Business & Economy

Los Angeles reaches agreement with Airbnb. What's next?

A picture shows the logo of online lodging service Airbnb displayed on a computer screen in the Airbnb offices in Paris on April 21, 2015.
A picture shows the logo of online lodging service Airbnb displayed on a computer screen in the Airbnb offices in Paris on April 21, 2015.
MARTIN BUREAU/AFP/Getty Images

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Even as the Los Angeles City Council considers new regulations limiting the number of days an Airbnb can be rented out, the city's chief administrative officer announced an agreement Monday with the short-term rental platform to collect lodging taxes starting next month.

The city estimates it will be reap $5.8 million a year from the tax while Airbnb says the number is closer to $23 million. The funds will go towards providing housing for homeless people.

The deal comes after 18 months of negotiations, which Airbnb says it initiated.

"Our community of hosts want to pay their fair share, and we want to help," said John Choi, Airbnb's public policy manager for Southern California. "These agreements allow cities to rightfully benefit in the economic impact of home sharing while also making it easier for Airbnb hosts, ­the vast majority of whom are middle class people sharing their own home, to comply with local tax laws."

Robert St. Genis, executive director of the Los Angeles Short Term Rental Alliance, which represents Airbnb owners, said most of his members were already collecting transit occupancy taxes on their own and paying it to the city. Now, the process will be streamlined, since Airbnb will charge customers at check-out, and pass the money directly to the city.

“It just makes everything easier," St. Genis said. "It’s a winner for our hosts.”

In a memo, the city's Chief Administrative Officer Miguel Santana stressed that the agreement does not preclude Los Angeles from developing new restrictions on the short-term rental industry. 

Last month, the Los Angeles City Planning Commission approved a proposal limiting the number of days short-term rentals can be rented out each year to 180 days. The proposal is awaiting approval from the city council, which will consider it in the next few months, according to councilman Mike Bonin.

He said he is undecided on the measure, but he does not want council members to be influenced by by Monday's agreement.

"I've always said it's important that the regulations dictate the revenue and not have the revenue dictate the regulations," said Bonin.

St. Genis says it would be a mistake for the council to approve those regulations, because the city would be limiting its own tax revenue while not achieving its goal of making housing cheaper.

“There’s no positive outcome comes from limiting the number of days across the board," St. Genis said. 

Housing advocates disagree, and argue that the restrictions would incentivize property owners to stay out of the vacation rental business, and instead rent their units year-round to L.A.'s residents. That, they say, would increase the city's housing supply and stabilize rents.