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The Real Deal Los Angeles

Lockdown on Airbnb

Cities around LA County are adopting restrictive home-sharing regulations that could cause major problems for the online platform
By Dennis Lynch | April 20, 2018 10:00AM

UPDATED May 3, 2018, 5:04 p.m. Airbnb has been shackled or shut out of a number of cities in Los Angeles County, but that hasn’t stopped the growth of the home-sharing industry in the City of Angels.

In some cities, like Santa Monica, sneaky hosts have made Airbnb millions of dollars with listings prohibited by local regulations. In other cities, Airbnb has benefited from the lack of action from lawmakers, largely giving the short-term rental giant freedom to operate without any outside rules.

That was the case in the City of Los Angeles proper, where the City Council had been hesitant to draft laws regulating short-term rentals — until now. In early May, after three years of debate, a City Council committee approved a draft ordinance to regulate Los Angeles’ enormous — and currently illegal — short-term rental business and its biggest player.

The measure caps the number of days Angelenos can rent out their primary residence each year at 120. It also creates a means for “qualified hosts in good standing with the City” to exceed that cap. The committee originally drafted the ordinance with a 180-day limit but lowered it in March.

The City Planning Commission and City Attorney will now review and write the actual ordinance, which will need to pass through two more committees before getting to the full Council for final approval, according to a representative for its author, Council member Jose Huizar.

L.A.’s proposed home-sharing ordinance would legalize the business in the city, where all forms of short-term rentals are technically illegal. However, a complete ban is almost impossible to enforce, officials said.

There were more than 16,000 rooms and homes in the city of L.A. listed for short-term rental on Airbnb alone in March. According to the bill, short-term rental hosts would need the approval of all neighbors within 100 feet to exceed the ordinance’s 120-day limit, or otherwise prove to the city that exceeding the limit would not adversely affect the neighborhood.

Airbnb Policy Manager John Choi called the initial passage a “step in the right direction,” but signaled that Airbnb will continue to lobby city leaders to affect the regulations heard by the Council.

“We don’t need a system riddled with unnecessary fees and red tape,” Choi said. “We look forward to working with city leaders to find a balanced approach to a home sharing policy for Los Angeles.”

The bill, first introduced in 2015, is meant to cut down on so-called “bad actors” who abuse the home-sharing model, according to a spokesperson for Council member Jose Huizar, who chairs the Planning and Land Use Management Committee.

Critics of platforms like Airbnb have accused landlords of renting out multifamily properties as de facto hotels at high rates, taking vital housing off the market.

The bill has its critics, too. Some residents say that renting out rooms and apartments online is the only way they can pay rent in an increasingly expensive city. It’s also unclear what sorts of penalties will be levied against Airbnb and others who disobey the ordinance.

An earlier draft of the legislation called for the platform to pay $1,000 each day for advertising a listing from an unregistered host. James Elmendorf, the deputy director of Los Angeles Alliance for a New Economy, a community advocacy group, said that platform accountability is key to effective regulation. That draft also stipulated that a fine of $500 per day would be imposed on those hosts. “Fining does matter, otherwise hosts think ‘it’s free money if I break the law,’” Elmendorf said

Huizar said the current ordinance strikes a balance, allowing the city to “protect our housing supply, as well as the quality-of-life of our residents from bad operators, while ensuring the home sharing rental industry is fairly regulated and contributing to Los Angeles’ economy.”

In smaller cities in L.A., including popular spots such as Santa Monica and West Hollywood, Airbnb has faced significant pushback. Here’s how those areas have reacted to the proliferation of short-term rentals.

Santa Monica

In 2015, the beachside municipality passed an ordinance requiring that hosts be present during the entirety of a rental stay. In response, Airbnb sued Santa Monica in 2016 and is now nearing the end of it options to keep that lawsuit alive. A U.S. District Court judge denied a request for an injunction against the ordinance requested by Airbnb and HomeAway, another short-term rental platform. However, business does not seem to be hurting: The city released a report in March that found that less than 20 percent of short-term rentals in Santa Monica followed the ordinance and that Airbnb has netted $31 million from activity in the city since the ordinance went into effect.

West Hollywood

In March, West Hollywood banned renters from hosting a home share and required homeowners to be on-site for at least four hours a day while renting. Some L.A. County cities, including Redondo Beach and Hermosa Beach, have outright bans on short-term rentals.

Pasadena

Pasadena lawmakers have been somewhat more liberal than those areas about short-term rentals. The city adopted an ordinance in January that allows hosts to rent out their homes as much as they want, as long as they’re on the premises. They can rent for a maximum of 90 days when they aren’t on location. Still, the ordinance allows a host to rent only his or her primary residence and any accessory unit on that property. Hosts have to register with the city and pay a tax. Pasadena’s laws allowing for registration are more in line with what Airbnb would like to see elsewhere in L.A., said Airbnb Southern California Deputy Policy Manager Connie Llanos.

Airbnb’s take

Just because a city passes restricting regulations on short-term rentals doesn’t mean the conversation is over, at least to Airbnb. Llanos said her company continues to “work with” Santa Monica on policy, even as they duke it out in court. Airbnb is also still actively lobbying in West Hollywood.

Llanos acknowledged that the industry must be regulated and said the platform wants “sensible” laws, but she stopped short of saying that Airbnb had any legal responsibility to ensure its users are obeying local laws, only that Airbnb “encourages” them to do so.

That’s a debate that’s played out in a number of Airbnb’s courtroom showdowns. So far, Airbnb has mostly based its legal arguments on a federal law that protects online platforms from being responsible for the illegal activity of users.

That law, the federal Communications Decency Act, was the core of the company’s arguments against Santa Monica’s ordinance, but U.S. District Court Judge Otis Wright disagreed. Despite that ruling, Airbnb did have success with the same legal argument elsewhere, winning a recent decision as part of another lawsuit heard by the U.S. District Court for the Central District of California. That decision is being appealed.

For now, there’s no definitive answer on what federal law prescribes, but given how many local municipalities are adopting home-sharing laws, Airbnb and other platforms will have plenty of opportunities to make their argument in court.