- calendar_month December 28, 2022
Report: Nearly Half of the Units Listed in LA Through Short Term Rental Companies Are Violating Regulations
Current Real Estate, Industry, Local News, RE News December 15, 2022December 15, 2022 Seth Styles
It’s been over three years since the city of Los Angeles passed laws designed to regulate out-of-control listings by short term rental companies. Yet, a recent report highlights that, in light of a disturbing lack of enforcement, hosts are still bending the rules. Or, in many cases, outright breaking them. David Wachsmuth, an urban planning professor at McGill University, recently shared his eye-opening study with The LAist. It hints at regulations too complex for easy enforcement. With consequences few and far between, people are recognizing they can easily ignore the laws. And amidst California’s housing dilemmas, long term rentals are paying the price.
Short Term Rental Companies Are Being Used With No Regard for the Law
Photo credit: Fluffy89502
If you’ve looked for a home or apartment in LA within the last 5 years, Wachsmuth’s study won’t surprise you. Nonetheless, the statistics are staggering. At 45%, nearly half of listings of short term rental companies like Airbnb and Vrbo are violating LA city laws.
The host of a short term rental property must register it with the city. At this point, the city assigns a registration number to the unit. Hosts must clearly display these registration numbers in their listing to meet civic compliance. Yet, the study revealed several listings with registration numbers that were either erroneous or long since expired.
People listing properties through short term rental companies even found ways to violate terms using a valid registration number. A popular means of abuse? Extending stays far beyond the maximum days stipulated by short term rentals. Some renters, mostly professionals working temporary gigs in the entertainment industry, even booked short term units for months at a time.
The Violations of Short Term Rental Companies Are Hurting Long Term Rentals
Photo credit: Envato
This isn’t Wachsmuth’s first investigation into flouted short term rental regulations. In mid-2021, he launched another investigation that turned up a staggering amount of inconsistencies and warning signs. By the end of his research, he’d determined a solid 1/3 of all LA area short term rental units were somehow in violation of established laws. To make matters worse, many of these illegal units were operating out of rent controlled buildings.
The violations of the law are particularly egregious in this case since they significantly hurt the availability of long term rentals. This isn’t exactly news. Even prior to these violations, critics highlighted how short term rental companies contributed to higher long term rents. Hosts removed long term rentals from the market in favor of more lucrative short term rental units.
However, LA’s short term rental laws were intended to curb an unsustainable trend. Regulations prevented hosts from using short term rental companies to list properties other than their primary residence. But with little to no repercussions for skirting the law, the regulations haven’t had the intended effect.
Violations Are Likely Costing Long-Term Renters $67 a Month
Photo credit: Envato
Yet, the passage of regulations brought some progress. In his 2019 assessment, Wachsmuth believed that 6,510 units had left the long term rentals market. Today, he’s revised that number to approximately 2,500 units removed from the long term market for short term use. It’s debatable whether this is a result of the regulations or of the global pandemic that dramatically reduced both international and domestic travel.
Either way, it’s refreshing to see that number drop so significantly over the years. Unfortunately, anyone who is renting long-term in LA is still likely feeling the burn of those 2,500 short term units. In fact, Wachsmuth has estimated that short term rental companies have driven long term rents up by around $67 a month.
The City Responds to Accusations of Lax Oversight
Los Angeles City Councilmember Bob Blumenfield responded on Friday, December 2nd to the accusations of lax oversight and enforcement. Rather than refuting the claims, he requested a variety of civic departments to analyze the investigations before hammering out a plan for future enforcement.
However, The LAist reports that an unnamed representative pointed out that an analysis of all short term rental companies in LA revealed a dramatic decrease in available temporary rentals. How dramatic? A drop from around 36,000 units in November 2019 to around 8,000 units in November 2022. Again, it’s uncertain as to whether this drop can be attributed to new regulations or the tourism crash facilitated by the global pandemic.
Hundreds of Millions of Dollars Left on the Table
Photo credit: Envato
The matter remains that the unenforced regulations are leaving a lot of money on the table that could be used to support a host of civic programs. By the guidelines defined in short term rental regulations, hosts can accrue fines of $500 daily when listing a unit in violation of the law. And units surpassing the 120 day-per-year maximum for short term rentals without express approval can accrue fines of $2,000 daily.
Wachsmuth calculates that, in light of the current number of listed units in violation, the city could have collected approximately $302.2 million in fines last year. However, of this amount, the city of LA collected a mere $36,500 between November 2021 and August 2022.
Will Wachsmuth’s report put much-needed heat on the powers that be to start regulating these short term rental laws? Or will hosts continue to exploit an obviously indifferent regulatory system for personal gain while long term rentals pay the bill? It will be interesting to watch how this story develops, assuming it continues to do so. Especially as California struggles to add millions of long term rental units to the market in just a few short years!
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