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Santa Monica's Short-Term Rental Market Thriving


Bob KronovetrealtyWe Love Property Management Headaches!

SMTT tourism and economy

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

By Jorge Casuso

February 22, 2018 -- Short-term rentals in Santa Monica that were listed on sites such as Airbnb generated nearly $2.5 million in hotel bed taxes during the past fiscal year, according to a report issued by the City this month.

During the first four months of the current fiscal year, which began on July 1, the City collected more than $1 million in transient occupancy taxes (TOT), which is 14 percent in Santa Monica.

All told, the City collected more than $4.6 million in TOT from short-term or "vacation" rentals between June 2015 -- when a new ordinance allowing "home-sharing" took effect -- and October 2017, according to the report.

The ordinance allows residents to host vacationers in a portion of their home for 30 days or less as long as the owner or tenant lives on the premises during that time ("Santa Monica City Council Bans Short-Term Rentals Despite Protests," May 14, 2015).

The Santa Monica short-term market has been a lucrative one, netting an estimated $31 million for Airbnb and hosts over the past two years.

That, however, doesn't include many of the short-term rentals operating outside the law. While 187 home-share rentals are licensed, an estimated 760 short-term rentals are operating illegally, according to the report.

That's down from the estimated 1,700 total listings for short-term rentals in the City when the Council held its public hearings in 2015.

By March 2016, the number had dropped to 1071 total listings of which 150 were legal home-share advertisements.

City officials estimate the number of illegal short-term rentals has currently dropped to 502.

However, it is difficult to tell how accurate these numbers are, officials said.

Many hosts advertise the same unit on multiple sites or post a Santa Monica listings for units in a neighboring town.

"Some hosts remove their ads during the day to avoid detection by enforcement staff, then temporarily replace them during late night or early morning hours," staff wrote.

During the first two years the law was enforced, the City has collected $81,000 in fines, which were hiked from $75 to $500 in January 2017.

The City Attorney has successfully prosecuted four cases and has ten cases pending.

But vacation rental cases are usually lengthy, with cases open an average of five months, officials said.

"Vacation rental cases are extremely time-intensive due to the extra steps officers must take to ensure that they collect evidence necessary to take enforcement action that will withstand judicial review," staff wrote.

Under an amendment to the law made in January 2017, enforcement staff can include full investigative costs on administrative citations in addition to the fines ("Santa Monica Gets Even Tougher on Short-Term Vacation Rental 'Hosts,'" January 12, 2017).

Most of the legal home-share rentals were in the 90405 zip code, which includes Ocean Park and Sunset Park on the south side of the city.

As of October 31, 2017, nearly half of the home-shares licensed in the city were in the 90405 zip code, an area dominated by single-family residences, according to the report.

Seventy percent of the hosts were property owners, 29 percent were tenants and 1 percent were sub-tenants.


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