Los Angeles is finally regulating Airbnb stays — here's what the new short-term rental law means for hosts and travelers

The tide is turning in Los Angeles.

On December 11, the 15-person Los Angeles City Council unanimously voted to approve a new set of rules regarding short-term rentals.

The law, set to go into effect in July, finally legalizes short-term rentals in Los Angeles, but places a few significant restrictions on hosts. The regulations affect rental sites including Airbnb, HomeAway, and Vacation Rentals by Owner, or VRBO.

Most notably, it limits the number of days a host can rent out their home to 120 days a year and introduces a new "extended home-sharing" option to hosts who have been registered for at least six months and hosted for at least 60 days, Curbed reported. To qualify, hosts have to be citation-free and pay a $850 fee.

It also bars residents from renting out any home or apartment that is not their primary residence (where they live for at least six months of the year), is under rent stabilization rules, or is considered affordable housing. That means multi-family apartment building landlords would not be able to rent out individual units on a short-term basis, unless they live there. The same goes for homeowners who rent out a second property or vacation home on a home-share site.

The cost to register a short-term rental with the city will be $89 a year, according to Curbed.

There are more than 16,700 Airbnb rentals available in Los Angeles right now; 65% are for entire homes. BusinessInsider

Under the new regulations, home-sharing platforms will be fined $1,000 a day for processing any booking from a host who is unregistered with the city or exceeds the annual 120-day limit.

"We crafted an ordinance that allows good operators to thrive and weeds out those who are cited as nuisances to their neighbors," Councilman Jose Huizar, the author of the ordinance, which has been in the works since 2015, said when the ordinance was approved in May.

There are more than 18,923 Airbnb rentals available in Los Angeles right now, about 65% of which are listings for entire homes, according to Airbnb tracker AirDNA. The average daily rate for rentals is $154.

The city of Los Angeles does not include Santa Monica, a popular beach community and tourist destination that has its own home-sharing rules.

It's unclear how many current Airbnb listings will be affected by the new regulations; Airbnb does not release the addresses of its rentals to the public or to the city of Los Angeles.

Under the new regulations, rental days would be capped at 120 for hosts. BusinessInsider

Accessory dwelling units, or ADUs, have become increasingly popular in Los Angeles since a January 2017 law made it easier for homeowners to build "granny flats," or second units, on their property.

Under the new law, ADUs for which a building application was submitted on or after January 2017 cannot be rented out as a home-share, unless the resident can prove the ADU is their primary home.

Los Angeles and Airbnb have been battling it out for years over ways to regulate, and ultimately both benefit, from home-sharing. Some people argue Airbnb disrupts neighborhoods and inflames the housing crisis, while supporters say it's a way for struggling residents to earn extra income and promotes tourism to the city.

In 2016, the city of Los Angeles reached a deal with Airbnb in which the home-sharing site would collect a 14% transient occupancy tax on the listing price for stays of 30 nights or less, which has net the city $100 million in tax revenue already, according to an Airbnb press release.

In a statement provided to Business Insider on Wednesday, Airbnb's public policy manager John Choi said, "Today the City Council voted to legalize homesharing in LA, providing thousands of Angelenos a way to earn critical income to make ends meet, and launched a pathway to regulate the city's longstanding vacation rental market with sensible guardrails to protect housing. This is a big step in the right direction and we remain committed to working with the city to develop comprehensive, enforceable rules that are a model for cities around the world."

Airbnb has warned city officials that capping the number of days a host can rent their home, or restricting the type of housing, could greatly impact tax revenue. City officials are likely concerned about more than just tax revenue, however. Though home-share horror stories are rare, regulation may be able to make the vacation-rental industry safer for local residents and travelers alike.

The company has spent about $1.3 million on lobbying efforts related to LA city regulations in the last four years, according to city disclosures reviewed by the LA Times.

Los Angeles is finally regulating Airbnb stays — here's what the new short-term rental law means for hosts and travelers

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