The solution was to allow using .htaccess in /etc/apache/apache2.conf by changing from AllowOverride None to AllowOverride All.
More about it here
So that section related to my local website now looks like:
<Directory /var/www/local.webiste.com/public_html>
Options Indexes FollowSymLinks
AllowOverride All
Require all granted
Allow from 127.0.0.1
</Directory>
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