Michael Tortmann lives in Dortmund, Germany, but has been vacationing in the South Bay for years. He likes having access to the urban amenities of Los Angeles, while still laying his head down to the sound of crashing surf.
Earlier this year, Tortmann and three friends booked business class tickets for a two-week trip to the South Bay in early October. Like always, Tortmann and his friends made their lodging arrangements at a short-term rental in Hermosa Beach.
But in late May, Tortmann received a phone call from the person handling his October rental. The city, he was told, had banned short-term rentals in residential areas.
Tortmann was so surprised at the news that at first he thought he was being told a joke. But his confusion quickly turned into frustration.
“Why didn’t they say, ‘From this point on, you can’t take bookings of [fewer than] 30 days’?” Tortmann said. “If something is impacting the future, then you can plan around it. But now, we’ve booked everything.” (Tortmann did not say how much he and his friends had spent on flights, but an Expedia search of business class flights from Cologne to LAX in early October shows a per ticket price of $3,627.)
Tortmann is one of an unknown number of people caught up in Hermosa’s effort to address short-term vacation rentals, but the issue is more complex than upset vacation plans. The latest legislative action merely updated Hermosa’s municipal code, which has long prohibited the practice, leading both residents and city officials to argue that landlords renting the properties have been on notice.
Like other cities across the country, Hermosa is responding to changes wrought by the growing popularity of online exchanges like Airbnb and VRBO, which connect property owners, and sometimes long-term tenants, with those looking for hotel alternatives. So far, debate over the merits of the practice — whether it promotes raucous behavior, whether it raises rent for long-term tenants, whether the city may update its code without running afoul of the State Coastal Commission — has overshadowed practical enforcement concerns.
Hermosa’s ordinance goes into effect Friday, just in time for summer, the busiest part of the year for short-term rental operators. City officials have indicated that citations under the new law will likely not be issued before Labor Day, but have been less than clear on the mechanics of enforcement. Meanwhile, interviews with operators of short-term rentals and officials from nearby cities foreshadow challenges.
“I’m going to continue what I’m doing,” said Steve, who owns a short-term rental near downtown Hermosa, and provided only his first name out of fear of being targeted. He is no longer accepting bookings after November, but has no plans to cancel those already made. “Who knows, the Coastal Commission could come in and sue them. I’m not going to just stick my tail between my legs.”
Making the sausage
The past three Hermosa City Council meetings have addressed short-term rentals, including one which drew 60 speakers. After midnight at the most recent meeting, the council sussed out enforcement particulars. The results are complex, and leave some degree of uncertainty.
The ordinance establishes a penalty structure that escalates with the size of the unit and the frequency of violations. For one- and two-bedroom units, a first violation will lead to a $2,500 penalty issued by the city’s Code Enforcement officers. A second and third will be $5,000 and $7,500, respectively. For units three bedroom rentals or larger, those numbers are doubled. And for units of any size, cases of more than three violations in a 12-month period will be referred to the City Prosecutor’s office for possible misdemeanor charges.
But what exactly constitutes a violation?
Although the ordinance applies to those staying in short-term rentals as well as the property owner, council members stressed that the ordinance is intended to target landlords and their online advertising of the rentals on sites like Airbnb and VRBO, which they view as the principal cause of problem rentals. But those sites do not provide rental addresses. The address must be obtained directly from the people handling the bookings. This makes enforcement of short-term rental prohibitions cumbersome.
To address the problem, the council approved a contract with Host Compliance, a San Francisco company that collects short-term rental data from up to 17 home-rental websites and elsewhere on the Internet, and provides municipalities with the addresses of offending properties.
Host Compliance’s software allows for weekly updates of listings. So Hermosa plans to send letters to Hermosa property owners advertising short-term rentals, warning them that they are in violation of the city’s ordinance and giving them seven days to correct the violation. New violations will be issued for each week the advertising continues beyond the one-week grace period.
Despite the contract with Host Compliance, the rental websites remain the missing piece in the enforcement puzzle. At a recent council meeting, Mayor Pro Tem Justin Massey indicated that a future lawsuit against them was likely. Other cities that have attempted to crack down on short-term rentals have met with mixed success.
Short-term rental websites have continued to display listings in cities where the practice has been banned. An Airbnb search for “Manhattan Beach,” where the practice is already prohibited, yields over 300 active properties. Hermosa Beach City Attorney Michael Jenkins, who also serves as city attorney for West Hollywood, said that city has sent a demand letter to Homeaway, the parent company for VRBO, asking the site to delist properties in the city limits, but has not received a reply.
Requests for comment on this story from Airbnb were not returned. Matt Curtis, Homeaway’s senior director of government relations, said pre-existing reservations falling under the new arrangement should “absolutely be honored” by property managers or owners.
A safe harbor?
If Hermosa code enforcement discovers ongoing short-term rentals through means other than online searches, such through complaints or city inspection, penalties could accrue each day, according to Jenkins.
“If you’ve got a place that’s causing lots of impacts, and you give them seven days to cure, they’re going to be gone by the time Code Enforcement gets there,” said City Manager Tom Bakaly. Those short-term rental properties discovered through violations of noise or nuisance codes will be immediately subject to the updated ordinance, including violations during the 4th of July weekend.
While there was strong support for the immediate enforcement of nuisance properties, a majority of council members expressed concern about how implementing the ordinance would affect pre-existing bookings, especially for vacationers who had already booked flights.
Santa Monica, like Hermosa, updated its code to more clearly prohibit short-term vacation rentals, but permitted previously booked rentals. (Unlike Hermosa, Santa Monica allows homesharing, in which the landlord remains on the property while the guest stays.)
“In pretty much all cases, we allowed people to maintain existing reservations,” said Salvador Valles, assistant director of planning and community development for Santa Monica. “If not, they might not have a place to stay.”
Neighboring Manhattan Beach also updated its code to improve enforcement of a pre-exisiting ban on short-term rentals. Its revised prohibition went into effect on Aug. 6, 2015. The city permitted existing arrangements through January 1, 2016.
“To be fair, we didn’t want to modify existing contracts,” said Manhattan Councilmember Wayne Powell. “A number of residents were upset about that, by the way. They thought it should be enforced immediately.”
Some Hermosa residents felt the same. At the June 14 council meeting, Dency Nelson reminded the council that he and his Silverstrand Avenue neighbors had addressed the council on this issue more than 10 years ago — before Airbnb came into existence — about a nearby residence rented for fewer than 30 days.
“I think it’s extremely generous for any of you to suggest that there should be some kind of a waiver, some kind of leniency or noticing,” Nelson said. “There’s nothing to be noticed. All of these rentals are in violation of our code.”
No vote was taken on a safe-harbor provision in Hermosa. Instead council members and staff discussed a plan to inform residents about the ordinance, then find and notify short-term owners. Penalties, staff said, will likely not be issued until sometime after Labor Day.
Responding to these instructions, Jenkins said that the city would address non-nuisance short-term rentals with “all deliberate speed.” The phrase comes from the U.S. Supreme Court opinion in Brown v. Board of Education, and has become legal shorthand for dealing with a noble, but difficult-to-accomplish task.
To live outside the law
As the effective date of the ordinance draws near, opposition to the ordinance remains steadfast. While some have said they plan to exit the short-term rental business, others plan to continue business as usual.
Araceli Hogan owns a duplex on 31st Street. She lives in one unit, and rents out the other, sometimes for periods of more than 30 days, sometimes on a short-term basis.
Hogan works as a flight attendant, and often lets fellow flight attendants stay in the other unit when it is not occupied. They offer her a small amount of money or buy her dinner in exchange. She believes that the city will have a difficult time stopping such arrangements.
Hogan, who also manages an apartment building in Los Angeles and says she has more than 20 years of experience as a landlord, plans to draw up month-long lease arrangements for flight attendant friends once the law goes into effect. Although they would come and go throughout the month, she believes she would be in compliance with the law, with the only limit being county health codes about how many tenants may occupy a unit of a given size.
Hogan raised the prospect of neighbors or the city spying on residents in order to enforce the law. A similar argument was a key part of the successful opposition to a ballot measure last year that would have cracked down on short-term rentals in San Francisco.
“How are they going to know? Are they going to be checking on us?” she said. “They can’t just demand my documents. They have to prove I have done something wrong.”
Tortmann, the vacationer from Germany, has been in contact with the person coordinating his rental, and said something similar is being considered. He may enter into a month-long lease, with the understanding that he will leave in two weeks, and pay a reduced rate.
For large-scale operators, the equation is more complicated. Robert Reyes is the founder of Sunny California Vacation Rentals, a Pier Avenue business that manages short-term rentals throughout the South Bay. After Manhattan updated its code, he cancelled 75 reservations there, and moved 40 of them to Hermosa.
He is dreading the calls he now has to make. He said he emailed the city asking for a six-month grace period to accommodate existing, but received no reply.
“I’ve had lawsuit threats, husbands threatening to beat me up, wives crying on the phone,” Reyes said. “But what am I going to do? Say, ‘I’m sorry, the city council is angry’?”
Reyes estimates the updated ordinance will affect between 1,500 and 2,000 rental arrangements in the city. Reyes said he may need to suspend his high-profile short-term rental business, but believes that there is a high likelihood of defiance among smaller operators.
“The people who are against short-term rentals are loud and screaming,” he said. “The people who are for it are quiet, hiding in the background, waiting.”
