Evolving Home-Sharing Market Prompts a Variety of Local Regulations

This article originally appeared in Western Real Estate Business.

The growing popularity of short-terms rentals (STRs) has raised public concerns over issues like safety, taxation and the privacy of long-term residents. In response, various municipalities in California are reviewing or have enacted regulations that could have a substantial impact upon the STR market. Notably, however, the regulations already enacted or under consideration vary widely between differing municipalities and jurisdictions, meaning STR providers, including institutional providers, face uncertain compliance requirements and deadlines, depending upon the jurisdictions in which they intend to operate.

Navigating a Sea of Varied Regulations

Regulators generally view the STR market as falling into two primary categories: (1) hosted rentals, where the resident or owner is present during the rental period; and (2) unhosted rentals, where no permanent resident is present while the property is rented. In Santa Monica, where there has been some strong resistance to STRs, recent ordinances, including Santa Monica’s Home-Sharing Ordinance, effective June 12, 2015 (Santa Monica, Cal., Muni. Code art. 6, ch. 6.20 [2015]), essentially prohibit unhosted rentals (with express carve-outs for hotels, motels and traditional bed and- breakfasts), while regulating hosted rentals to compel hosts to obtain licenses and permits, collect and remit transient taxes and satisfy a number of related obligations. By prohibiting unhosted rentals, the Home-Sharing Ordinance effectively bars institutional landlords from entering the local market as STR providers.

Other cities, including San Francisco, are also grappling with the issue but have not prevented unhosted STR providers from conducting business in the city...