conditional home-share permits that would otherwise violate provisions of the home-share ordinance related to accessory buildings and ADUs. The following are proposed conditions to qualify for the program: 1) The home-share applicant must have been previously permitted by the City to home-share; 2) The home-share applicant’s request to renew their permit must have been denied by the City due to changes in home-share regulations or because the permit was previously erroneously issued; and 3) The proposed home-share unit cannot have any outstanding violations for unpermitted work. This would require homeowners to obtain building permits and final inspection approval for their home-share units to ensure that spaces are safe for overnight occupancy. The following home-share regulations would be waived under this special program: 11.B Packet Pg. 1075 6 of 7 • Requirement that the accessory building being proposed for home-share is within 6 feet of the primary residence, • Prohibition against accessory buildings containing a shower or tub enclosure; • Enforcement of deed restrictions recorded against a permitee’s property that prohibit use of an accessory structure as a rented room or sleeping quarters as long as the permitted has a valid permit issued pursuant to the Homeshare Legalization Program; and • Requirement that an ADU have received a building permit prior to March 31, 2017, in order to allow home-sharing by the long-term resident of the primary dwelling. The conditions to qualify for the program provides a fair pathway to incentivize previously permitted home-share operators to obtain building permits and final inspection to ensure that home-share units meet current Building and Fire Codes and ensures that by doing so, they are eligible to obtain a home-share permit to resume their home-share operation. If approved by Council, the special program would terminate at the earlier of the effective date of future amendments to the home-share ordinance or June 30, 2023, unless otherwise extended by Council. Environmental Analysis The proposed temporary home-share legalization program would allow a very limited number of previously permitted home-share operators to receive temporary permission to resume operations in violation of zoning restrictions pending permanent amendments to the Municipal Code is exempt from the provisions of the California Environmental Quality Act (CEQA) pursuant to Section 15061(b)(3) of the State Implementation Guidelines. Based on the evidence in the record, it can be seen with certainty that there is no possibility that the proposed temporary program will have a significant effect on the environment. The home-share legalization program would allow the temporary resumption of operations in locations that were previously permitted for home-share on properties with existing dwelling units. All home-share units would need to be fully 11.B Packet Pg. 1076 7 of 7 permitted and complete final inspection in order to be eligible for this program. Therefore, no further environmental review under CEQA is required. Past Council Actions Meeting Date Description 5/2/15 (Attachment B) Ordinance 2484 – Home-sharing Ordinance 1/24/17 (Attachment C) Ordinance 2535 – Home-sharing Ordinance update; amend definitions, limit obligations on hosting platforms 6/27/17 (Attachment D) Ordinance 2547 – Home-sharing Ordinance update; treatment of accessory dwelling units 9/24/19 (Attachment E) Ordinance 2616 – Strengthen regulation of home-sharing and vacation rentals Financial Impacts and Budget Actions Home-share properties are required to collect and remit the City’s Transient Occupancy Tax. If the special program results in an increase in the number of home-share properties, there may be an increase in tax revenues. However, some of the properties that were previously permitted for home-share before being denied continued to pay the tax. Therefore, any increase in tax revenues is anticipated to be minor. Prepared By: Jing Yeo, Planning Manager Approved Forwarded to Council Attachments: A. Resolution B. 5/2/15 Council Report (Web Link) C. 1/24/17 Council Report (Web Link) D. 6/27/17 Council Report (Web Link) E. 9/24/19 Council Report (Web Link) F. CCD - Reso - Home-Share Legalization Program - 102522 11.B Packet Pg. 1077 1 City Council Meeting: October 25, 2022 Santa Monica, California RESOLUTION NUMBER _________ (CCS) (City Council Series) A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA MONICA ESTABLISHING A HOME-SHARE LEGALIZATION PROGRAM WHEREAS, on May 12, 2015, the Council adopted Ordinance 2484 (CCS), adding Santa Monica Municipal Code Chapter 6.20, Home-Sharing and Vacation Rentals, to clarify the City’s long-standing prohibition of renting any dwelling unit, in whole or in part, for a period of thirty consecutive days or less for exclusive transient use, or “vacation rentals”, and to relax that prohibition by allowing renting of one or more bedrooms in a dwelling unit that is the primary residence of the host for a period of thirty consecutive days or less, while the host lives on site, in the dwelling unit, throughout the visitors’ stay, or “home-sharing” (the “Home-Sharing Ordinance”); and WHEREAS, on January 24, 2017, Council adopted Ordinance 2535 (CCS) to amend the Home-Sharing Ordinance to clarify certain definitions and, in response to portions of the ordinance challenged by home-sharing platforms, to limit the obligations imposed on those platforms; and WHEREAS, on June 27, 2017, Council adopted Ordinance 2547 (CCS), to amend the Home-Sharing Ordinance to treat accessory dwelling units (“ADUs”) that received building permits on or after March 31, 2017 as separate dwelling units for the purpose of defining home-sharing activity; and WHEREAS, on September 24, 2019, Council adopted Ordinance 2616 (CCS), to further amend the Home-Sharing Ordinance to strengthen regulation of home-sharing and vacation rentals; and 11.B.a Packet Pg. 1078 Attachment: Resolution [Revision 2] (5403 : Home-share Legalization Program (15 mins)) 2 WHEREAS, permitting regulated home-sharing while prohibiting vacation rentals strikes an important balance: allowing residents to supplement their income through home-sharing and providing home-share visitors with potentially more affordable accommodations, while deterring landlords from evading rent control laws, evicting tenants, and converting residential units into de facto hostels or hotels, thus removing needed permanent housing from the market while at the same time changing the character of and undermining community ties in residential neighborhoods; and WHEREAS, Santa Monica Municipal Code Section 9.21.020 provides that accessory structures shall be considered part of the principal building if the accessory building is located less than 6 feet from the principal building or if connected to it by fully enclosed space; and WHEREAS, Santa Monica Municipal Code Section 9.21.020 prohibits an accessory structure from containing a shower or tub enclosure; and WHEREAS, since September 2020, the City has denied applications for renewal of home-share licenses for properties that were previously approved for home-share due to changes in regulations in the home-share regulations or because the permits were previously erroneously issued; and WHEREAS, on June 8, 2021, City Council directed staff to return with proposed amendments to Santa Monica Municipal Code Chapter 6.20, the City’s home-sharing ordinance, to allow the home-sharing of detached accessory buildings located more than six feet from the main building occupied by the host; and WHEREAS, amendments to Santa Monica Municipal Code Section 9.21.020 are necessary for consistency with Council direction; and 11.B.a Packet Pg. 1079 Attachment: Resolution [Revision 2] (5403 : Home-share Legalization Program (15 mins)) 3 WHEREAS, amendments to Santa Monica Municipal Code Chapter 6.20 and Section 9.21.020 remain pending; and WHEREAS, the City Council now desires to establish a home-share legalization program that would allow Council to authorize previously licensed home-share operators to receive a temporary, conditional license to resume operations pending updates to the Home-Share Ordinance, as long as the proposed home-share units do not have any outstanding unpermitted work in order to protect the health and safety of home-sharing guests. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA DOES RESOLVE AS FOLLOWS: SECTION 1. Establishment of Program. The City Council hereby establishes a Home-Share Legalization Program in accordance with the terms and conditions set forth herein. SECTION 2. Authorization to Issue Temporary Permits; Eligibility. The City Manager, or designee, is hereby authorized to issue temporary, conditional home-sharing permits if applicant satisfies all of the following: A. The City previously issued the applicant a home-share permit for the dwelling unit in accordance with Chapter 6.20. B. The City subsequently denied the applicant’s request to renew the home- share permit due to changes in the City’s home-share regulations or because the permit was previously erroneously issued. C. The dwelling unit applicant proposes to use for home-sharing activities does not have any outstanding code violations for unpermitted work. To satisfy this condition, 11.B.a Packet Pg. 1080 Attachment: Resolution [Revision 2] (5403 : Home-share Legalization Program (15 mins)) 4 applicants must obtain building permits and final inspection approval for the proposed dwelling unit to ensure that spaces meet all health and safety requirements for overnight occupancy. SECTION 3. Applicability of home-share and related regulations. A. Notwithstanding anything to the contrary in the Santa Monica Municipal Code or applicable administrative regulations, the following provisions shall not apply to permittees receiving permits in accordance with the Home-Sharing Legalization Program: 1. Requirement that the accessory building being proposed for home- share is within 6 feet of the primary residence in accordance with Santa Monica Municipal Code Sections 6.20.010(c) and 9.21.020(A). 2. Prohibition against accessory structures containing a shower or tub enclosure in accordance with 9.21.020(A). 3. Requirement that an ADU have received a building permit prior to March 31, 2017 in accordance with Santa Monica Municipal Code Section 6.20.010(c). B. Except as provided in this Section 3, home-sharing operations conducted pursuant to a permit issued in accordance with the Home-Share Legalization Program are subject to all applicable law and accompanying administrative regulations. SECTION 4. Term. Permits issued pursuant to shall expire on the earlier of: 1) effective date of amendments to Santa Monica Municipal Code Chapter 6.20 and Section 9.21.020 as described herein; or June 30, 2023, unless otherwise terminated earlier in accordance with the terms of the permit. 11.B.a Packet Pg. 1081 Attachment: Resolution [Revision 2] (5403 : Home-share Legalization Program (15 mins)) 5 SECTION 5. The City Clerk shall certify to the adoption of this Resolution, and thenceforth and thereafter the same shall be in full force and effect. APPROVED AS TO FORM: _________________________ DOUGLAS SLOAN City Attorney 11.B.a Packet Pg. 1082 Attachment: Resolution [Revision 2] (5403 : Home-share Legalization Program (15 mins)) 1 City Council Meeting: October 25, 2022 Santa Monica, California RESOLUTION NUMBER _________ (CCS) (City Council Series) A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA MONICA ESTABLISHING A HOME-SHARE LEGALIZATION PROGRAM WHEREAS, on May 12, 2015, the Council adopted Ordinance 2484 (CCS), adding Santa Monica Municipal Code Chapter 6.20, Home-Sharing and Vacation Rentals, to clarify the City’s long-standing prohibition of renting any dwelling unit, in whole or in part, for a period of thirty consecutive days or less for exclusive transient use, or “vacation rentals”, and to relax that prohibition by allowing renting of one or more bedrooms in a dwelling unit that is the primary residence of the host for a period of thirty consecutive days or less, while the host lives on site, in the dwelling unit, throughout the visitors’ stay, or “home-sharing” (the “Home-Sharing Ordinance”); and WHEREAS, on January 24, 2017, Council adopted Ordinance 2535 (CCS) to amend the Home-Sharing Ordinance to clarify certain definitions and, in response to portions of the ordinance challenged by home-sharing platforms, to limit the obligations imposed on those platforms; and WHEREAS, on June 27, 2017, Council adopted Ordinance 2547 (CCS), to amend the Home-Sharing Ordinance to treat accessory dwelling units (“ADUs”) that received building permits on or after March 31, 2017 as separate dwelling units for the purpose of defining home-sharing activity; and WHEREAS, on September 24, 2019, Council adopted Ordinance 2616 (CCS), to further amend the Home-Sharing Ordinance to strengthen regulation of home-sharing and vacation rentals; and 11.B.f Packet Pg. 1083 Attachment: CCD - Reso - Home-Share Legalization Program - 102522 (5403 : Home-share Legalization Program (15 mins)) 2 WHEREAS, permitting regulated home-sharing while prohibiting vacation rentals strikes an important balance: allowing residents to supplement their income through home-sharing and providing home-share visitors with potentially more affordable accommodations, while deterring landlords from evading rent control laws, evicting tenants, and converting residential units into de facto hostels or hotels, thus removing needed permanent housing from the market while at the same time changing the character of and undermining community ties in residential neighborhoods; and WHEREAS, Santa Monica Municipal Code Section 9.21.020 provides that accessory structures shall be considered part of the principal building if the accessory building is located less than 6 feet from the principal building or if connected to it by fully enclosed space; and WHEREAS, Santa Monica Municipal Code Section 9.21.020 prohibits an accessory structure from containing a shower or tub enclosure; and WHEREAS, the Santa Monica Municipal Code previously required certain property owners to record deed restrictions which, in part, prohibited using accessory structures that were not accessory dwelling units as rented rooms or sleeping quarters; and WHEREAS, since September 2020, the City has denied approximately applications for renewal of home-share licenses for properties that were previously approved for home-share due to changes in regulations in the home-share regulations or because the permits were previously erroneously issued; and WHEREAS, on June 8, 2021, City Council directed staff to return with proposed amendments to Santa Monica Municipal Code Chapter 6.20, the City’s home-sharing 11.B.f Packet Pg. 1084 Attachment: CCD - Reso - Home-Share Legalization Program - 102522 (5403 : Home-share Legalization Program (15 mins)) 3 ordinance, to allow the home-sharing of detached accessory buildings located more than six feet from the main building occupied by the host; and WHEREAS, amendments to Santa Monica Municipal Code Section 9.21.020 are necessary for consistency with Council direction; and WHEREAS, amendments to Santa Monica Municipal Code Chapter 6.20 and Section 9.21.020 remain pending; and WHEREAS, the City Council now desires to establish a home-share legalization program that would allow Council to authorize previously licensed home-share operators to receive a temporary, conditional license to resume operations pending updates to the Home-Share Ordinance, as long as the proposed home-share units do not have any outstanding unpermitted work in order to protect the health and safety of home-sharing guests. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA DOES RESOLVE AS FOLLOWS: SECTION 1. Establishment of Program. The City Council hereby establishes a Home-Share Legalization Program in accordance with the terms and conditions set forth herein. SECTION 2. Authorization to Issue Temporary Permits; Eligibility. The City Manager, or designee, is hereby authorized to issue temporary, conditional home-sharing permits if applicant satisfies all of the following: A. The City previously issued the applicant a home-share permit for the dwelling unit in accordance with Chapter 6.20. 11.B.f Packet Pg. 1085 Attachment: CCD - Reso - Home-Share Legalization Program - 102522 (5403 : Home-share Legalization Program (15 mins)) 4 B. The City subsequently denied the applicant’s request to renew the home- share permit due to changes in the City’s home-share regulations or because the permit was previously erroneously issued. C. The building or structure applicant proposes to use for home-sharing activities does not have any outstanding code violations for unpermitted work. To satisfy this condition, applicants must obtain building permits and final inspection approval for the proposed building or structure to ensure that spaces meet all health and safety requirements for overnight occupancy. SECTION 3. Applicability of home-share and related regulations. A. Notwithstanding anything to the contrary in the Santa Monica Municipal Code or applicable administrative regulations, the following provisions shall not apply to permittees receiving permits in accordance with the Home-Sharing Legalization Program: 1. Requirement that the accessory structure being proposed for home- share is within 6 feet of the primary residence in accordance with Santa Monica Municipal Code Sections 6.20.010(c) and 9.21.020(A). 2. Prohibition against accessory structures containing a shower or tub enclosure in accordance with 9.21.020(A). 3. Requirement that an ADU receive a building permit prior to March 31, 2017 to allow home-sharing by the long-term resident of the principal dwelling unit in accordance with Santa Monica Municipal Code Section 6.20.010(c). B. Provisions in real property deed restrictions in favor of the City that are recorded against a permittee’s property and prohibit use of an accessory structure as a 11.B.f Packet Pg. 1086 Attachment: CCD - Reso - Home-Share Legalization Program - 102522 (5403 : Home-share Legalization Program (15 mins)) 5 rented room or sleeping quarters shall not be enforced against permittees with a valid permit issued pursuant to the Home-Share Legalization Program. C. Except as provided in this Section 3, home-sharing operations conducted pursuant to a permit issued in accordance with the Home-Share Legalization Program are subject to all applicable law and accompanying administrative regulations. SECTION 4. Term. Permits issued pursuant to shall expire on the earlier of: 1) effective date of amendments to Santa Monica Municipal Code Chapter 6.20 and Section 9.21.020 as described herein; or 2) June 30, 2023, unless otherwise terminated earlier in accordance with the terms of the permit. SECTION 5. The City Clerk shall certify to the adoption of this Resolution, and thenceforth and thereafter the same shall be in full force and effect. APPROVED AS TO FORM: _________________________ DOUGLAS SLOAN City Attorney 11.B.f Packet Pg. 1087 Attachment: CCD - Reso - Home-Share Legalization Program - 102522 (5403 : Home-share Legalization Program (15 mins))