Request of Councilmembers Torosis and Parra and Mayor Pro Tem Negrete to proactively address vacation homes and fractional ownership in Santa Monica During the pandemic, rising demand for second homes and an inventory shortage helped push prices to record highs. According to the Federal Reserve Bank of St. Louis, median home prices increased nationwide by almost $60,000 in the past year.
As a result, local workforce oftentimes finds themselves priced out of many desirable markets, including locally in Santa Monica. As home prices continue to rise, so too do corporate owners. California is the state with the fourth highest percentage of singlefamily homes purchased by investors (29%) behind Georgia, Arizona, and Nevada, according to data from CoreLogic.
Moreover, the state has seen the rise of the concept of fractional ownership – when multiple people own a portion of a vacation home and split the allowed time at the property through a formal arrangement. In the fractional model, the allotted time for each owner is based on their percentage of ownership, similar to a timeshare. This model was accelerated by the pandemic when families were seeking the space and refuge of a getaway. However, fractional ownership has been viewed by many as another practice to convert neighborhood homes into quick vacation destinations for those who can afford to cycle in and out of the community. Tourist destinations across the state are working to regulate this new type of ownership to ensure that homes remain in the local community. Carmel, Sonoma, and St. Helena are moving to limit or outright ban fractional ownership operations. In Beverly Hills, planning commissioners in March expressed support for an ordinance that would prohibit fractional ownership in the city.1 The City of Santa Monica has long expressed its desire to maintain the character and integrity of its residential neighborhoods while supporting the tourism and hospitality industry. As such, the City currently regulates short-term rentals and has advanced other policies to limit corporate rentals and the commercialization of singlefamily homes. 1 https://www.latimes.com/california/story/2023-03-29/newport-beach-battles-a-new-breed-of-luxury-partyhouses We, therefore, direct the City Manager and City Attorney to evaluate and develop recommendations for Council action to regulate fractional ownership of single-family homes and residential condominiums. These recommendations should also include a review of best practices from similarly situated jurisdictions.