What is a hotel?
That question is at the center of the latest battlefront over Santa Monica’s dwindling affordable housing stock: the conversion of apartments to top-dollar short-term rentals.
Beachfront rent-controlled units that once fetched between $350 and $700 a month — which were so affordable that tenants often hung on to them for years — have become a revolving door for visitors willing to pay ten times the old rates.
Like the neighboring $400-a-night luxury hotel rooms just south of the Santa Monica Pier, these units are fully furnished, and feature telephones with high-speed Internet access, fax machines and cable televisions. Management also provides maid service and even complimentary breakfast with a daily newspaper. Such accommodations blur the line between a hotel and an apartment. In fact, the similarity is part of the advertising pitch.
”We won‘t seem unusual for a Santa Monica Beach luxury hotel,“ reads the home page on the Internet site for Citrus Suites, a newly renovated 70-unit building near the terminus of Pico Boulevard, where furnished one-bedroom units with weekly maid service go for between $3,500 and $5,500 a month. ”That is, until you realize we’re actually not a hotel.“ The ad then goes on to tout the suites‘ hotel-like amenities, such as ”thick terrycloth robes, plush towels and fine linens [that] embrace you with the feeling of all the comforts of home.“
The short-term rental trend coincides exactly with the city’s precipitous decline in affordable housing. Both were spurred by a 1995 state law that allows landlords to rent voluntarily vacated rent-controlled apartments for what the market can bear. ”Vacancy decontrol,“ as it‘s called, has been in full effect for two years, and during that time landlords have been able to raise rents in about 5,700 units, according to a city study. Before the increases, 78 percent of these units were affordable to low-income households. Afterward, just 14 percent remained affordable.
It turns out that many of the newly pricey apartments have become virtual extended-stay hotels, which worries Santa Monica Mayor Michael Feinstein. ”I have grave concerns about the conversion of any more rental housing into short-term corporate apartments,“ said Feinstein, a member of Santa Monicans for Renters’ Rights (SMRR), which holds five of seven council seats. ”I am interested in a community of committed full-time residents who are not here today, gone tomorrow.
“We already have a lot of hotel rooms and more than enough short-term corporate apartments,” added Feinstein, who also is a California Green Party leader. “I don‘t want this city to turn into ’time-share Monica,‘ and I don’t think most other residents do either.”
It‘s not just the city’s social engineers who are concerned. The luxury hotels are nervous about unfair competition, while city staffers chafe over a loophole that allows these apartmenthotels to escape the city‘s hotel tax, a 12 percent Transient Occupancy Tax that contributed $17.9 million to the city’s coffers last year. Beyond finances, short-term rentals, say critics, intensify a building‘s use by increasing traffic and destabilize a community by making its residents more transient.
Anecdotal evidence suggests that the trend is both widespread and wide-ranging. Developers and landlords contend they are filling a demand whose supply was artificially depressed for two decades by the city’s restrictive rent-control laws. “This type of housing is just a niche in the housing market,” said developer Howard Jacobs, who remodeled the 70-unit rent-controlled apartments at the end of Pico into Citrus Suites. “There‘s a demand in all metro areas. Vacancy decontrol has allowed a demand to finally be met.”
The City Council was expected to take up the matter as early as this week, but only to designate a resolution of the issue as a top city priority. Staffers already are conducting a housing survey to get a handle on the marketplace.
Not all short-term rentals are in newly refurbished buildings. Nor are all landlords renting on at least a monthly basis — as required by city law. The Westside Rental Connection’s Web site recently listed half a dozen apartments renting on a shorter term. One furnished beachfront apartment rents for $100 a day, another on Main Street, a couple of blocks from the beach, goes for $380 a week.
Before going after these scofflaws, planning officials said they hope to craft an ordinance that would rein in the entire short-term rental market. Staff is currently looking at ordinances in Avalon, Monterey and San Jose that address the issue.
But city officials concede that it will be hard to write laws restricting the practice of monthly rentals, and given the potential for profits, curbing the trend will be doubly difficult.
“It‘s simple economics,” said Jay Trevino, the city’s planning manager. “There‘s a lot of economic motivation for people to do this.”