LA law set to prevent new “granny flats” as short-term rentals

Los Angeles’s law policing short-term rentals goes into effect Friday, and one crucial component is being overlooked: A ban on using newly constructed accessory dwelling units as short-term rentals.

Construction of accessory dwelling units – a.k.a. ADU’s, a.k.a. granny flats, or in-law flats – has exploded the last few years. At least some of these are posted on Airbnb and other short-term rental platforms, though no one yet has a count.

Depending on one’s perspective, the ban could be a needless blow to single-family homeowners and future development, or a necessary measure that could be difficult to enforce.

From ADU to Airbnb

ADUs – which are backyard dwellings or converted garages built adjacent to single-family units – started playing a bigger role in L.A.’s housing stock in 2017. That was when the city conformed to a California law easing ADU construction restrictions, including almost doubling the cap on ADU space to 1,200 square feet.

The effect was immediate. In 2016, the city of L.A. saw 299 permits for ADU construction, according to the Terner Center for Housing Innovation at UC Berkeley. The number of permits skyrocketed to 3,818 in the first three quarters of 2017, per Terner, and there have been about 13,000 additional permit requests over the last two years.

“L.A. is ground central for ADUs, because you have a lot of single-family homes with big lots,” said James Elmendorf, policy director at Los Angeles Alliance for a New Economy, a nonprofit that advocated for the short-term rental ordinance.

And new state laws could further the ADU building boom. Gov. Gavin Newsom signed five bills earlier this month that cut local government red tape on ADUs, including reducing the number of permits and fees.

At the same time as the ADU building boom, the City Council debated its ordinance to regulate Airbnb, HomeAway and other short-stay rental companies.

The original short-term rental ordinance drafted in 2015 said nothing about ADUs. But in September 2018, the City Planning Commission amended the law to state, “ADUs built on or after Jan. 1, 2017” – in other words when the state ADU law went into effect – “may only be used for home sharing if the ADU is the host’s primary residence.”

The city said the move enhances the role of ADUs in affordable housing stock.

“By design, ADU’s in Los Angeles have served as an attractive alternative for households who cannot otherwise afford to buy or rent in many of our single-family neighborhoods,” said Yeghig Keshishian, a spokesperson for the City Planning Commission.

“The ordinance does not allow home-sharing in ADUs, because the city wanted to protect these long-term units – ensuring that they are not taken off the market and replaced as backyard hotels,” Keshishian added.

For granny, or a backyard money-making machine?

The city, though, said it does not have a number on how many ADU’s are actually being used for short-term stays. City officials said they are still tabulating information that has come into a portal meant to register short-term stay hosts.

Real estate agents who have tracked the ADU construction boom are skeptical that people are building makeshift backyard hotels.

“The new short-term rental ordinance will play a role in certain homeowners’ decision on building an ADU, but I do not think it will be substantial,” said David Lukan, an agent at Compass. “From my research, most of the ADUs are being built for personal use or for relatives.”

There are approximately 30,000 housing units in the city used for short-term stays, with about 75 percent listed on Airbnb, said Chani Krich, of Homeshare Alliance Los Angeles, an advocacy group for short-term rental hosts that claims to be independent of short-term rental platform companies.

Krich hypothesized that a small number of these 30,000 units are ADUs. “Most people using ADUs are using it for their family,” she said.

Still, Krich said her group is opposed to the ADU provision, saying it was introduced too late in the legislative process, and constitutes a needless swipe against homeowners struggling to pay their mortgage.

On the opposite side of the debate, Elmendorf said the measure could be tough to enforce. The provision allows a short-term rental if the ADU’s primary dweller is renting out. But it could be ambiguous if the host actually lives in the ADU or, instead, lives in the property’s main single-family unit.

Like the city, Elmendorf views ADUs as a component of L.A.’s limited affordable housing stock, and said it would be “terrible” if homeowners manipulated the units for something else.

Airbnb, which is planning to go public in 2020, has sat out the ADU debate, declining to comment specifically on the provision. Company spokesperson Mattie Zazueta said that Airbnb is “excited to see Los Angeles join the ranks of cities that recognize the benefits of home sharing and will continue to work with city staff to ensure we are in compliance by November 1st.”