Landlords sue Santa Monica over “arbitrary” ban on short-term rentals

A slew of apartment landlords are suing the City of Santa Monica, claiming a law that bans short-term rentals is “arbitrary, capricious, and lacking in evidentiary support.”

The property owners behind 32 limited liability companies filed the lawsuit, which seeks to toss a measure the Santa Monica City Council passed in September. Those firms include Scott Walter’s WS Communities — which is building 850 rental units in the city —  and Neil Shekhter’s NMS Properties.

Under the law, the seaside town of 91,000 people now requires that residential leases last a minimum of one year. Also, landlords cannot rent out furnished apartments.

Filed on Monday in Los Angeles County Superior Court, the lawsuit paints a picture of once-powerful property owners who now feel blindsided by local government, and are trying different ways to fight back.

The complaint details the two-year process by the city’s planning department to study a new rent-term measure, partly in response to concerns about the rise of Airbnb and other short-term rentals, many of them unregistered.

Santa Monica officials initially decided against a mandatory long-term lease requirement, according to the lawsuit. But the suit claims the city eventually “bowed to political pressure,” from UNITE HERE, the powerful union that represents hotel workers. The lawsuit says the city then “openly pushed an agenda that solely benefited the hospitality industry.”

How does bowing to political pressure equate with an unlawful statute?

For one, it alleges Santa Monica is violating the California Coastal Act, which puts restrictions on city laws that govern land within 1,000 yards of the Pacific Ocean. The short-term rental law, according to the lawsuit, also violates the U.S. Constitution’s equal protection clause because it disproportionately affects tenants hurt by Covid who may be looking for temporary residence near hospitals.

The measure also goes against the property rights of landlords, the lawsuit argues. Because of the pandemic, landlords say they are still collecting far less in rent from tenants in downtown Santa Monica, some up to 25 percent less.

A statement from the city said it has a “successful record adopting balanced housing policies that protect limited housing for long-term residents.” The recent law, the statement continued, is “legally valid,” but officials are “reviewing the challenges raised in the complaint that was recently filed.”