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Paul Zimmerman

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Short-Term Rentals Spur Discord at Neighborhood Level

Article originally appeared in Hotel Association of Los Angeles (HALA) Newsletter.

The debate over short-term vacation rentals is increasingly pitting neighbor against neighbor. Despite the failure of San Francisco’s high-profile Proposition F, which would have limited short-term rentals to 75 days per year per unit, the dispute is far from over. Even in cities where short-term rentals are already restricted or banned, residents are growing increasingly flustered with local governments’ failure to enforce the legislation that is in place.

California cities have taken vastly different approaches to regulating short-term rentals. Ojai, for example, recently voted to ban short-term rentals altogether. Santa Monica, on the other hand, has taken a hybrid approach by banning rentals of entire units for less than 30 days, allowing a homeowner to rent out a portion of his or her home (i.e., a room or sofa) so long as the homeowner remains onsite.  Still other cities, like Anaheim, are taking a wait-and-see approach, extending moratoriums on short-term rentals until those cities can examine the issue more closely. Meanwhile, many cities, like Santa Ana, have decided not to regulate short-term rentals at all.   

In those cities that have either restricted or banned short-term rentals, the lack of resources available to respond to the overwhelming number of violators has made enforcement difficult. Santa Monica, for example, only has three full-time employees to monitor violations. Moreover, catching violators can be a challenge, in part, because most short-term rental websites don’t provide specific addresses until properties are booked. As a result, city enforcers must review online rental site property photos and then cruise the city streets to locate properties that match the units in violation. Still, in the 8 months that have passed since Santa Monica instituted its partial ban, the city has issued over 650 violations (the large majority levied directly against the short-term rental platforms), and has cited more than 102 property owners.

Still, efforts such as these have not gone far enough to appease angry neighborhood residents. The Los Angeles Alliance of Neighborhood Councils, for instance, passed a motion last month urging the Los Angeles City Attorney to enforce bans on short-term rentals, and asking the City Council to hire a private law firm to begin enforcement procedures if necessary.

Sensing the growing discontent among some neighborhoods, online platforms are starting to work with communities to address their concerns. Airbnb, for example, recently announced that it will soon introduce an online comments form to allow the neighbors of rental units to voice their complaints directly to Airbnb’s customer-support team, who will take action if necessary.

Despite legislation, short term rentals aren’t going anywhere anytime soon. As evidenced by the fact that Airbnb was recently valued at $25 billion ($4 billion more than Marriott International, Inc., incidentally), the industry is thriving. Not only that, it’s expanding. In Los Angeles, for example, there was a 42% increase in short-term rentals just last year. Other cities reported even higher growth rates.

To address this threat, the hotel industry may soon be dipping its hand (even deeper) into the short-term rental market. Arne Sorenson (the President and CEO of Marriott) recently commented that, should the highly-publicized merger with Starwood go through, Starwood’s Element brand could “possibly be repositioned to operate as a competitor for sharing-economy platforms like Airbnb and HomeAway.”

Of course, Marriott’s entry into the short-term rental market, while the most newsworthy to date, would not be the first time the hotel industry has become involved with short-term rentals. This past February, for example, AccorHotels acquired a 30% stake in Oasis Collections, while Choice Hotels International launched a platform on its website that allows consumers to rent units from third-party vacation rental management companies. Further still, in 2015, Hyatt Hotels Corporation was part of a group of investors that took on a $40 million stake in Onefinestay, a high-end short-term rental company. And, just this week, AccorHotels moved in to acquire 100% of Onefinestay.

At the end of the day, the short-term rental industry has proven that it is both wildly popular and a major player in the market. Given the strong emotions the industry elicits (both for and against), and the amount of dollars backing the industry’s expansion efforts, it’s a virtual certainty that new proposals, legislation, and public outcries will continue well into the future. M&R will keep you abreast of this important issue and provide periodic updates as the debate and situation develop.

This article is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.