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Proposed California Law to Help Enforce Santa Monica’s Ban on Short-term Rentals.

Santa Monica Real Estate Company, Roque and Mark

Pacific Park, Santa Monica Pier

Harding Larmore Kutcher & Kozal, LLP  law firm
Harding, Larmore
Kutcher & Kozal, LLP

By Niki Cervantes
Staff Writer

May 26, 2015 -- A bill making its way through the California senate would provide a helping hand to Santa Monica and other cities trying to regulate the explosion of short-term rentals in their communities.

SB 593 – the Thriving Communities and Sharing Economy Act – would prohibit vacation rentals in jurisdictions where the practice is already deemed illegal. It will also assist in collecting tourist taxes in all jurisdictions, regardless of whether short-term rentals are legal.

In all cases, the Act requires that online businesses like industry giant Airbnb provide data on where and when hosts rent out units, the total number of nights stayed and the room rate.

That information, needed to monitor hosts and make sure they are following the ordinance, is considered a key component of Santa Monica’s new law.

“This business of home sharing has evolved from its roots of couch surfing,” said state Sen. Mike McGuire, who represents Northern California’s Second District and authored the bill.

“This is a multibillion-dollar business. Our bill is simple. All it does is make online vacation rental businesses follow local laws, just like the rest of us.”

SB 593 is headed to the senate’s Appropriations Committee in early June, after it passed the senate’s Governance and Finance Committee on a 4-to-2 vote this month, McGuire’s office said.

Short-term vacation rentals are already illegal in many jurisdictions, including Santa Monica. But that went mostly unnoticed until the practice began booming with the popularity of sites like Airbnb.

In the toughest crackdown so far, Santa Monica reiterated that the practice is illegal by banning it unless the hosts are on site, are licensed and collect the City’s 14 percent tourist tax.

The City also promised vigorous enforcement, including trolling online for the thousands of Santa Monica units advertised on sites such as Airbnb.

Santa Monica has an estimated 1,700 short-term rentals, about 80 percent of which would be banned under the new law, City officials said.

Airbnb and short-term rental hosts argue those who will be most hurt by bans are individuals who rely on the rentals to make ends meet, which they contend make up the overwhelming majority of those advertising short-term rentals.

Supporters of the new Santa Monica law – composed of a loose coalition of housing advocates, the union representing hotel workers and frustrated neighbors -- argue the short-term rentals are, in fact, run as big businesses. They say management companies are using so many units as short-term rentals that it is undermining the city’s already shaky housing stock.

Scott Shatford, a Santa Monica-based entrepreneur and author of a how-to book on short-term rentals, says his analysis of Airbnb shows more than a third of its clients rent out multiple units.

Shatford has watched the backlash against short-term rentals unfold across California, from San Francisco to Los Angeles and now Santa Monica, and this much he’s pretty sure of: The cities’ efforts will ultimately fail, as those leasing short-tern rentals find ways to get around the law.

Even as the ban in Santa Monica was about to be formally approved, some of the opponents gathered at a rally outside City Hall were quietly formulating plans to skirt the regulation, according to press reports.

Some suggested advertising a shared unit -- which is legal -- but then offering a whole unit instead – which is illegal. Another contemplated advertising rentals of 30 days to get around the restrictions, but later offering guests shorter stays, according to reports.

Meanwhile, Airbnb is fighting attempts to require the disclosure of information about its hosts, arguing that it is a violation of privacy.

McGuire said Airbnb’s resistance to disclosing data is one of the reasons he authored the bill. He noted that San Francisco is still engaged in a battle to obtain the data and noted that the city of Malibu had to subpoena records from Airbnb to kick-start negotiations. Airbnb has agreed to tack Malibu’s 12 percent hotel tax onto bills.

McGuire believes it is time that the short term rental business starts paying for its impact on communities.

“As cities and counties have witnessed, online vacation rental businesses are often about one-way sharing,” he said. “They share all the benefits of a local community’s services, but they often share none of the responsibilities.

“Local governments are left to shoulder the burden of enforcement and expense associated with this expanding industry,” he said.


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