Santa Monica Takes on Airbnb, Is Sacramento Next?

Airbnb is the crown prince of the sharing economy.  Its is a platform for people to rent out beds, rooms, apartments and houses for short term stays.  The San Francisco-based company has over 800,000 listings in 33,000 cities and 192 countries. Founded in 2008, the privately held Airbnb now has a value of of approximately $20 billion.

While the image of Airbnb is of people renting out their own properties, the reality appears to be different.

Measuring Airbnb’s Impact

An City of Los Angeles study on Airbnb found

First, AirBnB’s impact on Los Angeles is far larger than previously understood. We identified 8,400 hosts and 11,401 AirBnB units listed for rent in Los Angeles.

Second these units are not, by and large, the “shared” space implied by terms like host or sharing economy. Instead, nearly 90 percent of AirBnB’s Los Angeles revenues are generated by lessors with whole units and leasing companies who rent out two or more whole units.

Third, AirBnB has created a nexus between tourism and housing that hurts renters. The 7,316 units taken off the rental market by AirBnB is equivalent to seven years’ of affordable housing construction in Los Angeles.

There also was some evidence that these listings were causing rents to rise faster in high Airbnb areas.

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Airbnb has countered with its own studies demonstrating that Airbnb generated $1.15 billion in economic activity in New York last year, an increase of more than 80 percent since August 2012 to July 2013. The Airbnb community also supported more than 10,500 jobs in New York in one year alone.  Airbnb guests spend more time and money in New York than traditional visitors, and the vast majority of Airbnb hosts are regular New Yorkers who use the money they earn to pay the bills in an expensive city.

In San Francisco, the City Planning Department stated that

While home sharing opponents claim Airbnb is taking affordable housing off the market, the San Francisco City Planning Department disagrees, “the current level of STRs likely has a limited effect on citywide housing prices and availability,” according to their own report. After examining the data, the Department concluded: “The median number of days where STR use would outcompete residential use is about 257 days.” Currently, the typical Airbnb host in San Francisco shares their space 6.5 nights per month (or 78 nights per year), earning just over $1000 per month.

In addition, an Airbnb economist questioned the Los Angeles study.

I don’t think there’s almost any way you can use a reasonable methodology to conclude that Airbnb is having a large impact on rents or owner costs around Los Angeles,” Even if all the units on Airbnb represented a subtraction from the housing stock around L.A., that would be something like a percent and a half increase in rent — but that’s a huge overstatement.

Santa Monica Acts

Santa Monica has been a goldmine for Airbnb generating $9.3 million a year in revenue; making it one of the top 10 revenue generators for greater Los Angeles.  Short term rentals, however, already are illegal in Santa Monica, but enforcement is rare.

Nonetheless, on May 12, the City of Santa Monica adopted an ordinance that would eliminate the current number of listings on Airbnb from 1,700 to just 300 by limiting listings to only owner/lessee occupied spaces.  Rental of whole units would be banned..  In addition, the city now plans to add three full-time employees to enforce the law.

The ordinance, which goes into effect on June 15, requires that a home-sharer:

• Obtains and maintains at all times a City Business License authorizing Home-Sharing activity.
• Operates the Home-Sharing activity in compliance with all Business License permit conditions, which may be imposed by the City to effectuate the purpose of this Chapter.
• Collects and remits Transient Occupancy Tax (“TOT”), in coordination with any Hosting Platform if utilized, to the City and complies with all City TOT requirements as set forth in Chapter 6.68 of this Code.
• Takes responsibility for and actively prevents any nuisance activities that may take place as a result of Home-Sharing activities.
• Complies with all applicable laws, including all health, safety, building, fire protection, and rent control laws.
• Complies with the regulations promulgated pursuant to this Chapter.

Is California Next?

In California, Senator Mike McGuire (D-Healdsburg) has introduced SB 593 the Thriving Communities and Sharing Economy Act which the Senate Government and Finance Committee has summarized as follows:

Senate Bill 593 requires a hosting platform to report quarterly, to a city or county that has not opted out of receiving the report, all of the following information: The address of each residential unit that was offered on the operator’s hosting platform for occupancy for tourist or transient use and was occupied for that use during that quarterly period. The total number of nights that the residential unit was occupied for tourist or transient use. The amounts paid for the occupancy of that residential unit.

SB 593 allows a city or county to impose and collect fines on an operator of a hosting platform for failing to comply with the reporting requirements and specifies limits on the amounts of the fines.

SB 593 prohibits a hosting platform from facilitating the rental of a residential unit offered for occupancy for tourist or transient use, if a city or county ordinance prohibits the renting of that unit or offering of that unit for occupancy for tourist or transient use. SB 593 allows a city or county to impose and collect fines on an operator of a hosting platform for knowingly violating this prohibition and specifies limits on the amounts of the fines.

The bill has been approved by two Senate committees and is now heads to the Senate floor for a vote.

Listen to Cyber Law and Business Report Podcast on the Santa Monica Ordinance

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