LEGAL AFFAIRS – The city of Manhattan Beach Short-term rental ban rejected by Court, again

The Emoji House, a short-term rental in Manhattan Beach that became internationally known after a neighborhood feud erupted over its use by Airbnb after the City banned Airbnb. Photo by JP Cordero 

by Mark McDermott 

A state appeals court last week ruled that the City of Manhattan Beach’s ban on short-term rentals flouted California law protecting coastal access, and is not legal. 

A sharply worded 11-page opinion, issued by the three-judge Second District Court of Appeal panel, and authored by Justice John Shepard Wiley Jr., rejected the City’s argument that it did not need California Coastal Commission approval for its ban on short-term rentals, such as Airbnb in its own coastal zone. 

“This case is about getting a room near the beach,” wrote Wiley in the opinion, which was issued April 5. “By law, public access to the beach is a California priority.” 

The opinion noted that Manhattan Beach enacted a local coastal program (LCP) 28 years ago that was certified by the Coastal Commission, but the City in 2015 and 2019 failed to obtain approval for changes to zoning that banned short-term rental, even though the Commission in 2016 explicitly asked all coastal cities grappling with short-term rental issues to do so. The appellate court fully upheld Superior Court Judge James C. Chalfant’s 2019 ruling that the City’s ban was illegal. 

“The trial court rightly ruled the City’s old ordinances did permit short-term rentals,” the opinion said. “This means the City’s recent laws against platforms like Airbnb indeed are amendments requiring Commission approval, which the City never got. We affirm.” 

The overturn of the ban is the result of a lawsuit filed by resident Darby Keen, who owns a home he formerly rented for short-term in the city’s coastal zone. His attorney, Frank P. Angel, said the City’s approach amounted to an end run around the Coastal Act and the Coastal Commission.

 “My client and I are delighted with the outcome,” said Angel. “The court laid down the law forcefully and pithily.” 

City Attorney Quinn Barrow said he was limited in his ability to discuss the case until City Council has considered this latest development, but did say that the Court of Appeals ruling was “based upon a fairly narrow basis” in only considering the City’s ordinances in the context of whether or not they are amendments to the LCP and thus require Coastal Commission approval. 

“The City is reviewing the opinion to determine next steps,” Barrow said. 

Among those possible next steps presumably would be an attempt to have the case heard by the California Supreme Court. 

The City’s ban was mostly popular among residents. Short-term rentals, and the threat some people believed they posed to the neighborhood character in residential areas, became a hot button topic during the last two City Council elections. The City’s 2019 ordinance followed up on the 2015 short-term rental ban by creating enforcement mechanisms, including $1,000 per day fines on owners hosting short-term rentals, outlawing advertising rentals of less than 30 days on platforms such as Airbnb and VRBO, and the hiring of a company, Host Compliance, to oversee these restrictions. 

The City argued that its LCP ordinances implicitly banned short-term rentals by not explicitly allowing them, so therefore its new ordinances implementing a ban did not represent an amendment to the LCP requiring Coastal Commission review. The court flatly rejected this argument. 

“Because its ordinances say nothing about the duration of rentals, the City cannot credibly insist its ordinances permit long-term residential rentals, but have always banned short-term rentals,” Wiley Jr. wrote. “That interpretation makes no sense.” 

The City also argued that neither the 2015 nor the 2019 ordinance had much impact. 

“There is nothing in the record to suggest that either Ordinance reduced the actual number of STRs in the City,” the City’s appellate brief argued. “The record indicates that the City did not prosecute any property owners for STRs, and issued only a handful of administrative citations prior to the 2019 Ordinance, and even fewer after its adoption.” 

The Court, in its opinion, expressed astonishment that the City made such an argument. 

“The 2019 ordinance had a pronounced effect: by June 2019, short-term rentals dropped, in round numbers, from 250 to 50,” Justice Wiley wrote. “The ban was markedly, although not completely, effective…Bewilderingly, the City tells us there is no evidence its ordinances reduced the number of short-term rentals in the City. The record contradicts this.” 

Angel argued that the City’s actions were particularly egregious because initially, in 2015, city officials met with Coastal Commission staff to consult about possible amendments to its local coastal program. And then in 2016, as short-term rental issues arose throughout the state, the Coastal Commission sent a letter to all coastal cities emphasizing that they needed to work with the agency to adopt regulations on such rentals. 

“Please note that vacation rental regulation in the coastal zone must occur within the context of your local coastal program (LCP) and/or be authorized pursuant to a coastal development permit (CDP),” the letter said. “The regulation of short-term/vacation rentals represents a change in the intensity of use and of access to the shoreline, and thus constitutes development to which the Coastal Act and LCPs must apply.” 

The Appeals Court also drew attention to this letter and its context for the City’s subsequent actions.  

“The Commission emphasized that ‘vacation rentals provide an important source of visitor accommodations in the coastal zone’ and that blanket bans would rarely be appropriate,” the opinion said. 

Angel argued that the City’s actions emerge from a long history of attempting to exclude visitors of different socioeconomic backgrounds from visiting Manhattan Beach, beginning, he said, with the events that occurred at Bruce’s Beach a century ago. 

“Categorical short-term rental bans in the coastal zone are a barrier to the coast,” Angel said, noting that such bans disproportionately impact visitors coming from lower income areas and differing ethnicities who seek an affordable way to vacation at the beach. 

Angel said he has filed a request with the City Attorney and City Council seeking five actions: the suspension of enforcement of the short-term rental ban in the City’s coastal zone; advising Host Compliance that the ban is lifted; obeyance with the 2020 ruling, which would require the City’s ban be repealed; recorrect the City’s website, which includes information on the ban; and refund all fines issued to former hosts.

“We have yet to receive a response,” Angel said. 

The question now is whether the City will be liable not only for the fines it issued but for three years of lost revenues among the owners of 200 short-term rental operators who quit renting due to the ban.

One such operator was Kathryn Kidd, who owned and operated what came to be known as the “Emoji House.” Kidd was reported by her neighbors for operating a short-term rental on 39th Street and issued a $4,000 citation. She in turn had two smiley face emojis painted on her house facing her neighbors, resulting in a neighborhood feud that eventually drew national and even international attention. Kidd eventually sold the house, although she still owns another on El Porto, which was also formerly a short-term rental. 

Kidd claims she lost roughly $200,000 a year from the El Porto house alone, which she rented from $250 to $500 per night. Kidd indicated she may legally pursue damages for lost revenue, the harassment she endured, and the eventual loss of her house on 39th Street, which she says she felt compelled to sell. 

“Who in their right mind comes to my house and asks guests how long they have been staying, and after they say four days, then fines me $1,000 a day?” Kidd said. “With all that is going on in the world, is that really a huge concern? I lost a lot more than revenue. I sold the house on 39th out of desperation because the City was coming after me and the neighbors were harassing me. You know, the emoji signs were upsetting to some people. But with all the negativity, I was afraid. I had attorneys calling me, threatening. It just wasn’t a pleasant thing, and now we know what the City was doing was not legal.” 

Kidd said that she is a senior citizen and those rentals were her retirement plan. 

“What they have done is they forced people like me to find alternate ways to make mortgage payments. They forced me to think outside the box,” Kidd said. “This is wrong. It’s not like I was opening up a pot shop. I was doing nothing illegal. I am giving people a vacation home, maybe a little cheaper than a hotel, and better, because they were coming to stay near the beach and they had a family. The City should be penalized for this.” ER 


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