The Real Deal Los Angeles

Could Los Angeles effectively regulate Airbnb?

Everything you need to know about the fight over Airbnb in L.A. County

May 27, 2016 03:30PM
By Cathaleen Chen

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Attendees from Saturday's forum (credit: Roy Samaan)

Attendees from Saturday’s forum (credit: Roy Samaan)

In West Hollywood, short-term rentals are illegal.

Yet tourists looking to take a stroll down the Sunset Strip over Memorial Day weekend have the option to stay at the dozens of Airbnb units currently listed on the website.

In WeHo, and elsewhere in La La Land, policy makers are struggling to figure out how to regulate and enforce regulations on the service, which has taken the county by storm. Los Angeles is the second-largest market in the U.S. for Airbnb, the now ubiquitous short-term rental platform that boasts more than 2 million listings worldwide. The only place where it has a larger presence is New York, according to report by Penn State University’s School of Hospitality Management.

Tensions around the regulation of Airbnb are running high, and reached a breaking point when the city of L.A. proposed its own plan of how to regulate Airbnb in April. The proposal — which calls for limits on the length of stays, taxes and fines for those who disobey — is up for a City Council vote in July.

Much like it has in other cities, the online service has garnered some formidable foes in the City of Angels, including the hotel industry and housing advocates.

At a city forum last Saturday, hundreds of Angelenos showed up — Airbnb hosts, hotel workers and housing activists alike — with signs and t-shirts to voice both support and opposition to L.A.’s foray into short-term rental regulations.

Understanding the laws

In some parts of L.A., it’s already illegal to rent out a residence under current zoning ordinances, technically.

Depending on where you live in the city, the disparity can be wide, UCLA urban planning professor Paavo Monkkonen told The Real Deal.

“Most single family zoning prohibits it, and some multi-family zoning does but not all. And when I say illegal, it’s a zoning code violation rather than a criminal infraction,” he said. “But the codes were written 60 years ago, and the legality of it in many cases can be murky.”

A “hotel” is defined loosely under L.A. County’s Transient Occupancy Tax, colloquially known as the “bed tax,” under which operators are charged 12 percent of their lodging rates.

Under the new draft of regulations, short-term rental hosts would not be taxed as hotel operators. But they would be severely limited in the quantity as well as length of their listings.

The proposed rules dictate that users could rent out their homes or a room within their homes for no longer than 90 days annually and only if they register it with the government. Units listed as a short-term rentals must be the user’s primary residence, defined as the home in which they live for at least six months out of the year.

Those who don’t abide by these rules would face hefty fines — up to $2,000 per day past the three-month limit and $200 per day for posting an unregistered listing.

These measures are contingent on one essential stipulation: that Airbnb turn over user data so the city could actually enforce them.

But it’s unlikely that Airbnb would comply without putting up a fierce fight. Compared to that of other cities, L.A.’s regulations are the most stringent yet — especially considering the data dump requirement. Airbnb has never released unredacted information on its users, not even under the New York attorney general’s subpoena.

Airbnb and its proponents react

Airbnb isn’t pleased about L.A.’s prospective rules.

The proposal not only puts an extreme burden on users, company spokesperson Alison Schumer told TRD, it also poses “serious privacy concerns.”

“[The] proposal is a step backward, putting consumer privacy at great risk by requiring online platforms to give the government unfettered access to confidential user data without any idea of how that information would be used,” she said in a statement.

But lawmakers may have been taking a cue from San Francisco’s failures. There, it is up to hosts to register and it is not fact-checked with any data.

In the four weeks after the Bay Area ordinance passed, only 159 hosts applied for registration — out of the city’s 5,000 Airbnb listings on any given day, city spokesperson Gina Simi told SFGate.com last year. With Airbnb’s data, it would be more enforceable.

Privacy, however, isn’t the only concern of critics of the measure. Proponents of short-term rentals claim that the 90-day cutoff is unfair. Some members of the L.A. Short Term Rental Alliance, for instance, say renting out their homes has become part of their livelihood, allowing them to make mortgage payments and even escape eviction.

The foes of Airbnb

Hoteliers have an obvious interest in the matter — not unlike the taxi industry’s vocal opposition to Uber. They argue Airbnb hosts are skirting the existing body of rules that apply to bed and breakfast’s and the Holiday Inn.

Housing advocates argue that short-term rentals can have a detrimental impact on the already strained housing market. They say that when landlords and tenants with multiple residences realize they can make more money from Airbnb rentals than from long-term renters, they take units off the rental market and establish de facto hotels, thereby reducing supply and contributing to growing rents.

Critics from all sides of the aisle are concerned about the enforceability of the regulations. In both San Francisco and Portland, freshly minted policies allow hosts to rent out their homes if they first register with the city. The problem? Barely anyone is.

When it comes down to it, “it’s not a policy issue, it’s a competence issue,” Monkkonen said. He has worked previously as a consultant for Airbnb on studies.

Which data can you trust?

According to Airbnb’s own data published earlier this month, 84 percent of Airbnb hosts in L.A. are sharing their permanent homes, and the typical Airbnb listing is for well under 90 days. The average is 62 nights per year.

But here’s where it gets tricky. There are more than a few databases and reports that aim to monitor Airbnb activity — and they all have different stats.

The Los Angeles Alliance for a New Economy (LAANE), for instance, is a progressive labor group that has been vocal about Airbnb regulations. According to its 2015 analysis on Airbnb, 64 percent of all listings on the website are for whole units, rather than individual rooms.

“Our analysis shows a correlation between short-term rentals and the number of available housing units, which will lead to housing shortages,” LAANE researcher Roy Samaan told TRD. His analysis alleges that whole-unit listings are responsible for 90 percent of Airbnb’s total revenues from L.A. — which he says is equivalent to seven years’ worth of affordable housing construction.

Meanwhile, independent database Inside Airbnb calculates that about 58 percent of all users rent out their entire homes. It also found that listings are occupied for an average of 91 nights per year and that about 45 percent of all users have more than one listing.

Ari Teman of SubletSpy told TRD that the numbers cited by both those databases are too low. The entrepreneur behind the Airbnb monitoring software said that 40 hosts — out of L.A.’s 20,000-some users — account for the majority of L.A.’s Airbnb activity.

Outside assessments are proliferating because critics are skeptical of the accuracy of Airbnb’s own published data. TRD previously reported that right before Airbnb released a comprehensive New York City report, the company purged over 1,000 listings to paint a more favorable profile of its hosts.

On the macro level, the numbers differ as well. While Airbnb claims that it “generated more than $670 million in economic activity and an estimated $920 million in economic impact” in L.A. last year, its detractors say the city actually lost tax revenue.

The Penn State study determined that if Airbnb hosts were forced to pay hotel taxes, the city of L.A. would collect an extra $41 million each year.

And while Airbnb countered that the study was inaccurate, the much implicated de facto hotels seem to be a matter of common ground between the company and its enemies — at least on surface level.

Airbnb’s Schumer points to Airbnb’s Community Compact — a pledge for the company to work alongside communities with strong rental activity. One of the promises, she said, is to “limit our impact that would be detrimental.”

If anything, L.A.’s impending regulations may help Airbnb with its own commitment.