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SR 04-11-2023 16D City Council Report City Council Meeting: April 11, 2023 Agenda Item: 16.D 1 of 1 To: Mayor and City Council From: Denise Anderson Warren, City Clerk, Records and Election Services Department Subject: Request of Councilmembers Torosis and Parra and Mayor Pro Tem Negrete that Council direct the City Manager and City Attorney evaluate and develop recommendations for Council action to regulate fractional ownership of single- family homes and residential condominiums. These recommendations should also include a review of best practices from similarly situated jurisdictions. Prepared By: Denise Anderson Warren, City Clerk Approved Forwarded to Council Attachments: A. Fractional Ownership 16 item -04-11-23_revised B. Written Comments 16.D Packet Pg. 2172 Request of Councilmembers Torosis and Parra and Mayor Pro Tem Negrete to proactively address vacation homes and fractional ownership in Santa Monica During the pandemic, rising demand for second homes and an inventory shortage helped push prices to record highs. According to the Federal Reserve Bank of St. Louis, median home prices increased nationwide by almost $60,000 in the past year. As a result, local workforce oftentimes finds themselves priced out of many desirable markets, including locally in Santa Monica. As home prices continue to rise, so too do corporate owners. California is the state with the fourth highest percentage of single- family homes purchased by investors (29%) behind Georgia, Arizona, and Nevada, according to data from CoreLogic. Moreover, the state has seen the rise of the concept of fractional ownership – when multiple people own a portion of a vacation home and split the allowed time at the property through a formal arrangement. In the fractional model, the allotted time for each owner is based on their percentage of ownership, similar to a timeshare. This model was accelerated by the pandemic when families were seeking the space and refuge of a getaway. However, fractional ownership has been viewed by many as another practice to convert neighborhood homes into quick vacation destinations for those who can afford to cycle in and out of the community. Tourist destinations ac ross the state are working to regulate this new type of ownership to ensure that homes remain in the local community. Carmel, Sonoma, and St. Helena are moving to limit or outright ban fractional ownership operations. In Beverly Hills, planning commissione rs in March expressed support for an ordinance that would prohibit fractional ownership in the city.1 The City of Santa Monica has long expressed its desire to maintain the character and integrity of its residential neighborhoods while supporting the tourism and hospitality industry. As such, the City currently regulates short-term rentals and has advanced other policies to limit corporate rentals and the commercialization of single- family homes. 1 https://www.latimes.com/california/story/2023-03-29/newport-beach-battles-a-new-breed-of-luxury-party- houses 16.D.a Packet Pg. 2173 Attachment: Fractional Ownership 16 item -04-11-23_revised (5706 : Address vacation homes and fractional ownership in Santa Monica) We, therefore, direct the City Manager and City Attorney to evaluate and develop recommendations for Council action to regulate fractional ownership of single-family homes and residential condominiums. These recommendations should also include a review of best practices from similarly situated jurisdictions. 16.D.a Packet Pg. 2174 Attachment: Fractional Ownership 16 item -04-11-23_revised (5706 : Address vacation homes and fractional ownership in Santa Monica) 1 Vernice Hankins From:Ellis Raskin <ellis.raskin@gmail.com> Sent:Tuesday, April 11, 2023 11:53 AM To:councilmtgitems; Gleam Davis; Lana Negrete; Phil Brock; Oscar de la Torre; Christine Parra; Caroline Torosis; Jesse Zwick Subject:Agenda Item 16-D (Fractional Ownership) EXTERNAL  Dear Hon. Councilmembers,  I strongly support the proposal advanced by Mayor Pro Tem. Negrete and Councilmembers Parra and Torrosis to direct  the City Manager and City Attorney to return with options for regulating the fractional ownership of Single‐Family  Homes and Condominiums.   As we continue to see the proliferation of corporate ownership of Santa Monica homes, these regulations will be  essential tools for ensuring that our laws prioritize the wellbeing of our residents.   Best,  Ellis Raskin  Item 16.D 04/11/23 1 of 2 Item 16.D 04/11/23 16.D.b Packet Pg. 2175 Attachment: Written Comments (5706 : Address vacation homes and fractional ownership in Santa Monica) From:Natalya Zernitskaya To:councilmtgitems Cc:Jesse Zwick; Gleam Davis; Caroline Torosis; Christine Parra; David White; Phil Brock; Lana Negrete; Oscar de la Torre; Attorney Mailbox Subject:Santa Monica City Council Agenda 4/11/2023- Items 16B & 16D Date:Tuesday, April 11, 2023 1:32:56 PM EXTERNAL Good Afternoon Mayor Davis, Mayor Pro Tem Negrete, and City Councilmembers, I urge you to support both items 16B and 16D on tonight's agenda, to direct the City Manager & City Attorney to study and draft an ordinance that would guarantee healthcare workers a minimum wage of no less than $25/hr and to evaluate & develop recommendations related to fractional ownership of single-family homes and residential condos, respectively. Regarding Item 16B, the past 3 years have shown us how vital healthcare workers are to the health and wellbeing of our community. Despite how important workers in this sector are, many are woefully underpaid and can't even afford to live in the community where they work. The item, as drafted, directs the City Manager & City Attorney to study the issue and draft an ordinance guaranteeing healthcare workers (as defined) a minimum wage of $25/hr. Assuming a standard 40 hour workweek, that comes out to $52,000/year. We should take care of the healthcare workers who take care of all of us and supporting this item is an excellent step towards that goal. Item 16D addresses a very important issue that Santa Monica has been faced with before, the use of our City's residential properties for vacation rentals rather than for residents. As we experienced with the rise of AirBnB and other vacation rental companies, our City should take care to ensure that our housing stock is occupied by residents, with minimal exceptions. The latest rising trend of fractional ownership of homes, which effectively creates a timeshare-like system for single family homes and residential condos, is an issue that can negatively impact existing and future residents by limiting the availability of homes available to longer-term residents. Newport Beach is already facing challenges due to fractional home ownership and is exploring the best options for their city. I urge the Council to get ahead of this issue before it becomes a significant problem and direct the City Manager & City Attorney to evaluate the options and develop recommendations for the best way to regulate fractional home ownership in Santa Monica. Thank you for your consideration of these pressing issues before you tonight. Sincerely, Natalya Zernitskaya Natalya Zernitskaya (she/her) nzernitskaya@gmail.com Item 16.D 04/11/23 2 of 2 Item 16.D 04/11/23 16.D.b Packet Pg. 2176 Attachment: Written Comments (5706 : Address vacation homes and fractional ownership in Santa Monica)