Yesterday, the Buzz reported on the details of Planning Department’s Staff Report and latest draft of the proposed new Short-Term Rentals (a.k.a. Home Sharing) Ordinance, which is intended to help regulate AirBnB-style rentals throughout the city. As we mentioned in that story, however, this is an extremely passionate issue for many different stakeholder groups, because it goes right to the core of sensitive issues like housing, property owners’ rights, freedom of commerce and more.
It’s also an extremely complex and multi-sided issue, without simple “pro” and “con” positions. In fact, there are many distinct stakeholder groups, and many of them heartily support various provisions of the proposed ordinance, while vehemently opposing others. Over the next few days, we’ll take a closer look at several of those stakeholder groups, and what they seem to support and oppose in the proposed home-sharing/short-term rental ordinance. Today we look at the city’s position, and why city officials are moved to act, and act quickly, on short term rentals at this point in time.
The City of Los Angeles
The Los Angeles City Council, in response to increasing outcries from the various stakeholder groups affected by home-sharing and short-term rentals, passed a motion in December, 2014, to direct the Department of City Planning to draft what the recent Planning Department report calls a “regulatory framework to legalize and regulate the short-term rental (for less than 30 days at a time) of one’s own home.”
To the occasional surprise of many short-term rental hosts and customers, and even though there’s a long historic tradition of homeowners renting out spare rooms (though mostly for longer stays) – no such rentals are currently allowed in residential neighborhoods.
But that hasn’t stopped short-term rental activity from skyrocketing since the advent of online platforms such as AirBnB and VRBO, which easily connect hosts and renters, provide other kinds of services (such as pricing help) to hosts, and which provide at least some amount of review and vetting of both hosts and renters. In fact, according to a recent report released by AirBnB, there were about 12,270 active AirBnB hosts in Los Angeles, and about 560,000 total guests stayed with AirBnB hosts in Los Angeles in 2015…and that’s just one of the popular platforms. So it was clear that some sort of city management was necessary, and the city had three major goals for a control ordinance.
First, as travelers bypass traditional commercial hotels for home stays, the city loses out on the opportunity to collect hefty hotel taxes (specifically, the Transient Occupancy Tax), which provide significant and necessary income for the city coffers. There was clearly an opportunity to recoup some of that loss by officially registering short-term rentals and collecting a tax on this kind of commerce, which could be used both to administer and enforce the new rules, and which could also potentially be used to address other kinds of housing issues in the city.
Second, the currently illegal and unregulated status of the short-term rental industry has also left the door open for abuses, with no framework in place for control, enforcement or prosecution. And this makes it hard for the city to address neighbors’ and tenants’ complaints about problem properties or owners. New registration and tracking mechanisms would provide the city with both registration data and a basic set of rules that would provide pathways for enforcement, investigation and prosecution, as well as specific penalties for violators.
And third, as the city’s housing crisis worsens, with just a 2.7% vacancy rate (which the Planning Department’s staff report says is “the lowest of any major metropolitan area in the United States”), there has been concern from both the city and its residents that some owners are either buying whole properties that formerly housed permanent residents, and converting them to short-term rental use…or, worse, actively evicting permanent residents from properties they already own (often via the “Ellis Act,” which allows evictions if a property is being permanently removed from the rental market) and then re-opening them just weeks later as more lucrative short-term rental venues.
This issue is currently being addressed by a recent lawsuit filed against specific property owners by City Attorney Mike Feuer, but the proposed ordinance sets forth longer-term protections by specifically prohibiting short-term rentals in units not currently occupied by the property owner, properties that are covered by the city’s Rent Stabilization (rent control) Ordinance, and units recently removed from the long-term rental market (there would be a five-year waiting period before such a unit could be used for short-term rentals).
For the most part, there have been few major objections to the three overall goals of the ordinance as outlined above, with many property owners testifying at recent hearings that they do support general registration, taxation and control measures. Much more controversial, however, are two more specific proposed rules intended to help keep owners from converting potential long-term rental space to short-term rentals: a proposed limit of 120 days per year on rentals of any one space, and the ability of owners to advertise and book only one space at a time. We’ll look more closely at these issues tomorrow, as we examine the goals and concerns of short-term rental property owners and hosts.