The letter urges the city council to reject a staff recommendation that would make short term rentals a criminal offense. It argues that short term rentals provide economic benefits to the city and that only a small minority of rentals cause problems. The letter recommends developing a more balanced policy such as requiring permits and registration, limiting the number of nights a property can be rented, avoiding criminal penalties, and further studying the impacts before enacting regulations. The letter asks the council to take a progressive approach and not follow the examples of other cities that have imposed stricter regulations.

1. 30 April 2016
Dear City Council, Mayor and City Manager,
BACKGROUND
The planning commission in a meeting on 19 April approved a staff recommendation to amend policy and make
criminal short term rentals (STR’s). I understand this is to be reviewed by council on the 10 May Agenda. I ask you
to overwhelming reject this overreaching policy position.
I was unaware these proceedings were taking place this year, I would have participated. In short, the policy that
staff and the commission recommend is amending the text of municipal code that makes it a misdemeanor to list
your home on internet sites, lease your home, or lease a home. As a misdemeanor, it is subject to 6 months in
county jail and a $1000 fine. As indicated by staff, this is because the current $100 fine does not have enough teeth
to stop the practice as an administrative penalty.
DEVELOP WISE POLICY BASED UPON FACTS
I’m not sure why all the sudden we have a huge problem on our hands that needs immediate remediation. What
and why is that? I would imagine there are a small percentage of platform renters that have parties that cause
issues to some residents and I appreciate their concern. I also imagine 99% spend their money in our restaurants,
stores, enjoy our community and go unnoticed. The former atmosphere is what I experience nearly every weekend
in Hermosa living near downtown for the last 16 years  and has nothing to do with STR’s.
My father god bless his soul, lived his life and reminded me that everything is a matter of balance. A CEO I once
reported too told me everything is a matter of timing  So between balance and timing I’ve learned some sage
advice. This municipal code amendment has neither. What problem are we trying to solve? How are we being fair
about it? What is the imperative to act now with this policy to be turned into law?
THE FUTURE AND SHARING ECONOMY REGULATION
We have a sharing economy in many industries that PWC states in 2014 that 19% of all US residents have
participated in, which has only grown substantially in 2 years. On our horizon are self-driving cars, Amazon flying
drones for rooftop same day packages, the Internet of Things ( IoT) may connect us all in ways we can’t even
fathom. Our lives will change drastically in the next 10 years. Technology, culture change, and new models allow
complete job categories to be dynamically located anywhere in the world. Indeed, the way we own property may
even change in our lifetime. The one thing our city should not do is impede progress, apply old ways of regulating
to new models, and making our long term residents criminals. As my Dad would say, we need to have balance and
my old boss would wonder about your timing.
The sharing economy at its heart is based on trust, reputational capital, achieving optimal resource utilization, and
building emotional connection. Gilles Duranton, a Wharton real-estate professor, said it is probably too late to stop
the sharing economy with regulation. That the genie is not going back in the bottle and the sharing economy is
only going up. Ethan Mollick, a management professor at Wharton states that what’s ahead is a period of
compromise and bargaining between government and sharing services. The meteoric rise of these companies, he
said, has forced the political sector to examine which regulations “really matter,” and to live with a new market
reality. Benjamin Edelman of Harvard Business School insists that wise policy decisions should ensure that the
activities of software platforms are not prohibited or made unnecessarily difficult by government restrictions. That
such impediments would block the economic efficiencies. Additionally, The National League of Cities Center for
City Solutions and Applied Research conclude that “Overall, cities that have successfully created regulations
around TNCs and homesharing have made a conscious choice to integrate these popular,increasingly trusted
services”.

2. COLLABORATIVE CONSUMPTION, SHARING PLATFORMS, AND POLICY
Maybe we should evaluate some action, but it is not staffs or the planning commission’s recommendation. I’m a 59
year old, long standing member of the community, have two young children and contribute to HBEF and my wife
volunteers significantly to the school district. I rented my house out once during vacation, did not even know it was
illegal. It was to a couple with a Harvard and Stanford MBA with children. Professionals at a large silicon valley
company that Hermosa wants visiting their community. I engaged with them and I trust them. Is the answer to
make us all criminals with misdeameanors facing jail time ? I know your answer is No.
So let’s have sensible policy. The short term rental sharing economy has some prevalent characteristics:
Reputational Capital. There is a vested interest in both tenants and owners on accommodation sharing platforms
to make it work. I personally due quite of due diligence on and off the platform to ensure I have people of high
character and caliber renting my property in the off occasion I have. I have refused many. In the process, I befriend
them. I surveyed the one stay I had after the fact with my neighbors and note such in any review. I would continue
to do so.
It’s Not a Business for Most. This is my primary family home. I’m not in the business of STR’s such as hotels. The
property is very different than what can be found in a hotel so it does not even come close to competing with their
business. What is desired by those seeking such a place is a local experience with amenities no hotel can offer.
Plus it is ONLY available when my family is on vacation like once a year and as my family home you bet I’m VERY
selective. It has nothing to do with affordable housing as claimed by some and it’s not a hotel. My neighborhood
has a historic home that has been owned by the same family for ages with a large extension of family and friends. I
meet new people there many weekends. Yes they have a good time and they all chip in on expenses. I actually
enjoy meeting and get to know them as do my kids who play with theirs. As well, the people I would ENTRUST with
my primary home would be people you’d want to have here and befriend.
Benefits the City and Community. These people come from all over the world and spend money at restaurants and
shops and pay taxes on those purchases. This benefits our local economy. If my family is planning a STR, we are
spending our money elsewhere on vacation. The city services consumed in their STR stay are negligible unless you
talk about the sub 1% of people who cause a problem. Do not dissuade them, encourage them, befriend them. You
get to meet different people from different countries, it is a glorious thing to be celebrated. It enriches us all. Is
Hermosa truly the beautiful city, then get to know the people and let’s have policy that is accommodating.
RECOMMENDATION
I would imagine there a minority of residents that have experienced issues and I have empathy for them. So let’s
figure that out and deal with that problem. In so doing, please reject this proposal outright and go back to the
drawing board.
I would recommend some of the following:
1) Permit. Turn the fine no one knows about, into a permit fee and registration fee. Each time a property is
rented, have a registration of that event and a contact number. Study the impacts by having information.
Find the owners who are repeatedly making this a business and not caring about their neighborhood. Deal
with the problem. Study the impact of STR density in neighborhoods. Institute a potential escalating
penalties for those properties that incur ongoing, verifiable complaints.
2) Potentials Limits. Instead of a complete restriction with criminal impact, consider a potential limit on the
number of nights that can be rented based upon STR density and property issues. A limit initiative itself
was defeated handily in San Francisco in proposition F. Proposition F called for a limit of 75 nights. I
personally would never consider more than 15 nights due to Internal Revenue Code sections and the
taxation impact on my primary residential home. Evaluate what makes sense. I understand the difference,
but it seems preposterous that the federal government and the Internal Revenue Code in certain
situations do not even need require the inclusion of STR income as taxable income. However, Hermosa
Beach wants to make primary residence owners criminals?

3. 3) Do Not Criminalize. Totally resist backward regulation. I honestly feel what is proposed is almost Anti-
American and infringes my rights, but at minimum it’s just certainly just bad economic policy as experts
have stated. The policy to criminalize internet activity, is this Hermosa Beach or China?
4) TOT. Even if allowed by law and statute, resist charging the TOT unless it looks like a business. TOT is a tax
that benefits cities directly because they aren’t shared, so it’s oh so tempting to grab it as other cities
have in wrestling with this same issue. I would suggest that after analysis and reasonable limitations, it
would be next to nothing and the benefits far outweigh that tax imposition.
5) Study. This is an issue that needs far more evaluation and collaboration that should involve more notice as
discussed above.
Let’s be a progressive forward thinking city that understands emerging trends, new business models and does not
impose old broken ways and regulatory policies that are unfair and impede economic activity. Manhattan Beach
and other cities that instituted draconian acts should not be your guidepost to responsible policy, they are far from
it. Let’s show the rest of California and Nation how it’s truly done with balance and fairness by seeking to measure
and understand before acting. Take the time to act responsibly. Reject the planning commission and staff proposal
with guidance to re-evaluate and draw up a balanced policy that aligns with the above.
Thank you for the consideration
Bob Dunn