Business & Economy

Los Angeles City Council panel calls for comprehensive plan to regulate short-term rental sites like Airbnb

File: The Airbnb website. L.A.'s budget panel on Monday approved a plan to levy lodging taxes on Airbnb and other short-term rental sites.
File: The Airbnb website. L.A.'s budget panel on Monday approved a plan to levy lodging taxes on Airbnb and other short-term rental sites.
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Los Angeles Mayor Eric Garcetti wants L.A. to collect a 14 percent lodging tax every time someone books a stay in L.A. using a short-term rental website, such as Airbnb or HomeAway.

Several cities across the U.S. have already made such agreements with the online rental sites. In cities like Chicago and Washington, D.C., customers are charged lodging tax during the checkout process, which gets routed to city coffers.

Garcetti has said a tax like this would generate about $5 million in Los Angeles, which he wants to use to fund new housing complexes to provide affordable apartments for lower-income residents.

But a panel of L.A. city council members decided Monday to hold off on negotiating tax agreements with the sites. Members of the budget committee said Los Angeles must first draw up a comprehensive plan to regulate short-term rental sites before it tries to collect "transient occupancy taxes" from them.

"I think (taxing the companies) would actually put the cart before the horse," Councilmember Mitch Englander said.

Airbnb could not be reached for comment. But the group representing short-term rental operators in LA said in a statement that it wants to work with the city to help hosts who aren't yet collecting the tax to do so.

The Los Angeles Short-Term Rental Alliance added that "it is important that (the city) also pass legislation that insures that registering for collection of TOT won't cause witch hunts to try and enforce other regulations while the city is negotiating it's future with short term rentals."

Taxing Airbnb is seen by some as a way for municipalities to recoup the costs associated with short-term rentals. But critics say cities can also clamp down on home-sharing sites by restricting the short-term rental market. Some cities have done this by passing zoning ordinances that dictate how often residents can rent out their homes, and prohibiting some neighborhoods from doing it altogether. Santa Monica passed an ordinance earlier this year, prohibiting all short-term rental stays except in cases where a host stays on the property with their guest.

Local supporters of policies like Santa Monica's say "home-sharing" has hurt the character of neighborhoods, especially around the beaches. They say sites like Airbnb have also made it easy for landlords to get out of the longterm rental business, and switch to the more lucrative short-term "vacation rental" business. Housing advocates say a growing number of landlords are converting traditional apartment units into vacation rentals. That's meant fewer traditional apartments go up for rent each month, and Southern California's residents pay higher rents.

While most agree that skyrocketing rents are a problem, and that L.A. needs more housing supply, the city's elected leaders are now left with the task of choosing a strategy to make that happen. Members of L.A.'s budget committee this week signaled an interest in preserving the housing that currently exists in L.A. by calling for a plan to regulate the short-term rental sites. Garcetti meanwhile, is focused on taxing the sites, and building new housing with the money.

Connie Llanos, a press secretary in Garcetti's office, said in a statement: "As the City Council continues to deliberate this proposal, the Mayor's Office will continue to work with Airbnb to help move it forward as a way to secure more affordable housing for Angelenos."

Budget Committee chair Paul Krekorian said there are many ways L.A. can generate millions of dollars for future housing projects - lodging taxes is not the only way to do it.

"I don’t think this was intended to be a lockbox arrangement," Krekorian said. "We can fund it from a number of other different sources."

Opponents of short-term rentals praised the budget committee for waiting to act on lodging taxes. Joanne Yvanek-Garb of the West Hills Neighborhood Council said she'd rather see the city come up with a comprehensive plan that includes keeping Airbnb out of residential areas than rush to collect $5 million in tax revenue.

"In today’s market, how much is $5 million going to buy in affordable housing?" Yvanek-Garb said.

Yvanek-Garb said a proliferation of short-term rentals is ruining the neighborhood feel and created a "revolving door for transient visitors."

This summer, Los Angeles Councilmembers Mike Bonin and Herb Wesson proposed their own motion to both regulate short-term rental sites and tax the stays that are allowed. It's not clear when that motion will be taken up by the full council. It is still pending in the city's planning committee.

This story has been updated.