The Los Angeles City Council on May 2 unanimously approved the first set of proposed rules to govern Airbnb Inc. and other companies in the short-term rental industry.

The ordinance caps at 120 days the amount of time each year that a residential unit can be rented out on Airbnb, HomeAway.com Inc. and other short-term rental platform companies, with the right to appeal for an extension. Only primary residences can be used for short-term rentals and any units subject to the city’s rent control ordinance (primarily those built before 1978) would be barred altogether from short-term rentals.

The rules must still go back to the city Planning Commission to formalize some of the details and then will come back to the full Council later this year for a final vote. Also, some tweaks could still come as various councilmembers asked city staff to look into proposals such as allowing short-term rental hosts to rent out their units for an entire year if they show proof they intend to remain on site the whole time.

Nonetheless, the May 2 vote is a major milestone in the four-year effort to regulate the burgeoning short-term rental industry.

Neighborhood groups and the hotel industry had long called for controls on the industry, contending that the practice disrupted neighborhoods as de-facto hotels were allowed to operate unchecked. Housing advocates also argued that commercial short-term rental operators were taking units off the long-term rental market at a time when there is a shortage of apartment units for low and middle-income households.

“We applaud the Los Angeles City Council for taking a critical step that provides common-sense protections, holds short-term rental platforms accountable in an effort to reduce their negative impacts on neighborhoods across Los Angeles,” Katherine Lugar, chief executive of the American Hotel & Lodging Association said in a statement. “This ordinance will protect affordable housing for Los Angeles residents including hotel employees, as well as preserving the fabric of neighborhoods.”

But Airbnb, HomeAway and their backers had argued that any broad attempt to limit short-term rentals would deprive Los Angeles residents of the ability to earn extra income at a time when living costs have been skyrocketing. Many short-term rental hosts have testified at city hearings that without this extra income, they would be forced to abandon their units because they could not afford the cost.

“We are pleased with the City Council’s decision to move forward with this proposal, which will allow thousands of Angelenos to earn valuable supplemental income by sharing their homes year-round," John Choi, Southern California Policy Manager for Airbnb, said. "This is an important step in the right direction and we look forward to continuing our work with City leaders as they finalize a clear and balanced home sharing policy for Los Angeles.”

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