NELA Real Estate in 2018: Big Money and Big Issues at Stake in Regulating Short-Term Rentals

2018 Editions Jeffery Marino June News Real Estate

Los Angeles is awash in short-term rentals (STRs) and neighborhoods in Northeast L.A. are no exception. A recent glance at Airbnb and other STR sites turned up 251 offerings in Highland Park at an average rate of $98 per night, 159 in Eagle Rock at an average rate of $159 per night and 118 in Mount Washington at an average nightly rent of $123. Throughout L.A., STRs include spare rooms, back houses, condos, apartments and entire houses.

And many if not most of them are illegal.

Under L.A.’s municipal code, renting out all or a portion of a residentially-zoned property for fewer than 30 days is not allowed. STRs have flourished due to lack of enforcement.

To cope with the situation, the L.A. City Council recently backed a proposal to legalize STRs, as long as several conditions are met, including a permit registration requirement for hosts and an annual cap on rentals of 120 days (which can be extended upon city approval). In addition, to be legal, a short-term rental property must be the host’s primary residence. 

The aim of the proposed rules is to give homeowners a legal way to make some additional income from STRs, without fostering short-term rental businesses in residential areas. In Eagle Rock, for example, nearly a third of STR hosts have multiple properties listed for short-term rent, which suggests they are not renting out their homes for extra money but rather running vacation-rental businesses in a residential area.

The proposed regulations must be vetted by the city’s Planning Commission before returning to the City Council for a final vote, probably by the end of August, according to NELA Councilmember José Huizar.

There are strong feelings, pro and con, about the proposed regulations. Keep Neighborhoods First, a pro-regulation group made up of neighborhood advocates and people associated with the hotel industry, has long argued that short-term rentals increase rents for everyone by taking properties off the market that would otherwise be rented to long-term residents. The group has also argued that short-term rentals attract disruptive visitors and erode the quality of neighborhood life. 

Judith Goldman, a co-founder of Keep Neighborhoods First, told the Boulevard Sentinel that the group is generally happy with the proposed rules and hopes they will be enacted soon. “Homes are being taken off the market every day,” she said.

On the other side, Airbnb, HomeAway and other STR services want as little regulation as possible and have spent hundreds of thousands of dollars lobbying City Hall to go easy with any new rules, according to an L.A. Times report.

Local residents who rent their homes short term have also spoken out against the proposed regulations. At a City Council meeting in May, several hosts pleaded with councilmembers not to limit the number of days they can rent their homes, saying they would be unable to afford their mortgages and property taxes without the extra income.

Los Angeles is way behind other major cities in regulating short term rentals. If and when it imposes rules, it seems likely to confront what other cities have experienced: There is no set of rules that will please everyone.

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