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The Future of Airbnb in Los Angeles

Los Angeles provides not only key employment in areas such as entertainment, technology, real estate, and hospitality, but has become a world-class destination with 50 million visitors and $22B spent in tourism related activities such as hotels, dining, and shopping in 2018. [1] With the Olympics coming to Los Angeles in 2028, coupled with existing attractions, the City of Los Angeles is investing resources to improve and create 28 metro projects, along with a projected $509.8M renovation of the LAX airport terminal. [2] At the same time, we are starting to see a shift and lagging trends in the housing economy. For instance, over 20,000 units were completed in 2018 according to CBRE’s market report. [3] Additional units lagging with many development projects breaking ground in 2019 and competition targets through 2020 will increase existing supply in the market place, while rising rents and affordability for home ownership have become a concern. As competition for profits starts to increase with increasing tourism opportunities, the short-term hotel market in Los Angeles has been growing. But on July 1, 2019 that could all change.

Effective July 1, 2019, new City of Los Angeles legislation will regulate short-term rentals for primary residence hosts. [4] Here are the top requirements to be aware of before you place a home on the short-term rental market.

1. Obtain the proper Transient Occupancy Registration Certificate and pay the appropriate tax.

2. Approval of the landlord is required, if renting the unit.

3. Properties subject to rent control are not allowed. Your neighbors renting out their apartment units or rent controlled duplex unit (if under the Rent Stabilization Ordinance) would not be allowed as a short-term rental.

4. Only one registration per person. Therefore, your dreams of buying multiple homes for purposes of short-term rentals, at least in the City of Los Angeles, are no more.

5. Maximum 120 days per year, with some exemptions to go beyond the maximum.

6. Accessory Dwelling Units (ADUs) with a permit application on or after January 1, 2017 are not permitted, unless one can prove it is a primary residence and does not violate the Rent Stabilization Ordinance. This may hurt many people who recently built ADUs for purposes of short-term rentals.

7. Additional restrictions will prevent online platforms from making bookings that are not registered with the city including daily fines that could be up to $1,000 per day. Those online platforms include Airbnb, VRBO, or anyone booking rentals on behalf of owners.

8. Fines for owners found in violation of the ordinance, include $500 a day (or two times the monthly rate charged, whichever is greater) for advertising a unit in violation of the ordinance. And a daily of fine of $2,000 per day (or two times the monthly rate charged, whichever is greater) for hosting beyond the 120 day cap without proper approval.

What does this mean for your property? If you own your own home within the City of Los Angeles, that fits within the requirements, then this can be a good option for obtaining some additional income while you are traveling, as an example. You can also always rent your home traditionally with a Month-to-Month lease. Just keep in mind incorporated cities of Los Angeles are included in the new ordinance, which means most cities within the San Fernando Valley.

What about other areas? While sometimes we may refer to Los Angeles to include the Greater LA area, there are in fact several cities within the region with their own cities and regulations. These are a few of the independent cities, where short-term rentals have become even more difficult and have not been as favorable to investors looking to convert residential properties for hotel purposes:

· West Hollywood

· Santa Monica

· Beverly Hills

Other cities, considered part of the Greater LA area, that are independent and without extensive restrictions include:

· Culver City

· Malibu

Culver City is a tech and entertainment industry magnet. On short-term rentals, there is no specific ordinance in-place; however, the City Council announced in February 2019 a proposed ordinance that would allow short-term rentals through a host’s primary residence with no limitation on the number of nights. [5] Malibu has attracted group visitors due to its beautiful stretch along the pacific coast, home to many celebrities, and proximity to Santa Monica and other beach cities.The City of Malibu has allowed short-term rentals for residential properties, so long as the owner paid a transient occupancy tax and obtained the required rental permit. In 2018, the City Council rejected proposed banning of short-term rentals.

Whether you agree or not with the City's actions, it is important to be aware of any new or pending legislation that could affect your property and future investment plans. There are many benefits and risks to owning real estate. At Estate Match Realty, we provide advisory services including consulting on projects to ensure our clients have the right information to make more informative decisions.

[3] 2019 US Real Estate Market Report. Multifamily. CB Richard Ellis.

[5] Culver City Subcommittee Proposal to City Council.


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