BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON TRANSPORTATION AND HOUSING
                              Senator Jim Beall, Chair
                                2015 - 2016  Regular 

          Bill No:          SB 593            Hearing Date:    4/21/2015
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          |Author:   |McGuire                                               |
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          |Version:  |4/6/2015                                              |
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          |Urgency:  |No                     |Fiscal:      |No              |
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          |Consultant|Randy Chinn                                           |
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          SUBJECT:  Residential units for tourist or transient use:   
          hosting platforms


            DIGEST:  This bill 1) requires electronic "hosting platforms"  
          (e.g., Airbnb) to regularly report the addresses of, nights of  
          use at, and revenues obtained by residences that were leased  
          through the platform;  2) prohibits the hosting platforms from  
          offering properties if prohibited by law; and 3) requires the  
          platforms to collect and remit any applicable transient  
          occupancy tax if requested by the local government.

          ANALYSIS:
          
          Renting a home or room has never been easier because of the rise  
          of several internet platforms.  VRBO and Homeaway have for years  
          been a source of vacation rental listings.  More recently,  
          Airbnb has expanded the availability of rentals to include  
          individual rooms as well as homes, encouraging many property  
          owners and renters to join the rental market.
            
          Existing law authorizes cities and counties to levy occupancy  
          taxes for the privilege of occupying rooms in hotels, inns,  
          homes or other lodging.

          This bill:
          
          Requires the hosting platforms to report quarterly to the city  
          or county the following:









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           The address of each property that was offered and rented  
            during the quarter
           The total number of nights the property was rented
           The amounts paid for the occupancy

          Prohibits the hosting platform from facilitating the rental of a  
          property if such rental is prohibited by the city or county.

          Authorizes a city or county to establish civil fines on the  
          hosting platforms of up to $1,000 for a first day of violation,  
          $2,000 for a second day of violation, and $5,000 for subsequent  
          days of violation of these provisions.  The platform must be  
          given written notice of the violation and 30 days to correct the  
          violation before a fine may be imposed.

          Requires the hosting platform to collect the applicable  
          transient occupancy tax if requested by the city or county.

          COMMENTS:

          1.Purpose of the bill.  The author believes that online vacation  
            rental businesses, described as hosting platforms in the bill  
            and exemplified by Airbnb and VRBO, force cities to bear the  
            costs and burdens of their operation.  Increased and  
            undisclosed tourist traffic alters neighborhood character,  
            creating additional demands on public safety.  The author  
            contends that the hosting platforms frequently ignore local  
            government prohibitions on the renting of residences for less  
            than 30 days and fail to collect and remit applicable  
            transient occupancy taxes.  Moreover, the increase in  
            short-term vacation rentals reduces the availability of  
            already scarce affordable housing.  

          2.Business is taking off.  Founded in 2008, Airbnb, a California  
            company based in San Francisco, claims to have served over 25  
            million guests with growth of almost three times compared to  
            2013, according to one estimate.  (Airbnb was originally  
            founded as AirBed and Breakfast, giving an indication of its  
            roots as a bedroom-sharing service.)  Homeaway, another online  
            vacation rental company, had over 1 million listings at the  
            end of 2014, 17% more than 2013.  The growth in online  
            vacation rentals has created growing pains, particularly in  
            Los Angeles and San Francisco.  Supporters are concerned about  
            unfair competition with hotels, the loss of housing, and  
            short-term vacation rentals arising in residential  









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            neighborhoods.  But the benefits to vacationers and  
            individuals renting out their homes and apartments are  
            undeniable, attested to by the remarkable growth of these  
            businesses.

          3.Level playing field.  Some parties raise concerns about fair  
            competition in that properties rented through the online  
            hosting platforms often don't assess the hotel tax, which can  
            be 10% or more.  To the extent that traditional hotel rentals  
            are lost to lodging rented through the hosting platforms,  
            cities will suffer revenue losses.

          4.Loss of housing stock.  Relatively new concerns have arisen  
            over the effect of these vacation rentals on the character of  
            neighborhoods and the availability of housing.  The Los  
            Angeles Alliance for a New Economy (LAANE), a nonprofit,  
            asserts that Airbnb has taken more than 7,300 units out of the  
            rental market, turning them into vacation rentals.  In Venice,  
            12.5% of all housing units have become Airbnb units, without  
            public approval.<1>   Late last year San Francisco approved an  
            ordinance legalizing short-term rentals with restrictions  
            while reinforcing its prohibition against the conversion of  
            residential housing into full-time de facto hotels.  Many  
            cities restrict or bar short-term rentals of less than 30  
            days.

          5.A hotel in every neighborhood.  While the increasingly  
            widespread availability of short-term rentals has given  
            vacationers more choices, it can burden neighborhoods with  
            unwanted guests.  Cities can control where hotels are placed,  
            and neighbors can have input when a residential usage is  
            changed to a commercial usage, but short-term vacation rentals  
            can pop up anywhere without oversight or regulation.  Public  
            safety officials may have more difficulty finding a  
            responsible party to deal with a problem tenant in a  
            short-term rental than a tenant in traditional lodging.

          6.The hub of the wheel.  This bill recognizes the hosting  
            platform as the center of the vacation rental universe,  
            connecting renters with properties.  From the perspective of a  
            local government that wishes to collect its hotel taxes and  
            regulate which properties are available for short-term  
            rentals, it is certainly convenient to do so as the hosting  


          ---------------------------
          <1> Airbnb, Rising Rent, and the Housing Crisis in Los Angeles,  
          March 2015.  Roy Samaan for LAANE.








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            platform has complete knowledge of which properties are  
            rented, when they're rented and how much they're rented for.   
            Denying a property access to the platform literally takes the  
            property off the market, a very effective compliance tool.

          7.Opponents' concerns.  Airbnb objects to being used to enforce  
            legal obligations on the individuals making properties  
            available on their site, known as hosts.  It believes it is an  
            invasion of privacy to reveal information about its hosts,  
            particularly with no limitation on how that information is  
            used.  There may be alternative ways to accomplish the goals  
            of this bill which reduce the obligations on the hosting  
            platforms:  

                 Who is offering?  An alternative to making the hosting  
               platform provide the rental information is for the local  
               governments to go onto the hosting platform and search for  
               properties in their jurisdiction.  This should be a  
               relatively simple search.

                 How much are they making?  The best way to ensure  
               accurate information about how much and how many days a  
               property was rented for would seem to be by getting it from  
               the hosting platform.  Such information could be obtained  
               directly from the host, but there are obvious incentives  
               for fudging the numbers. 

                 Enforcing local restrictions.  Cities impose varying  
               restrictions on short-term rentals, from prohibition to no  
               restriction at all.  When a city prohibits short-term  
               rentals, it is easy to identify violators on the hosting  
               platform.  The most effective way to enforce the  
               prohibition would be for the platform to bar the listing.  

               When a city allows a specific number of rental days, it is  
               harder to know when there is a violation, because a  
               property could be made available on multiple hosting  
               platforms and through more traditional rental mechanisms.   
               But the city could aggregate the information obtained from  
               the platforms.  At that point the city could identify  
               violators and enforce its rules through the platforms to  
               bar the listing.  There is precedent for using an  
               intermediary to enforce the law:  The California Public  
               Utilities Commission can require telephone companies to  
               disconnect service from moving companies who violate their  









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               regulations.

                 Collecting the hotel tax.  Airbnb has negotiated  
               agreements with several cities, including San Francisco,  
               San Jose, and Malibu, to collect and remit hotel taxes.   
               Other negotiations are in progress.  Airbnb is concerned  
               that the bill language may impose a tax liability upon it.   


          1.The sharing economy.  New internet-based business models are  
            challenging and disrupting traditional businesses.  These new  
            models are often ill-fitted to existing laws and regulations.   
            The impacts and consequences of these new business models are  
            not yet fully realized.  This bill attempts to reconcile the  
            benefits from one of these new business models with the  
            effects on competitors and community values.

          2.Double referral.  If this bill is successful, it should be  
            referred to the Rules Committee where a referral to the  
            Governance and Finance Committee will be considered.

          Related Legislation:
          
          SB 761 (Hall) - Requires the hosting platform to provide notice  
          to renters subleasing their property that they may be in  
          violation of their lease.
          FISCAL EFFECT:  Appropriation:  No    Fiscal Com.:  No    Local:  
           No


            POSITIONS:  (Communicated to the committee before noon on  
          Wednesday,
                          April 15, 2015.)
          
            SUPPORT:  

          California Association of Boutique and Breakfast Inns
          California Association of Code Enforcement Officers
          California Hotel and Lodging Association
          California Police Chiefs Association
          California Professional Firefighters
          California State Association of Counties
          California Teamsters Public Affairs Council
          Neighbors for Overnight Oversight
          Rural County Representatives of California









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          Santa Cruz county Conference and Visitors Council
          UNITE-HERE, AFL-CIO

          OPPOSITION:

          Airbnb
          Internet Association



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