Business & Economy

CAO report: Short-term rentals are not violating rent stabilization

A quick search on Airbnb shows a woman named Martha has 14 listings at The Ellison — each one going for $200 a night.
A quick search on Airbnb shows a woman named Martha has 14 listings at The Ellison — each one going for $200 a night.

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A new report from the city’s Chief Administrative Officer says property owners who rent units as short-term rentals are not in violation of the city’s rent stabilization ordinance (RSO).

The report, which council members will use to formulate future policies regarding sites like Airbnb and VRBO, found that there are about 4,500 short-term rentals throughout the city.

Under the city's current RSO, landlords can only raise the rent on a current tenant by 3 percent each year. Landlords can raise rent to the market value after a tenant voluntarily vacates, and can choose to convert the unit into a short-term rental (STR). This was in compliance with the RSO, the report said. It gives this example: 

A landlord may rent an RSO property as an STR for $100 a night to Guest A and then charge $200 a night to Guest B, as long as the guests or renters vacate the property, according to the RSO rules. Therefore, STRs are not removing units from the RSO.

Some housing advocates may take issue with that interpretation, since a full-time, short-term rental unit can generate more rental income monthly than a traditional long-term leased unit. As more traditional rental units have been converted into short-term units, city leaders raised concerns that too much housing stock has been taken off the market, leading to higher rents for Southern California residents.

The report says the city could choose to modify the RSO to restrict the use of these properties to long-term residents. The updated ordinance would need to be approved by the city council and it "also needs to include enforcement for the proposed restrictions," according to the report.

The report does say some short-term rentals may be in violation of city code: 

As the City evaluates how best to balance the presence of so many STRs with the Zoning Code restrictions, it is possible that the Zoning Code may need to be amended to permit the use of STRs in certain residential zones under particular circumstances. 

But because of the proliferation of the house-sharing industry, the report says it would be difficult and "impractical simply to ban STRs from Los Angeles."

It pointed to economic benefits: "visitors tend to stay longer and spend more money, which increases economic activity for non-hotel industries."

The report also noted that "affordable housing", which is publicly-subsidized for lower-income residents, cannot be used for short-term rentals. 

The CAO will release another report soon discussing the collection of the transit occupancy tax. It said other cities have generally agreed that short-term rentals "should be on a level playing field with hotels."

The CAO investigated eight cities, including West Hollywood and Malibu, to create the report.