The West Hollywood City Council, by a 3-2 vote on Feb. 20, approved a first reading of an ordinance that would regulate usage of short-term rental websites such as Airbnb among residents who own houses or condos.

The ordinance, which would establish an 18-month pilot program, is pending a second reading. It would exclude renters from city-approved home-sharing, but a provision that allows hosts one violation of the home-sharing law without being evicted would still apply to renters.

Owners of condos and houses would be able to legally home-share with the written approval of their homeowners association. Terms of the ordinance include limiting the number of guests at a property to two more than twice the number of bedrooms listed on city or county records, and requiring that hosts reside in their properties during their guests’ stay.

The ordinance would ban home-sharing from properties where tenants have been vacated over the previous seven years through the Ellis Act, a state law designed in the 1980s to allow landlords a way to leave the rental business by evicting their tenants. Landlords and tenants throughout the county have accused landlords and developers of exploiting the law to displace renters and replace affordable housing with luxury condos.

Several residents who spoke during public comment said the original draft of the ordinance, which allowed tenants in rent-stabilized units to host short-term rentals, gave landlords too much of a loophole to potentially remove those tenants and keep those units off the market. West Hollywood Mayor John Heilman added that a landlord could use a “faux tenant” to occupy a rent-stabilized unit.

“We run the risk of rent-stabilized units just being taken off the market and converted in this while they’re still on the rolls as apartments, but they don’t really have a tenant in there,” Heilman said. “There will be collusion between the landlord and the tenant, and it will just turn into an Airbnb unit.”

Councilmen John Duran and John D’Amico voted against the ordinance, indicating that the regulations didn’t go far enough.

“There’s an entire underground economy that’s existing in the shadows that we’re not regulating at all,” Duran said.

D’Amico mentioned the income the city has missed out on in the form of transient occupancy tax, typically levied to hotels, from short-term rentals.

“I know that it’s going on,” he said. “And the city is getting all of the public safety problems, all of the residential problems, all of the bad rap of not taking care of our tenants, and none of the income of a [transient occupancy tax]. … We’re pretending and we’re proclaiming at the same time, but it sounds to me like we’re yelling at the ocean and running from the waves at our feet. This is happening and we’re getting none of the benefit.”

Other provisions of the proposed ordinance include the elimination of a previously discussed 90-day annual limit on the number of days hosts can rent their apartments. City staff reported last year that the cap’s effect would be negligible and difficult to enforce.

The proposed law would be a reversal from two years ago, when the City Council voted 3-2 to prohibit rentals of units, or portions of units, for 31 days or less. Councilwoman Lindsey Horvath said previously that the city’s improved relationship with Airbnb has helped enable it to pursue regulations allowing home-sharing. Council members also mentioned the struggles the city has had enforcing the ban.

Also at stake for the city, depending in part on further discussion with Airbnb, is the amount of transient occupancy tax it stands to collect from short-term rentals. Council and city staff said the amount could be in the tens of thousands, if tax were only collected from the units that were regulated under the ordinance. Or it could reach up to $2 million, according to an estimate they cited by Airbnb, based on collecting from additional and currently illegal short-term rentals. Based on the original version of the ordinance that included renters, city staff said it expects to generate approximately $20,000 in business license application fees and $35,000 in transient occupancy tax this fiscal year.

“Creating a business license program to administer hosted home sharing allows residents to participate in the shared economy while protecting the community-at-large from the impacts that unhosted home sharing and vacation rentals can create,” according to a city staff report.