What Hotel Owners Think of L.A.'s New Short-Term Ordinance

Los Angeles has passed a highly requested ordinance to regulate the massive increase in short-term rental activity, which has become popular thanks to websites like Airbnb and Home Away. The new ordinance defines short-term rentals and outlines tax requirements. In general, the hotel community has been in opposition to the short-term rental activity, but this new ordinance helps to level the playing field.

“Not all hotel operators speak with a single voice, but many hotel interests have opposed short-term rental activity,” Andy Starrels, a Los Angeles-based attorney and member of the West Coast Land Use and Environment Group, tells GlobeSt.com. “Opposition was most intense when the activity potentially avoided payment of lodging taxes, because hosts would have a competitive advantage over other hospitality businesses. The new L.A. ordinance confirms that short-term hosts will collect and pay the applicable taxes, eliminating any perceived unfair advantage. To the extent that registration and tax collection injects transparency to the process and eliminates disparate treatment, most industry opposition became resigned to the change.”

It isn’t all that surprising the city allowed short-term rental activity to continue, despite strong opposition from the real estate community. This is because—mostly—short-term rentals have been wildly popular. “The popularity of online platforms and broad appeal among hosts wishing to participate in the activity made it a political certainty that the city would allow the activity in some way, especially given the potential for tax revenue,” explains Starrels. “So most hotel interests seemed resigned that some activity would be allowed.”

In addition to the tax issues, there has also been concern about allowing tourist activities in single-family and residential communities. “Hotel industry opposition had also focused on the potential for short-term rentals to bring tourist-serving uses to single-family neighborhoods and other areas of the city where hotels are not otherwise allowed,” explains Starrels. “The 120-day annual cap on short-term rentals by a host reflects an important compromise. Community groups that were concerned about the impact of increased tourist activity in residential neighborhoods had sought stricter restrictions, but limiting the activity to 120 days seeks to appease both rental platforms and hosts as well as community groups.”

While the hotel community has been the most vocal in their opposition to short-term rentals, the activity has also concerned multifamily landlords. The ordinance, however gives landlords more authority over activity in their property. “Generally, the landlord community has supported this version of the ordinance because it preserves the landlord’s ability to prohibit the practice and represents compromise among conflicting views about short-term rentals and home-sharing,” says Starrels. “Online rental platforms have been lobbying aggressively to allow the activity within the city, and many residents view the practice as a means of coping with high housing costs.”

Starrels believes that the ordinance is a true middle ground and will settle much of the opposition around short-term rentals in Los Angeles. “Multifamily owners and operators were generally satisfied with the ability to deny consent to short-term rental activity and the outright prohibition in rent-restricted properties,” he says. “I detect an overall sentiment among all constituencies involved in the debate that the ordinance approved by the City Council represents a middle ground of sorts, and that at least something was put into the Municipal Code to both allow and regulate the practice.”