The Time to Permit Your “Intermediate Length Occupancy” Unit is Now

With relatively little fanfare, two years ago the Board of Supervisors adopted strict new rules to regulate ‘Intermediate Length Occupancy’ (ILO) units. An ILO unit is defined as a dwelling unit that is rented for more than 30 days but less than one year. Tapping into fears that the City’s housing was being bought up by corporations and turned into “tech dorms,” the rules put a hard cap of 1,000 ILO units City-wide. At the time, the City estimated that more than 3,000 ILO units were operating in the City. The legislation did not exempt existing ILO units from the new rules, meaning that 2,000 existing ILO units would no longer be able to legally operate once the rules went into effect.

The legislation did include a 24-month compliance period, where owners of existing ILO units could apply to authorize their ILO units. That compliance period ended June 22nd. By late April, the Planning Department had received a grand total of 11 ILO applications and permitted 37 ILO units, even though over 3,000 units were still being advertised on rental platforms like AirBnB.

Last month many of the rental platforms emailed property owners to tell them that the “deadline” to apply was June 22. To be clear, owners of existing ILO units can still (and should) apply to permit their ILO units. However, applications are also now open to new units that were constructed after June 2020. Permits are issued on a first-come, first-served basis until the cap is reached. If your unit is eligible and operating as an ILO, the time to apply is now.

The eligibility controls are strict. A unit is not eligible for a permit if the unit is 1) located within a mixed-use zoning district; 2) in a building with 3 or fewer units; 3) restricted as affordable; 4) subject to rent control; or 5) in a building with an active Notice of Violation.

For buildings between 4-9 units, ILO permits can be issued through the typical building permit process. For buildings with 10 or more units, only 20% of the units may be used as ILO units and must be authorized through the Conditional Use Authorization process that requires a public hearing at the Planning Commission.

How the City intends to enforce the new restrictions is unclear. The program is not being run by the Office of Short-Term Rentals, and there are no automatic penalties in the ILO legislation. The Planning Department has indicated it has no plans to “actively” enforce the restrictions, but will respond to complaints. Complaints by your neighbor will likely result in a notice telling you to stop renting your unit on an intermediate-length basis.

However, the legislation also made changes to the Administrative Code’s Residential Rent Stabilization and Arbitration Ordinance. The amendments make clear that any “fixed term” rental agreement, or any other agreement that purports to create a “non-tenant” relationship, is void. Illegally operating an ILO could result in an enforcement action for violations of the City’s rental unit disclosure requirements, which do carry monetary penalties, and create a landlord-tenant relationship that limits your ability to evict someone without just cause.

If you have questions about the ILO rules or need assistance permitting your ILO unit, please contact us to request a consultation.