April 25, 2018

Los Angeles Commission Hearing for Airbnb Short Term Rental Limit

April 25, 2018

Los Angeles Commission Hearing for Airbnb Short Term Rental Limit

I wanted to give you an update on a current discussion that's happening in a committee of the Los Angeles City Council that's relevant to all of us who run Airbnb short term rental units. This discussion has sort of been going on for the past three years and has to do with regulating how many nights property owners can rent out their properties to vacation goers.

This has been a hot topic throughout the state of California in recent years. Santa Monica, for instance, has one of the strictest laws regarding short-term vacation rental units. Santa Monica requires that hosts live at the residence that they are renting, apply and register with the city, and pay the Santa Monica hotel tax. No rentals over 30 days are permitted at all.

San Francisco laws also require that hosts are permanent residents of their rental unit, living in the home at least 275 nights each year. Individuals who own multiple properties may not conduct short-term rentals out of any other unit except where they actually live. Hosts must register as a business and become a certified host from the government. In addition, hosts are limited to renting properties for a maximum of 90 days per year when they are not present in their home.

Today, Los Angeles and the surrounding areas are not affected by similar laws and regulations. The discussion that is currently happening is not binding or a law at this point, and I expect that more discussion, changes and developments will happen in upcoming months as they continue to explore this topic. Before anything is finalized, Mayor Eric Garcetti would have to approve, and he has a reputation of being very supportive of Airbnb short term rental businesses and the sharing economy.

In the early days of the discussion, the committee was looking at a 189-day cap for short-term rentals. The current cap in discussion is at 120 days for a primary residence, including only reservations under 30 days. That means that rentals lasting 30 days or more do not count toward 120-day cap. This limit would not apply to second residences or investment properties.

In reality, the wording of the proposed law as it currently stands probably won't have a big impact on Airbnb property owners in Los Angeles. Most of our clients rent out their properties for an average of 150 days per year, and many only rent properties during the peak seasons anyway. Combine that average, which is fairly close to the 120-day cap, and eliminate stays over 30 days, and the effect of the possible law may be negligible.

If you take a look at the impact of the short-term restrictions and laws in San Francisco, you'll see that when the laws first went into affect, nearly half of the properties got kicked off sharing platforms for failing to register or obtain required permits. As a result, you had a pretty major disruption to the short-term rental equilibrium. Supply went down while demand went up, and prices climbed during that time.

The same thing could happen in Los Angeles. For instance, if you're charging $300 per night, you might be able to boost that rate to $400 or $500 per night during peak seasons. In reality, many of our clients tend to rent out their properties in the busy seasons and charge two or three times as much as the off-season or shoulder seasons. Since the wording of the possible law is more lenient and does not include rentals of 30 days or more, it could result in higher revenue for many property owners.

Right now, things are only in the discussion stages. A committee of the Los Angeles City Council is basically talking things over, and the Planning Department has written an initial report. Some of the things they are talking about include a possible no-cap exemption for hosts who are living at the residence they are renting. Some members of the Planning Department would like to see additional fees and forms to increase revenue from short-term rentals as well as up control; however, many current City Council members are not in favor of additional bureaucracy.

The bottom line is that we don't know what the final language will look like at this point. All of our vacation rental properties in Hollywood, Venice, Eagle Rock, Highland Park and other Los Angeles areas are fine today and will probably be fine through the end of the calendar year. My guess is that if anything happens officially, it won't go into effect until 2019 at the earliest.

I wanted to simply put this information out there. My organization has typically provided this information to clients through private chats. This is the first time we've reached out to the public to help inform you of interesting discussions that can affect all of us in the Airbnb business. Stay in touch, and we'll keep you updated as developments continue in upcoming months.

Tagged: airbnb regulations