Rent AIRBNB, Go To Jail: Subletting Five Apartments Gets Man Misdemeanor Conviction

Scott Shatford is not a property owner. He would rent several, perhaps as many as 5 apartments, by filling out forms with his own credit information. He would then use his own website and AIRBNB to rent out the apartments as vacation rentals.

In a pre-arranged plea agreement, the Santa Monica City Attorney apparently got Shatford to plead guilty to violation of the City's new anti-vacation statute. It's the first conviction under the statute.

Apartments in Santa Monica that might fetch 3500 a month as ordinary rentals, are worth three or four times that on a daily or weekly basis. This is because the demand for hotel rooms locally is higher than the supply. All of Santa Monica is within 2 miles of the beach and close to other attractions.

Denise Smith works as an Administrative Analyst for the City of Santa Monica. She is one of 3 people hired to enforce the anti-short term rental law. The other two are code enforcement officers, she says.

I asked her why have this law at all. "The City Council really wanted us to make sure that the housing stock was not impacted by that type of activity, in this case we had a gentleman who had more than one short term rental. Shatford's is the type of post we want to impact. We have a lot of people doing it on one unit, and they're violating the law too, but they're not our top priority. If they're doing multiple rental units, they're a priority.

Smith says that her unit has about 200 open cases right now. "Not all of those people are what we call "corporate hosts,' people who buy or rent out more than one Santa Monica unit just for the purpose of renting it it as short term rentals."

Smith says that Shatford "claimed in a newspaper article to offer five units as short term rentals. We were only able to confirm two. He had 4 units on his website, scottshatford.com, on that website, he actually advertises his own units, and also provides advice" to others seeking to AIRBNB their units."

Under Santa Monica's statute, Smith says, it does not matter if you rent the unit or own it. If you're renting it out for less than 30 days while you are not there, you're violating the law. "Los Angeles is currently considering a similar ordinance, there's is a little different than ours, I believe they're going to allow it for 90 days a year," says Smith.

City Attorney Yibin Shen told me that "We're not entirely sure how many apartments Shatford was renting. He used both AIRBNB and his own website" to rent out the units for $200-$900 a night.

The City attorney charged Shatford with operating his illegal vacation rental business without City Permits, and refusing to comply with City Administrative Citations, Shen said.

It seems to me the guy got off rather easily, I told Shen. "He paid $3500 in fines, which is about ten nights in one of his apartments." Shen reiterated that the City is not entirely sure how many months Shatford's business went on, nor how many apartments were involved, nor how much they rented for.

"I don't mind people making a profit," I said. "But on the other hand, the homeless shelters are filled with long time residents who can no longer afford an apartment anywhere West of downtown. I have several friends who are longtime Westside residents who are now homeless, as a result of high apartment rental prices."

Shen said that Shatford paid the maximum allowed under the City's anti Vacation Rental statute, SMMC 6.04.020, and also that "our main concern going forward, is that he not do this any more, and that the rental units be returned to the housing market as normal apartment rentals."

"Prior to referring the case to the City Attorney's Office, Officers from the Task Force attempted to work with and educate Mr. Shatford for many months, issuing multiple warnings and citations with fines." meaning they tried to get the dude to back down, but Shatford said, "are you kidding? People will pay serious money to stay in my places for 2 days!!"

"However, these efforts were unavailing. Instead of coming into compliance, Mr. Shatford continued to operate his illegal vacation rentals within various residential dwelling units within the City and he boasted publicly that he was "not concerned" about local law because it would be "difficult" for the City to enforce the law. As a result, the City Attorney's Office commenced prosecution." This from the City Attorney's press release. My translation of this is that he kept explaining he was banking coin, so the City attorney got medieval on Shatford. (I actually asked the City attorney if this was true, but no response; I'm sure they're all on ten weeks of paid vacation in Bali).

The City is not alone in its concern. Democratic senator Elizabeth Warren is the latest to lash out at the short-term rental start-up, as she joined a group of senators who called on the Federal Trade Commission to investigate the effect on housing costs from companies such as Airbnb.

The rest of this is directly from the City press release:

This is the first conviction resulting from investigative work undertaken by the City's newly established Vacation Rental Enforcement Task Force (the "Task Force"), a unit of the City's Code Enforcement Division trained to target illegal vacation rental businesses operating in Santa Monica.

On July 5, 2016, Mr. Shatford pleaded "no contest" to the misdemeanor charge of operating his illegal vacation rental business in the City of Santa Monica. Under a plea agreement with the City Attorney's Office, Mr. Shatford was placed on 24 months of probation and ordered to:

1. Cease operation of all vacation rental business activities within the City of Santa Monica.

2. Pay approximately $3,500 in fines and investigative costs to the City.

3. Pay hundreds more in criminal fines, and victim restitution.

4. Comply with all other applicable laws and permit conditions.

"This is a positive and fair result" said Salvador Valles, Assistant Director of Planning and Community Development, who has responsibility over Code Enforcement and the Task Force. "Last year, when the Council adopted Santa Monica Municipal Code Chapter 6.20, which reaffirmed the City's longstanding prohibition against vacation rentals in Santa Monica, it clearly reiterated its deep interest in and concerns about protecting Santa Monica's diverse permanent rental housing stock.

Our law provides for true home-sharing of a person's home, however, the proliferation of vacation rentals, operated within residential dwellings like a hotel, do substantial harm to this housing diversity, often displaces long term rent-controlled tenants, and changes the character of our neighborhoods. I am pleased that the Task Force, led by Code Enforcement Manager Sharon Guidry, in cooperation with our partners at the City Attorney's Office, successfully prosecuted this case. Of course, even with this and other enforcement successes, there is much more work to be done."