ORANGE COUNTY, Calif. — Short-term rentals have boomed in recent years offering easy booking for customers and a host of options available to everyone with a smartphone.
But hoteliers are pushing for new legislation that could allow cities to create stricter enforcement rules. Some even hope a new California state law could even the playing field by saying that services like Airbnb and HomeAway.com are avoiding costs that competitors are stuck paying.
One bill, introduced by state Sen. Steve Glazer (D-Orinda), aimed to enhance the enforcement powers of local municipalities.
Introduced last year, SB 1049 aimed to allow issuance of hefty fines as high as $5,000 for violations. Glazer argued that many rentals can earn thousands in a weekend, necessitating such a high fine.
That bill stalled out last year, just before Airbnb stock catapulted upward.
Newport Beach is among a string of Orange County cities tiptoeing around tricky enforcement issues.
Competing government and private bodies have grappled with each other over how to enforce good management over short-term rentals. The Newport Beach City Council has routinely fenced over how to fine homeowners for misbehaving renters.
Despite complaints, cities have seen short-term rental numbers grow and with it fresh revenue. An additional concern has been what it might do for hotel profits.
“It’s definitely taken a bite out of the hotel business but it’s kind of hard to quantify,” said Alan Reay, president of Atlas Hospitality Group. “But there’s no question it’s taken a bite out of the industry.”
He also pointed to zoning issues, saying that these private residences aren’t set up for commercial use.
The city of Newport Beach has been a case study for some of this enforcement as it has struggled to negotiate with the California Coastal Commission. The city’s Newport Island, a sliver of land with just under 150 housing units with 18 permitted for short-term rental, has been a source of consternation. The city and the Coastal Commission have disagreed on how to manage and enforce the permits.
Short-term rentals like Airbnb have been able to pick up some of the slack. Most cities tax them like hotels, pulling a robust Transient Occupancy Tax often of at least 10% that goes straight to the city. But during the pandemic cities like Newport Beach and Costa Mesa issued temporary bans for health and safety reasons.
Hotels have been forced to make pricey investments in cleaning and enhancements to protect costumers and staff during COVID-19. Some have complained it has skewed the playing field, adding expenses to the hospitality industry while short-term rentals are unobstructed.
“The basic premise has been, and still is, we just want a level playing field,” said Lynn Mohrfeld, president and CEO of the California Hospitality and Lodging Association.
Hotels are on the hook for expensive insurance homeowners don’t pay, and Mohrfeld said the rules around short-term rentals predate these services.
He said he’s been issuing letters and supporting advertising backing legislation that could help hotels.
The local picture, and threat of Airbnb, is less clear.
“[Hotels] certainly look at it as competition, but they haven’t come to us and asked us to curb it for their sake,” said Will O’Neill, a former Newport Beach mayor and current city council member.
While the city earns millions off of short-term rentals, it’s nowhere near what it earns from hotels.
Without state legislation, the city is negotiating with the coastal commission to solidify its enforcement options.
For Mohrfeld, he’s waiting for laws that can add some clarity for local municipalities.
“It’s really still the wild west,” he said. “Here we are a decade later and it’s still really lawless.”