LA Airbnb hosts charge higher rates and rake in big payouts amid city crackdown

Running an Airbnb in Los Angeles has never been so profitable.

As the city tries to crack down on illegal listings and advocacy groups complain about the company’s effect on LA’s housing crisis, hosts are charging higher rates than ever while taking payments increasingly important.

But don’t expect them to talk about it.

The data shows that a large number of dwellings are operating without active registration, which is required by the city to operate a short-term rental. Several of these hosts spoke to The Times anonymously for fear of being fined by the city or, even worse, having their listing taken down by Airbnb.

“It’s my main source of income,” said a host who operates three different accommodations. “I finally make a decent living from this. A single registration would not suffice.

Since 2020, host revenues have grown steadily, well beyond pre-pandemic levels. Average income jumped to $17,654 in 2022, up more than $4,000 year-over-year, and the numbers are at a similar pace for 2023, according to data from the analytics firm. short-term rental AllTheRooms.

In total, Los Angeles hosts earned $375 million last year, an Airbnb spokesperson said.

A few factors contribute to this increase. For one thing, daily rates for Airbnb rentals have climbed over the past four years, from $152 in 2019 to $244 in 2023. This is a trend happening in the short-term rental industry, as hotel and VRBO rates have steadily increased since COVID. -19 pandemic as well.

Basic supply and demand is another factor. Except for a dip in the early months of the pandemic, Airbnb occupancy rates have remained largely flat, with the average rental being occupied more than 40% of the time. But the number of announcements has dropped considerably.

In August 2019, there were 16,973 Airbnb listings in Los Angeles. Currently there are 7,360.

Supply is down at the moment, but advocates fear that if revenues continue to rise, more landlords will convert their properties to Airbnbs.

Much of the decline is due to the pandemic, but supply hasn’t increased since 2020, in part due to the city’s enforcement of its Home Sharing Ordinance, a law that came into effect in 2019 which restricts Angelenos to only hosting short term rentals. in their main residence – houses where they can prove that they live for at least six months a year.

Los Angeles and Airbnb have worked in tandem over the years to enforce the law, launching a system in 2020 that streamlines the process of identifying and removing illegal short-term rental listings.

It was effective; the number of short-term rental listings on all colocation sites has fallen by more than 70% over the past four years, from around 36,600 in November 2019 to just under 10,000 in June 2023, according to the planning department.

But there are plenty left.

The Times had previously reported that thousands of listings violated the law, and last year a report claimed that 22% of listings in Los Angeles hosted guests more than 180 days a year.

“I cannot afford to rent my accommodation for only six months a year. I would lose half of my income,” said a host who rents a two-bedroom apartment in Hollywood on Airbnb.

Two other Airbnb hosts hung up in the middle of an interview when asked if their listing was their primary residence or if their registration number was valid.

“It’s a ‘don’t ask, don’t tell’ system. I can’t afford to have my business threatened because of a registration number,” said one.

In August, there were 4,293 active listings for home sharing, according to the city’s planning department. But on Airbnb alone, there are currently 7,360 homes for rent.

“LA has a pretty big rent problem on its own, and then you have a rogue industry that’s taking over the city and starting to take rental properties off the market,” said Peter Dreier, a professor at Occidental College.

Dreier worked with the team that drafted the ULA Measure, a new tax that funnels money into affordable housing initiatives, and said the short-term rental industry is both contributing to the housing crisis and the homelessness crisis.

“When you take housing off the market and rent it out to tourists, one of the consequences is more people fighting for less housing. And that leads to higher rents,” he said.

The planning department prepares with other departments a report analyzing the application of the housing sharing ordinance. It will provide recommendations to City Council on how to improve the program.

In the meantime, more ads bring in more money for taxpayers. Los Angeles charges a temporary 14% resort tax, often referred to as “bed tax,” paid by guests of a hotel or short-term rental like Airbnb.

In the 2021-22 fiscal year, the city collected $33.88 million in temporary occupancy taxes, according to the planning department.

That’s a sizable sum, but a report by McGill University urban planning professor David Wachsmuth suggests the city could rake in even more by fining illegal short-term rental listings.

The study claims that 45% of all short-term rental listings are illegal in some way and that the city could have taxed between $56.8 million and $302.2 million in fines in 2022.

“I’ve never paid a fine, but my guests pay the tax. As long as the city gets money from somewhere, it’ll be fine,” the Hollywood Airbnb host said.

Randy Renick, an attorney at Hadsell Stormer Renick & Dai LLP, is executive director of Better Neighbors LA, a coalition that includes hotel workers, tenant rights groups and housing advocates. He co-founded the group in 2019 as part of a public education campaign to highlight the impact of short-term rentals on communities.

He said rental hosts are getting around the rules in several ways. One strategy is bait-and-switch, where a host will advertise that a property is somewhere near the Los Angeles border, such as West Hollywood, and therefore not subject to strict LA rules. But when tenants show up, the property is actually in Los Angeles.

Others give fake registration numbers – some smarter than others.

“1234567 was popular for a while,” Renick said.

Some simply use expired registration numbers, and others have used one active registration number but for multiple properties.

The organization’s website has a hotline for Angelenos to call and report illegal listings in their neighborhood, and Renick said they get several calls a week.

From there, they urge the city to take action on issues big and small. Sometimes it’s a call for a fine to be imposed on a certain property, and sometimes it’s a campaign about how short-term rentals can drive up long-term rents in an area by taking market houses and renting them out to tourists.

“We’re trying to show the impact of short-term renting and how it contributes to the housing and homelessness crisis,” Renick said. “Strict application of the measures will make it possible to put thousands of units back on long-term rental. »

He cited Santa Monica and New York as two cities that Los Angeles could take inspiration from. Santa Monica has a robust law enforcement system, including several full-time employees tasked with interviewing property owners and issuing fines for illegal listings.

The Coastal City only allows short-term rentals (less than 30 days) if the host lives on the property for the entire duration of the visitor’s stay. New York City passed a similar rule last year, and enforcement begins Tuesday.

While there’s a long way to go, Renick said Los Angeles has raised the bar on the evidence required to show that an ad is the host’s primary residence.

Frank Tai, owner of a luxury beachfront rental in Playa del Rey, witnessed this process. It has only one listing and makes sure to renew its license every year, but the process has become more laborious over the years as the city and Airbnb seek to detect illegal listings.

“I’m in compliance, but it’s a lot of work. I fill out a 40-page application every year and send in property tax bills, utility bills and other documents,” he said. “Every year, something goes backwards. They try to stay informed. »

Tai said the process was worth it. Its rental is very profitable; it’s booked all summer and nightly rates double during the holiday season. It hasn’t even seen a downturn during the pandemic, just a shift from out-of-town guests to Los Angeles residents looking for a staycation.

“I don’t sneak into the system, but I imagine people do because it’s very profitable,” he said.