Short-term rentals are technically illegal in Los Angeles, but for the past few months the city has been collecting a 14 percent tax on Airbnb rentals – and that revenue has greatly exceeded expectations.
In August, Airbnb added the transient occupancy tax on L.A. rentals. Users who book stays in the city now pay the tax at checkout and the money is funneled to the city. Hotels have long charged the same tax on their rooms.
City officials had estimated that about $5.8 million dollars would come from the Airbnb tax.
“There was still some doubt whether any revenue would be collected,” said Ben Ceja, L.A.'s assistant city administrative officer.
But as it turns out, the city collected $13 million in just five months.
Five million dollars of that will go towards fighting homelessness. The rest is going into the city’s general fund, said Ceja.
“It’s going to be helpful in that we are currently projecting revenue shortfalls in other categories,” he said.
There is still no law on the books allowing short term rentals in L.A. The city didn’t collect taxes from Airbnb before last year because as councilman Paul Koretz put it in 2015, they would be enabling “the cheating economy.”
But as the short-term rental sites have grown in popularity, the city council has considered plans to restrict the number of days a resident can rent their home to vacationers.
They solicited public feedback from residents many times 2016. Some residents told them that sites like Airbnb have allowed them to rent out rooms and investment properties make extra money, helping them to live in high-priced Southern California. Others said that short-term rentals were turning their neighborhoods into tourist traps. Still others said too many property owners have converted traditional apartments into vacation rentals, leaving residents with fewer long-term rental options.
In June, The Los Angeles City Planning Commission approved a proposal that would limit short-term rentals to 180 days per year. It has yet to be approved by the city council.
In nearby Santa Monica, city officials banned short-term rentals entirely, and fined Airbnb and residents who use the site to rent out their properties to vacationers.
Airbnb, while pledging to work with cities, has fought restriction ordinances. The company has also been eager to tout the big tax revenue that comes from the 14 percent tax on stays.
"We are eager to partner with more U.S. cities," the company said in a recent report estimating the 50 largest U.S. cities could have brought in $250 million in tax revenue in 2016 if they had signed tax collecting agreements with Airbnb. "Across the United States, the Airbnb community is making cities stronger and generating much needed revenue for families and communities."