Yesterday, the Santa Monica City Council voted to back rules that would block full time vacation rentals in Santa Monica. The proposed new rules would eliminate full time vacation rentals in Santa Monica while also placing new regulations on AirBnB type rentals. Apparently, the City of Santa Monica expressed concern about the scarce availability of apartment rentals and placed blame for that scarcity on the increase in vacation rental type properties. Housing advocates argued that the limited number of apartments are being taken off the residential apartment rental market so that they can be rented out to tourists at a highly nightly basis, thereby creating a long term housing shortage.
According to today’s Los Angeles Times article, the Santa Monica city staff found about 1700 vacation rentals advertised in Santa Monica for short term rentals and Santa Monica estimated that about 1400 of them would be banned under the new regulations the Santa Monica City Council is backing. The proposed new rules would still allow “home-sharing”, which involves renting out a room or rooms while the owner also stays in the rental. These limited rentals would still have to pay the 14% transient occupancy tax.
This is an interesting move because it cuts against Santa Monica’s ability to bring additional tourist dollars into its budget by doing away with the income it would receive from the 14% tax on the other 1400 or so rental units in Santa Monica. Such rules also limit rental income that many vacation rental owners rely upon in order to meet their property’s monthly and yearly financial obligations. In the internet market of today where virtually everything is rentable, we think this is a step backwards. The income produced by these rental incomes is tremendous and Santa Monica could use this income to reinvest in city resources and even into its own housing programs. In general, the law disfavors making property less marketable and these new rules may interfere with an real property owner’s bundle of rights that they typically have with property ownership.
Unfortunately, according to the Los Angeles Times article, no representative of AirBnB, Homeaway or VRBO attending the meeting yesterday. That said, yesterday Carl Shepherd, the co-founder of Homeway stated “this law is the equivalent of a 3 year old closing their eyes and saying, ‘I want it to go away'” because he thinks the proposed laws will be hard to enforce.
We will be watching this issue closely as this battle is looming in more and more cities nationwide.