California looks to regulate short-term rental units

Cities will have a way to enforce their regulations on short-term residential unit if a bill co-sponsored by the League of California Cities becomes law.

SB 346, which has passed the state Senate and Assembly, will also allow cities to collect the property tax owed to them and remove illegal units, according to a statement released by the Sacramento-based nonprofit.

“In a time of budget uncertainty for the local governments and the state alike, every tax dollar counts,” reads a statement issued by the league in support of the bill. “SB 346 is a revenue-generating and cost-saving measure for every community in California.”

Gov. Gavin Newsom has until Oct. 9 to sign or veto the bill, which was introduced by State Sen. Maria Elena Durazo, D-Los Angeles.

“Cal Cities is proud to sponsor this SB 346, which received overwhelming bipartisan support in the Legislature “said Carolyn Coleman, the league’s executive director and chief executive officer, in the statement. “Not a single vote was cast against it.”

The bill is also being sponsored by the California Association of County Treasurers and Tax Collectors.

Supporters say passing SB 346 is crucial for reasons besides cracking down on illegal units and collecting tax revenue: Los Angeles is scheduled to host the World Cup next year, the Super Bowl in 2027 and the Summer Olympics in 2028. All three events will attract short-term renters from around the world.

“The timing of the bill is key,” the Cal League statement reads.

Short-term rental units can also contribute to housing shortages, and they can help raise the rent charged at long-term facilities if the supply of long-term facilities dwindles, as it sometimes does when short-term rentals become more popular.

SB 346 is designed to be flexible and address as many of those problems as it can, said Ben Triffo, a legislative advocate for Cal Cities.

“Each community has different needs, and different rules,” Triffo said. “A university town might put in a strict cap on because they want to protect their student housing. The point is there are tax dollars owed, and they should be collected and we need a mechanism to do that.”

Introduced in February, SB 346 allows local governments to pass an ordinance requiring the rental property’s online platform – usually Airbnb or Vrbo – to report their property address to the appropriate local agency.

The address can be checked against the city’s records. If that number is not on the list of permitted short-term properties, the property owner could face a penalty, depending on how the local ordinance is written.

Local government is defined as a city, county or a combination of the two, a short-term lease one of 30 days or less. SB 346’s intent is to ensure that the transient occupancy tax, also known as a hotel or bed tax, is being collected properly, and that all regulations regarding short-term rentals in that jurisdiction are being followed.

SB 346 does not mention penalties, leaving that decision up to the cities and counties.

“Some places might have penalties, some might not have any,” Triffo said. “We wanted to be as open as we could on that issue. It’s up to the local jurisdictions.”

Seventy-five cities, including 12 in the Inland Empire, have endorsed SB 346. San Francisco County has also given the bill its stamp of approval.

“This is not confined to resort towns,” Triffo said. “Just look at the cities supporting the bill. They’re statewide. I think that shows it’s a serious issue.”

SB 346 received a strong endorsement from one Coachella Valley mayor.

“Indio welcomes visitors year-round,” said Indio Mayor Glenn Miller in the league’s statement, one several Southern California mayors quoted in favor of the legislation. “SB 346 brings the transparency and accountability we need from short-term rental platforms, so properties follow the rules and taxes are paid. That means fair competition for compliant hosts and stable funding for city services.”

Cal Cities, which represents 476 of California’s 483 cities, began hearing about problems with short-term rentals several years ago. One obstacle to solving those problems has been the online platforms that secure tenants for short-term rental units.

Cities and counties need addresses, but the online platforms won’t give that information to anyone other than their renters, because of safety concerns. All of the platforms have maps with dots that show the general location of a rental property, but not its exact address.

“They say it would be a violation of privacy, and that if we want that information, we have to subpoena them, but that’s not practical,” Triffo said. “Local governments can’t subpoena multi-national corporations every time they need that kind of information. We’d be challenged on every subpoena in federal court if we did.”

Neither Airbnb or Vrbo responded to emails seeking comment.

SB 346 is based in part on a bill that New York Gov. Kathy Hochul signed into law in December, Triffo said.

Both pieces of legislation require short-term rental platforms to give their addresses to their local jurisdictions before they receive their license.

Some California cities have passed ordinances meant to get their short-term rental units under control.

In 2022, Palm Spring passed its Vacation Rental Ordinance, which limits vacation residency to a residential property’s “ancillary or secondary use,” according to a statement on the city’s website.

The program also limits such occupancy to single-family residences, while requiring permits and operating requirements, according to the statement.

Now is the time for the state to take similar action regarding short-term rental units, according to Triffo.

“We have three events coming up that we know will cause a surge in demand,” Triffo said. “I think there’s a sense all over the state that now is the time do something.”