DEPARTMENT OF City of Los Angeles EXECUTIVE OFFICES CITY PLANNING 200 N. Spring Street, Room 525 California Los Angeles, CA 90012-4801 CITY PLANNING COMMISSION VINCENT P. BERTONI, AICP DAVID H. J. AMBROZ c vOS director president & (213) 978-1271 renee dake wilson vice-president KEVIN J. KELLER, AICP EXECUTIVE OFFICER Caroline choe (213) 978-1272 vahid khorsand w JOHN W. MACK lisa m. webber, aicp samantha millman marc mitchell DEPUTY DIRECTOR veronica padilla-campos eric garcetti (213) 978-1274 dana m. perlman mayor rocky wiles http://planning.lacity.org commission office manager (213) 978-1300 October 19, 2017 Los Angeles City Council c/o Office of the City Clerk City Hall, Room 395 Los Angeles, California 90012 Attention: Planning and Land Use Management (PLUM) Committee REPORT BACK RELATIVE TO PROPOSED HOME-SHARING ORDINANCE (COUNCIL FILES 14-1635-S2, 14-1635-S3) On June 13, 2017, the Committee considered the proposed Home Sharing Ordinance (HSO) and requested the Department of City Planning (DCP) and the Housing and Community Investment Department (HCIDLA) to report on the following: 1 An analysis of the current state of short-term rentals in the City, including but not . limited to a) the number of impacted housing units and loss of affordability, b) concentration areas Citywide and c) percentage of RSO and covenanted rental housing 2 The number of nuisances related to short-term rentals; . 3 Rationale for key ordinance provisions, including a) primary residency, . b) 180-day limit and c) prohibition on utilization of RSO and affordable units for home-sharing. 4 Proposed registration and enforcement processes and potential fee structures, . including best practices from other cities. 5 Various policy options . 6 Potential revenue impact of proposed draft regulations and potential variations as . well as alternative funding options; 1. CURRENT STATE OF SHORT TERM RENTALS (STR) IN THE CITY, INCLUDING POTENTIAL IMPACTS a. Number of STR properties and impact on long-term rental housing stock Committee members requested more detailed data and analysis on the impact of STR on the City’s housing stock. To analyze the impacts, it is necessary to determine how many otherwise rentable spaces are being used for STR. Based on Citywide data provided by short-term rental services company Host Compliance, LLC (see Attachment 1), there are approximately 29,000 STR listings within the City of Los Angeles, PLUM Committee CFs 14-1635-S2, 14-1635-S3 Page 2 which represent 23,000 unique STR rental units after duplicates and units available for longer- term stays are excluded. Of these 23,000 active unique STR listings, approximately 15,900 (69%) are "entire home” listings. However, not all of these units are actively rented or otherwise empty year-round, and therefore do not necessarily represent a loss in housing stock. The Host Compliance report estimates there are a total of 11,400 listings in Los Angeles renting for more than 90 days in the last year, with about 6,600 rented for more than 180 days. Units rented for more than 90 days a year as STRs are unlikely to be available as long-term rentals. Therefore the number of listings for STRs that are unavailable for long-term rentals in Los Angeles is likely between this range of 6,600 and 11,400. However, when factoring in Host Compliance’s 12.4 percent duplication rate, the range of unique housing units used primarily for STRs is reduced to a range of between approximately 6,000-10,000 housing units. The estimated nights per year is shown below. Table 1. Estimated Annual Nights Rented Per Year for Short Term Rental Nights Hosted Number of Listings % of Listings 0 to 30 nights 12,680 43.8% 31 to 90 nights 4,850 16.8% 91 to 120 nights 2,147 7.4% 121 to 180 nights 2,673 9.2% Over 190 nights 6,588 22.8% Total 28,918 100.0% Source: Host Compliance LLC. October 2017. Los Angeles: Short-Term Rental Market Overview Compared to the number of total housing units in the City, the range of 6,000-10,000 housing units potentially lost to STR is a relatively small portion of the 1.45 million total housing units in the city1 (less than 1 percent). However, the fast growth of the practice and its concentration in certain neighborhoods threatens housing availability, affordability and residential stability of an increasing number of communities throughout Los Angeles. This is particularly the case because of the region’s low rental housing vacancy rates (reported most recently as 3.8 percent). This ordinance is intended as an effort to limit these effects. To understand how many long-term housing units are potentially converted to STRs each year, the STR growth rate must be analyzed. Overall, Host Compliance’s data from May 2016 and September 2017 shows STRs have grown by 45 percent over the last 16 months, which translates to a 34 percent growth rate over 12 months2. Given the current range of 6,000-10,000 dedicated STR units, a 34 percent growth rate indicates an increase of approximately 1,500 to 2,500 STR units in the last year. While not all of these spaces would necessarily be rented out to a long-term tenant otherwise, that would be a viable alternative in most cases. For perspective, the City has lost about 1,300 units subject to the Rent Stabilization Ordinance (RSO) each year from all demolitions and condominium conversions combined since 2001. b. Concentration of STRs Citywide STR activity occurs across the City but appears to be highly concentrated in a relatively small number of neighborhoods. The highest concentration of listings appear to be in neighborhoods like Venice, Hollywood, Mid-Wilshire, Echo Park, Downtown, East Hollywood, Beverly Grove, Los Feliz, and Sherman Oaks. The highest concentration appears to be in Venice, which now has i U.S. Census Bureau American Community Survey, 2015, 2 These past growth rates are not an indicator of future growth under the proposed Home Sharing Ordinance. PLUM Committee CFs 14-1635-S2, 14-1635-S3 Page 3 approximately 1,600 entire home Airbnb listings alone (2,100 total Airbnb listings), compared to 21,500 total housing units. When considering how quickly units have moved from long term to STR, compared to the amount of new housing that has been added (about 150 units since 2010), it is clear STR can have a significant impact on the housing stock in certain neighborhoods. c. Concentration of Covenanted Affordable Housing and Rent Stabilized Units Approximately 55 percent of active STR listings in Los Angeles are located in multi-family buildings, according to the 2017 Host Compliance report (Attachment 1). Eighty percent of multifamily units in Los Angeles are subject to the Rent Stabilization Ordinance (RSO), so it is possible that 44 percent of current STR units are RSO units. Airbnb performed their own analysis looking at actual RSO address locations and estimated to the Department that between 2,000­ 3,000 units covered by the RSO were active on the Airbnb platform, accounting for roughly 7-10 percent of the tax revenue generated by Airbnb hosts in Los Angeles. Differences between these two figures may be explained by a high number of listings in RSO units that are not very active. There is considerable overlap between areas with high levels of Airbnb activity and evictions. This does not necessarily imply a causation between these phenomena. Ellis Act evictions are likely to occur in areas that are experiencing a surge in market interest, which also tend to coincide with areas that many guests want to visit. (See “Restrictions on RSO Units“ on pg. 5 for more on the rationale for the restriction on RSO units). 2. NUMBER OF NUISANCE COMPLAINTS RELATED TO STR On multiple-family properties, for which code enforcement is the responsibility of HCIDLA, there have been a total of 419 STR complaints opened since March 2015 (as of September 27, 2017). At least 133 cases have been closed but 286 remain open/pending. A total of 12 cases have been referred to the Office of City Attorney for further action, eight of which are in Council District 11, three in Council District 5 and one in Council District 2. HCIDLA reports that these complaints are normally related to the illegal use of the building and that many tenants report that the high turnover of strangers in their apartment building is in itself a nuisance. For single family homes, LADBS, (the code enforcement agency for all single-family properties) reports that in the past four years there have been approximately 200 STR-related complaints. However, this is just an estimate as the total includes any complaint with related keywords such as “short term,” “Airbnb,” “transient,” etc. The type of violation cannot be discerned from the available data, so it is possible that some of these complaints were for issues unrelated to STR. The proposed ordinance is based upon the principle that sharing one’s own home creates fewer neighborhood impacts as compared to an absentee landlord (or tenant) renting out their otherwise empty unit. If there is a neighbor to talk to, most nuisance problems can be managed. And if someone lives in a unit, the STR does not occur at the expense of a long-term housing unit. Therefore, enforcement of the primary residence requirement is the central deterrent against absentee hosts, nuisances and housing impact concerns. 3. KEY ORDINANCE PROVISIONS Zoning laws in most cities, including Los Angeles, have traditionally treated “transient” uses (properties inhabited for a period of less than 30 days) much differently than long-term residential uses. This distinction has roots in the original rationale for zoning laws - that an unchecked proliferation of commercial uses in a residential area can reduce its desirability as a place to live. In Los Angeles, transient uses such as hotels and apartment hotels are only permitted in commercial areas (C zones) and higher-intensity residential areas (R4 and R5 zones), normally through a Conditional Use Permit (CUP). Allowing transient uses throughout the City marks a PLUM Committee CFs 14-1635-S2, 14-1635-S3 Page 4 significant change from this principle, with the potential for significant negative impacts given the rapid growth of this industry. Limiting the use of STR to one’s own primary residence and the establishment of a cap on the number of days a property can be rented per year can help to strike a balance between allowing legitimate home sharing and protecting residential neighborhoods and long-term housing stock. The discussion below is intended to better illuminate the issues involved. a. Primary Residence The initial City Council Motion (CF 14-1635-S) directed the Department of City Planning to prepare an ordinance to allow short term rental (STR) in one’s own primary place of residence. This focus on primary residences is the most common way other cities have attempted to limit the negative impacts on neighborhoods and the City’s long-term housing stock, while allowing greater use of space in one’s own home. It is the centerpiece of the proposed ordinance as well. Primary Residence is defined in the proposed ordinance as “the property on which the host conducts Home-Sharing and in which the host resides at least 6 months of the year.” This would be verified at the time of registration (see “Best Practices for Registration and Fee Structures” on pg. 5). This definition precludes STR in a property where the host does not reside. Often these types of secondary units are called “vacation rentals.” The new primary residency requirement would not affect the majority of existing STR hosts. Airbnb recently stated in a September 2017 report that approximately 84 percent of hosts rent out their primary residence. However, most research supports that a larger percent of overall hosting activity, in terms of the overall number of nights rented, (and therefore revenue generation) comes from absentee hosts not living on site (see the discussion on “Potential Revenue Impacts"on pg. 11). b. 180-Day Limit The Department originally proposed a 90-day limit on the number of nights that could be rented each year for short-term stays. This provision was intended to protect residential character, emphasize the part-time (accessory) nature of this activity and limit its impact to neighbors and the City’s housing stock. In response to testimony by hosts that a cap of 90 days per year was too low, the Department increased the proposed cap to 120 days in the draft ordinance presented to the City Planning Commission. The Commission, in turn recommended the current 180 day cap. With regards to residential character, the concern is that full-time STRs could lead to a variety of nuisances associated with transient and tourist guest stays. While most hosts and guests are respectful and impacts are usually minor, more intensively used properties are more likely to have negative effects that may not be easily addressed by absentee operators. By capping STR activity at just less than half the year, a limit of 180 days ensures that STR activity remains an accessory use of a building and not its primary use. This is relevant for both the Zoning Code and Building Code. The Building Code, for example, has higher life-safety standards for transient use. Finally, a cap on the number of nights per year a property can be used for STR is intended to prevent an economic incentive for landlords to rent vacant units to short-term guests. When STR becomes more profitable, there is a significant rise in the pressure to potentially remove existing tenants and more units may be removed from the long-term rental market. PLUM Committee CFs 14-1635-S2, 14-1635-S3 Page 5 The exact break-even point between the potential financial benefits of long-term and short-term rentals varies significantly by neighborhood, but appears to average somewhere between 83 and 177 days per year Citywide, according to two contrasting studies by the Los Angeles Alliance for a New Economy (LAANE) and Airbnb respectively. The lower estimate suggested by LAANE considered the rents households were actually paying (contract rent as reported in the American Community Survey), while Airbnb’s estimate is based on current average asking rents. Both methodologies likely have relevance in different situations. c. Restrictions in RSO Units The proposed ordinance would not permit home-sharing in units subject to the Rent Stabilization Ordinance (RSO). This is primarily to ensure the protection of this critical rental housing stock. The Department has heard testimony from landlords who mentioned that one of the reasons they switched from long-term rentals to STRs is because STRs are not subject to many of the provisions of the RSO. For example, by switching to STRs, there are no limits on allowable rent increases, no long term commitments and the potential for significantly more revenue. The Department has heard testimony relating to evictions of tenants based on false pretenses. For example, tenants have been evicted based on a claim that a landlord’s family member was going to move in but later it was claimed the unit was converted to a STR. The restriction on RSO units is meant to preserve this critical stock of affordable housing and provide a clear line to aid enforcement and prevent any incentive for abuse in these buildings. The Department has heard from many landlords and property owners who are concerned about STR activity in their buildings. Subletting or renting a unit for STR is typically against the terms of a standard lease. Also, any allowance of STRs in RSO buildings may require additional CEQA analysis. The Housing Department reports that organizations representing both landlords and tenants agree in opposing short term rentals in RSO units, which would reduce the number of affordable units available for rent. Any changes to the current RSO restriction would need to be carefully evaluated to consider any potential negative impacts on existing RSO tenants, the potential for upward pressure on initial RSO rents, and the potential reduction in the number of RSO units available to full time residents. The Department continues to recommend a cautious approach to RSO units. This does not preclude the City from allowing RSO units to participate in Home-Sharing in the future, but the ordinance as currently drafted protects the units and their renters until the City can evaluate the effectiveness of enforcing the proposed Home-Sharing ordinance. 4. REGISTRATION AND ENFORCEMENT PROCESSES a. Best Practices for Registration and Fee Structures The goal of a registration structure is to have as many legitimate hosts register and receive registration numbers as possible. This is important for enforcement purposes so that efforts can be concentrated on the non-permitted commercial operators who will not have registration numbers. Therefore an important goal is to make it as easy as possible to register for home­ sharing. Processes requiring multiple stops or in-person visits to City offices are likely to be less utilized than online application systems. In cities that currently regulate STRs, hosts are typically required to register or obtain licenses or permits. To pay for the administrative costs associated with STR permits, most cities levy a fee for the service. However, up-front registration costs may be a barrier for many, particularly more casual hosts. PLUM Committee CFs 14-1635-S2, 14-1635-S3 Page 6 One option to pay for new administrative and enforcement costs is by applying a specialized fee. For example, the City of Denver charges an Occupational Privilege Tax when hosts receive more than $500 a month from STRs. Chicago charges a 4.5 percent Hotel Accommodations Tax along with a 4 percent Shared Housing Surcharge that is imposed on STR listings. In California, Proposition 218 and Proposition 26 highly regulate added taxes and fees and staff is taking those rules into account in preparing the Home Sharing ordinance. Generally, a fee or surcharge is permitted to be charged without voter approval if it applies only to a select group of property owners for the reasonable regulatory costs of issuing permits, performing investigations, inspections, administrative enforcement, etc. The proposed ordinance dedicates 10 percent of all TOT revenues generated from Home Sharing to administration and enforcement of the ordinance. This year, based on $40 million in TOT revenues (from Airbnb bookings alone), a 10 percent allocation to administration and enforcement amount would have been $4 million; however the City Administrative Officer (CAO) estimates a reduction of annual expected revenues closer to $25 million annually, representing a low-end estimate of $2.5 million for administration and enforcement. Either figure would be sufficient to cover the startup and year-one cost of the program. An alternative option to this set aside would be to impose a fee with reduced revenue generation, within the limits of Proposition 218 and 26. The percentage of TOT revenues dedicated to administration and enforcement could be adjusted as needed in the following years. Please see Table 3 below as well as the Potential Revenue Impacts section on pg. 11 for alternative options to fund these essential functions. Table 3. Registration Fee and Tax Structures in Selected Cities City Registration Fee Tax Primary Term Residence Requirement San 2 Years $250 14% TOT Yes Francisco Denver 1 Year $25 10.75% + Yes Occupational Privilege Tax Chicago 1 Year 0$ 4.5% Hotel No Accommodation Tax + 4% Shared Housing Surcharge________ Santa Monica N/A 0$ 14% TOT Yes (plus stays must be hosted) New Orleans 1 year $50-$500 TOT plus $1 a night Yes, except in surcharge nonresidential zones. Los Angeles 2 years TBD 14% TOT Yes (proposed) Effective enforcement of the primary residency requirement begins at the start of the process when a host applies for home sharing (discussed under “Definition and Verification of Primary Residence" above). A host that successfully completes the application process will receive a registration number. The registration number must be placed on all online and print advertisements (listings) for the STR property. If an individual lists their property in violation of the proposed regulations, the ordinance provides multiple ways to enforce. These enforcement strategies are summarized in Table 3, Enforcement Options: PLUM Committee CFs 14-1635-S2, 14-1635-S3 Page 7 Verification of a host’s primary residence is one of the reasons the ordinance requires a registration process. Registration also helps with tracking, verifying compliance with TOT payment, and overall enforcement. The City intends to utilize an easy-to-use online application process to verify the identity of the hosts and establish proof of their residency. The ordinance allows for application instructions and guidelines to be developed by the Department of City Planning for this purpose. Appropriate documentation may include a combination of: driver’s license, motor vehicle registration, car insurance, bank statements, voter registration/balloting materials, and/or tax documents. The Department is also in discussions with the Department of Water and Power (DWP) and LA County Assessor’s Office, to determine whether their information can be of assistance in verifying a host’s residency. b. Best Practices for Enforcement Many communities that have adopted STR regulations have found effective enforcement to be difficult. This is due in large part to the temporary and private nature of the use. Most cities have been unable to secure cooperation from hosting platforms to ensure they will not list illegal STRs. This has put the onus on cities to devote resources to regulate STRs. However, over the past few years, a combination of stricter regulations, court decisions and policy shifts by some hosting platforms has led to more cooperation and enhanced enforcement capabilities. Many cities are moving in the direction of imposing platform accountability for listing illegal postings, including Seattle, San Francisco, Portland, and Santa Monica. Some hosting platforms are complying with STR limitations in certain cities and/or have begun practicing self­ enforcement against users that are clearly commercial operators or places of other criminal activity. Most cities utilize their own staff to comb through online platforms, building a record of violations and sending warning letters out to property owners. New York City funds a 48-person multi­ agency Office of Special Enforcement dedicated to STRs that includes building inspectors, attorneys, police officers and administrative staff. San Francisco and Santa Monica have six and three STR staff respectively. In most cases, upon notification of the property owner and/or host, cities report that the STR activity is ceased and the listing is removed. In other cases, the listing is not removed and/or the owner is non-responsive. In those cases, the proposed ordinance follows the lead of cities like Santa Monica and San Francisco in requiring that hosting platforms remove the listings or face penalties. Penalties have been assessed by cities against both hosts and platforms. This framework appears fairly effective according to staff from both cities, which have both seen significant declines in commercial STR listings. However, the system is both labor- and time­ intensive for city staff to enforce. San Francisco recently settled a court case with Airbnb and HomeAway that upheld the San Francisco ordinance’s strict requirements on hosting platforms. Under the settlement agreement, both companies are required to build a system that prevents illegal listings from being posted. San Francisco has reported that the settlement immediately resulted in hundreds of illegal units being removed from various listing platforms. The new system has not been fully operationalized to evaluate its success. Similarly, in Chicago and New Orleans, Airbnb has worked with local governments to create a system whereby they pass through registration information and commit to remove listings that do not qualify. Both systems are new and it is too early to determine the results of these policies. Finally, a 2016 Council Motion (CD 14-1635-S3) directed the Department of City Planning to consider technology-based options for the implementation and enforcement of the proposed ordinance. Many cities are increasingly utilizing technology-based solutions to counter illicit STR PLUM Committee CFs 14-1635-S2, 14-1635-S3 Page 8 activity, given that much of this activity is conducted online. Possible areas where technology based options might be helpful include: Creation of an online/mobile registration portal; Creation of an online database to maintain information on legal and illegal listings; Weekly monitoring of dozens of hosting platform websites for illegal listings; Creation of an automated system which can issue notice of violation letters; and Creation of a 24/7 hotline that accepts complaints, including audio or visual documentation, along with a service that contacts the host within 15 minutes and may also notify law enforcement. In line with the motion, the Department is set to release a Request for Information (RFI) and looks forward to receiving information on the various technology options that may exist to aid in enforcement of the ordinance. The Department can report back on the details it receives through this process at a later date. Table 3 below outlines the two main types of enforcement strategies other cities have utilized and which remain as options for the City. The first is the existing code enforcement process, relying on the way code enforcement is typically done today. The alternative to this approach would rely more on proactive strategies of searching the internet for illegal listings (posted without a registration number, or beyond 180 days booking in a year). It could be complemented by an IT consultant as described above. Table 4. Enforcement Options Existing Proactive Option How Complaint-based Proactive internet searches for illegal Violations are listings (by staff or IT consultant) Spotted? First Step LADBS/HCIDLA staff investigates Screenshot of web posting is sent and schedules site visit (or along with a Notice of Violation letter alternatively could simply verify to the property owner. illegal web listing exists on that date) Second Step Order to Comply if violation is Second Notice of Violation letter is confirmed sent to owner and hosting platform Fines and Subject to the same penalties in New fines and penalties specific to Penalties the LAMC with regard to other home-sharing activity are included in types of code violations. the proposed ordinance and may be established by City Council $367 - doubling after 45 days $500 per night (or 2x nightly rate) for listing without registration number $2,000 for exceeding 180 days $1,000 per night for Hosting Platforms posting illegal listings, and refusing to provide their property addresses PLUM Committee CFs 14-1635-S2, 14-1635-S3 Page 9 A traditional enforcement model that relies upon complaints may not effectively prevent absentee hosts or vacation rentals, nor prevent units subject to the Rent Stabilization Ordinance (RSO) from being utilized or allow for enforcement of the 180-day cap. Enforcement staff are not traditionally pro-actively searching for violations and when they do receive a complaint, it may take a number of days to follow up due to workload demands. In addition, an inspector may not immediately have access to the premises to determine whether a STR has actually occurred or for how many days. To ensure effective enforcement of the ordinance, the Department recommends that sufficient resources be dedicated to proactive enforcement. The proposed ordinance accomplishes this by dedicating ten percent of tOt revenues generated by STR for the administration and enforcement of the ordinance. Based on research on best practices in other cities, it appears that it is far more efficient to include information technology (IT) solutions for STR enforcement, rather than solely relying on traditional complaint-based code enforcement. Given the complicated nature of creating an efficient registration system and locating and enforcing against illegal online listings, specialized expertise and capabilities are required. Technology solutions are available to automate the process of searching for non-compliant listings as well as other time-intensive enforcement activities. Platforms have not clearly indicated whether or how they plan to comply with the regulations of the Home Sharing Ordinance (HSO) to, for example, prevent, remove and cancel any illegal STR listings. Airbnb has demonstrated a willingness in other cities to use a pass-through registration system and prevent unapproved listings from being listed on the site. In addition, they have offered certain cities a "One Host One Home” policy, which limits hosts to entire home listings at just one address within the local jurisdiction (with some exceptions). But it remains unclear how platforms will respond to the exact provisions of the HSO. To better coordinate and direct City enforcement strategies, it is recommended that the City Council also direct the Department, HCIDLA, LADBS, Office of Finance and the City Attorney’s office to form an STR enforcement working group to develop the administrative procedures necessary to effectively and efficiently enforce the provisions of the ordinance. The working group would then report back to the City Council with ongoing recommendations. 5. POLICY OPTIONS a. Options for Secondary Residences Councilmembers requested that staff present policy options for secondary residences. Beyond the broader policy concerns with expanding beyond primary residences (discussed above), there are practical difficulties in determining what is a legitimate secondary residence vs. a third or fourth. If there is interest in removing the primary residency requirement to allow for secondary homes to be used as STRs, the Department recommends that it be through a parallel process apart from the proposed home sharing ordinance. As the impacts of secondary residence activity are likely to be higher, a discretionary process such as the current Conditional Use Permit (CUP) for Bed and Breakfasts is available to permit and regulate such activity. This may be addressed through a separate ordinance or may be folded into the current procedures. If the decision is made to include in the current procedures, the proposal will require additional analysis and development. It is important to note that expanding the proposed ordinance to allow secondary residences to participate in STR activity or to expand the pool of residential units permitted for use as STRs, may require additional environmental evaluation pursuant to the California Environmental Quality PLUM Committee CFs 14-1635-S2, 14-1635-S3 Page 10 Act (CEQA) to analyze the impact of permitting this type of STR activity in the City. The Initial Study and Negative Declaration dated July 22, 2016 prepared for the ordinance analyzed primary non-RSO residences as authorized for short term rentals. The addition of non-primary residences may require additional environmental review to assess the potential environmental impacts of such modifications. An analysis of the potential impacts to the zoning and building codes would also be necessary to ensure that allowing a transient use to become the primary use of structures is done in a way that is consistent with the City’s land use and building occupancy regulations. Policy options for non-primary residence STRs are as follows: 1. Allow non-primary residence STRs without restriction. 2. Allow for a Conditional Use Permit (CUP) for all types of vacation rentals; however, place a limit of one vacation rental per host/property owner. 3. Bifurcate the entitlement process based on type of vacation rentals. o Create an enhanced Home-Sharing registration process for select types of properties including owner-occupied duplexes, Accessory Dwelling Units (ADUs) and secondary homes that are lived in during the year. o Require a CUP for corporate rentals and other types of vacation rentals. b. Use Transient Occupancy Tax (TOT) Revenue to Supplement the Affordable Housing Linkage Fee’s Affordable Housing Impact Trust Fund The proposed ordinance amends Chapter 122 of the Administrative Code to allocate ninety percent of Transient Occupancy Tax (TOT) revenues attributable to home-sharing to the Affordable Housing Trust Fund and ten percent for administration and enforcement. This allocation could contribute an estimated $18 to $35 million dollars for affordable housing each year. This funding would supplement any fees raised for affordable housing through the proposed Affordable Housing Linkage Fee. The FY 16-17 budget did not allocate any STR revenues towards the Affordable Housing Trust Fund, as all revenues (approximately $40 million) were directed towards the General Fund. Any reallocation of these revenues for future years must be carefully analyzed for any fiscal impacts. c. Option to Limit Number of Hosts per Neighborhood Given the concentration of STR activity in certain neighborhoods, implementing a limit on the number of allowable STR hosts by neighborhood is one option the Department considered early in the ordinance development process. A few other cities have adopted STR policies which incorporate geographic variability, including Austin, New Orleans and Louisville. After consideration, staff did not recommend the inclusion of geographic variability based on implementation challenges and the benefits of a single system to improve user compliance. To introduce a limit on the number of STR hosts by neighborhood, several issues will need to be addressed, including the selection of appropriate neighborhood boundaries, how to determine the methodology for assigning each neighborhood’s quota and a priority registration system for areas where demand will outpace supply. In other cities that currently regulate STR activity, the most common regulatory approaches are to implement a limit on the number of days or to include a primary residency requirement. This approach has many of the same effects as a neighborhood-based host quota, and may diffuse STR activity from over-concentrated areas. 6. POTENTIAL REVENUE IMPACTS