Airbnb, HomeAway, and other home-sharing companies that have operated in a legal gray area in the city of Los Angeles are girding for a battle with hotel owners that claim the upstarts are cutting into their business.
In advance of City Council hearings next month, both sides have engaged high-powered lobbyists to make the case to council members. Now hoteliers are taking things further by partnering with their traditional nemeses, labor unions, in pushing for strict limits on short-term rental operators.
Two weeks ago, a coalition of hotel and labor groups sent Mayor Eric Garcetti a letter urging him to delay tax collection from Airbnb hosts, saying the tax agreement gives Airbnb legitimacy even as city officials are considering prohibitions on some types of short-term rentals. Airbnb agreed to a deal with the city in July to start collecting a 14 percent lodging tax from renters.
“This is such a hot-button issue for us right now that we are making common ground with groups that had previously been on the other side from us,” said Robert Amano, president of the Hotel Association of Los Angeles. Just three years ago, Amano was blasting the Hotel Employees and Restaurant Employees union and its nonprofit ally, the Los Angeles Alliance for a New Economy, for pushing broader living-wage legislation for hotels; now, all three groups have signed the letter to Garcetti.
Airbnb spokeswoman Allison Schumer said the tax deal struck earlier this summer is the core of a compromise that allows the San Francisco company to operate in Los Angeles.
“We have a commitment to pay taxes as part of our community compact in every city that we operate in,” she said.
The tax deal is only one skirmish in the larger battle set to play out before City Council committees in the second half of September. Hoteliers contend Airbnb and similar home-sharing companies have increasingly penetrated the multifamily market, turning some former apartment buildings into de facto hotels that compete with established hotels.
“It’s turned into something way beyond just a way for a struggling homeowner to make ends meet by renting out that extra room for a week or two at a time,” Amano said. “It has now become a commercial enterprise going after the heart of the hotel business, especially at smaller hotels.”
One local hotel operator who benefitted from overflow bookings during major citywide conventions said his hotel has seen a drop since Airbnb started operating here.
“We see the impact of Airbnb and other short-term rental operations primarily coming when there’s a citywide compression for a major convention,” said Mark Davis, general manager for the Hilton Universal City Hotel near Universal Studios.
In particular, Davis cited the last several Electronic Entertainment Expo (E3) events at the Los Angeles Convention Center. Typically, as rooms fill up downtown, overflow bookings go to places such as the Hilton Universal that have easy subway access.
“Our bookings have been down about 5 percent to 10 percent each year just for that show,” said Davis, noting other hotels have also booked fewer rooms during E3 even though overall expo attendance has been up. “The difficulty is that we block off rooms months in advance, so when we have no-shows, it makes it difficult to remarket the rooms.”
Amano’s group, along with the California Hotel & Lodging Association and the American Hotel & Lodging Association, want Airbnb and other home-sharing companies to play by the same rules as traditional hotels, including compliance with fire-life-safety standards, health inspections, and paying bed taxes. They also want short-term rentals banned from multifamily properties and restricted to homes where the owner is also the primary resident. In addition, they’re asking for a strict cap of 90 days or less out of the year that homeowners can rent out space using short-term rental companies.
A plan passed by the Los Angeles City Planning Commission in June called for a cap of 180 days and a shorter cap of 15 days for properties that the owner does not live in.
Hotel groups have hired local lobbying firms Kindel Gagan and Jimmy Blackman & Associates to make their case to city officials. Airbnb, which has hired lobbying firm Arnie Berghoff & Associates, and its business group allies contend that home-sharing actually boosts the economy, giving visitors more affordable options and allowing them to spend more at local stores, restaurants, and entertainment venues.
“It’s estimated that for every $1 spent on a short-term rental, $4 to $5 more are spent in the local economy,” said Leron Gubler, chief executive of the Hollywood Chamber of Commerce, in a recent op-ed supporting Airbnb and short-term rental companies. The extra spending “contributes to the growth of small businesses from Realtors to bookkeepers, to restaurant owners and landscapers. … Short-term rentals are an integral part of our tourism sector, helping to ensure the health of Hollywood’s local economy as well as our regional economy.”
Freedom to rent
While many business groups have come down on one side or the other, one local group has found itself split on the spread of Airbnb: the Apartment Association of Greater Los Angeles.
Some landlords have pursued renting out some of their units through short-term rental operators such as Airbnb and want greater flexibility to do so in the future, according to Jim Clarke, the group’s government affairs consultant. Currently, owners of pre-1979 buildings subject to the city’s rent stabilization ordinance are banned from renting units for less than 30 days; that ban is slated to continue under the proposed ordinance. Owners of some of these older buildings who operate on very slim margins would welcome a change in the law to allow them the opportunity to rent out units through Airbnb.
Other landlords are far more concerned about tenants offering up their apartments through Airbnb. And because courts have determined that a sublet comprises anything longer than 30 days, shorter stays are accepted under the law even when a rental contract bars sublets.
“In these cases, the landlord has no control over who is coming in and out of those units, which poses tremendous liability issues, not to mention issues of noise and trash,” Clarke said. “There’s no tenant screening going on.”
It is for this reason that the organization last month finally took a stand and came out against allowing Airbnb to operate in multifamily buildings, he said.
But that stance could change if Airbnb and other short-term rental operators would agree to give the landlords a role in screening customers who book through Airbnb.
“The key issue for us is the total lack of control we have over who is in our buildings,” he said.
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