Business & Economy

Apartment conversions to Airbnb 'hotels' driving up LA rents, critics say

A quick search on Airbnb shows a woman named Martha has 14 listings at The Ellison — each one going for $200 a night.
A quick search on Airbnb shows a woman named Martha has 14 listings at The Ellison — each one going for $200 a night.

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On its website, the The Ellison Suites in Venice boasts its celebrity pedigree: Doors frontman Jim Morrison lived there, and it was originally owned by Laurel and Hardy.

Built in 1913, it was converted to apartments in the 1950s, which means it's subject to rent stabilization laws capping rent increases to 3 percent a year, among other rules protecting tenants.

But the house-sharing website Airbnb shows a woman named Martha has 14 listings at The Ellison — each one going for $200 a night. That’s $6,000 a month. By comparison, a small one-bedroom unit at the nearby Waldorf building rents for $1,500 a month.

Tenant advocates argue that financial incentives such as those are causing landlords and management companies to switch rental units wholesale to short-term housing faster than the city can keep up — and, in some cases, in violation of municipal law.

Last month, the city of Los Angeles ordered the Ellison to stop renting short-term.

A fledgling tenant-rights group, Keep Neighborhoods First, has been tracking the proliferation of short-term rentals.

It wants the city to regulate the house-sharing economy, including limiting the amount of listings per host.

On its website, it provides evidence of real estate brokers who are using the profitability of converting properties into short-term rentals as a selling point. The Eastsider reported this month that a property in Echo Park is being promoted as an “Airbnb cash cow.”

There’s no denying short-term rentals are meeting a need. Last year, 43.4 million tourists visited L.A. — setting a record for the fourth year in a row. KPCC has reported that hotels are booked, and officials are warning of a shortage.

The question is whether all this Airbnb-ing is making these popular areas less affordable for people who live there year-round.

In Venice, as many as 12.5 percent of all housing units have become Airbnb units, according to the pro-labor group LAANE.

The group sought to find out whether the house-sharing service was having an effect on income for Los Angeles residents but wound up digging into its effect on rents.

Its report, published last week, said most of Airbnb’s revenue in L.A. is generated from conversions from residential units.

It claims seven years' worth of new housing stock has been changed to tourism stock.

L.A. City council member Mike Bonin, who represents the 11th district (including Venice), said he thinks all of this is making it more expensive to live there. He said it's a no-brainer: Reducing inventory leads to higher prices. 

"Really, over the past year, we've heard more and more from neighbors who've been saying a whole apartment building next door to me has been bought— everybody is being kicked out, and it's becoming a de facto hotel," said Bonin.

But Airbnb challenges that. It said eight in 10 hosts are listing the places where they live. 

"The Airbnb units are probably less than a percent of all the housing around metropolitan Los Angeles," said Tom Davidoff, an economist commissioned by the company.

He said, at most, he has calculated that Airbnb increased monthly rents by a total of $6 in the past five years. 

In order to convert an apartment to a hotel, the Housing and Community Investment Department says, "The conversion of a residential rental property would require a change in use permit application and approval by the Building & Safety and Planning Departments."

Zoning rules are complicated, but under L.A. municipal code, short-term rentals are illegal in residential neighborhoods. Hosts are required to pay a tax on the nightly rate.  

The city is in negotiations with Airbnb on enforcing that tax, and more regulations are in the works, said Bonin.

Carlos Camara has lived in the historic five-story, beachfront Venice Beach Waldorf for a decade. 

"The location is incredible," he said. "I love living in Venice — and I love the Venice community and the Venice neighborhood.

But recently, the landlord has converted a third of the building's 30 rent-controlled units to short-term rentals.

Camara said these conversions are damaging his neighborhood.

"As a consequence, there has been break-ins, petty thefts … and generally a sense of insecurity coming from the fact that you don’t know who’s staying there," he said. "They don't care if there's trash on the street. They’re there on vacation. And they’re usually there to party — especially in a place like Venice."  

The management company that runs the building said — and the city confirmed — that the Waldorf has the proper permissions to legally host short-term rentals. The manager said it's renting these rooms for a minimum of 30 days at a time. 

Bonin said he's trying to come up with some solutions.

"What I anticipate we'll do is stakeholders from all sides — including local residents including housing advocates and folks from the short-term rental industry — will come up with a set of rules and guidelines of where short-term rentals will exist, create a revenue stream, and make sure it's not displacing rental and affordable housing on any sort of large scale or permanent basis," he said.