Income from LA’s Airbnb Tax at War with Nervous Neighborhood Interests

LA WATCHDOG--The second most dangerous place in the City of Los Angeles is when you stand between cash and the City’s General Fund, even if the source of this revenue adversely impacts our neighborhoods and quality of life.  

This is the case with the City’s 14% Transient Occupancy Tax (the “hotel tax”) that is collected by Airbnb and other short term rental web sites (collectively, “Airbnb”) from their hosts who illegally rent their rooms, apartments, and houses for less than 30 days. 

We are not talking chump change for this recently discovered gold mine.  

For the fiscal year ending June 30, 2017, the City budgeted revenue of $5.8 million from Airbnb, up from zero in the previous year.  But lo and behold, the revised estimate is a whopping $27.5 million, a $21.7 million bump that aroused the financial wizards that occupy City Hall.  And for the upcoming fiscal year beginning July 1, 2017, the City is projecting a haul of $33.7 million, a 23% increase from the revised estimate. 

This implies that Airbnb hosts had revenues of $240 million, which, in turn, produced over $30 million of revenue for Airbnb. 

While Airbnb, its hosts, and the City each have a vested interest in maximizing revenue, this financial goal may run counter to the wishes of many Angelenos who believe that the in-and-out flow of transients disturbs their neighborhoods and compromises their safety, quality of life, and quiet enjoyment of their neighborhoods and apartment complexes.    

The hotel industry is also opposed to Airbnb because it represents a competitive threat, diverting revenue from their hotels by offering a low-cost alternative for tourists and the business community. 

The unions that represent hotel employees are also bent out of shape as they believe that the diversion of revenue from hotels will result in fewer union jobs and lower dues revenue to cover their overhead.  

The affordable housing and tenants’ rights advocates are also opposed to Airbnb because selected landlords are converting apartments to short-term rentals, depleting the supply and causing already high rents to increase.  This may force many displaced and already rent burdened tenants into even more over-crowded apartments or onto the harsh streets of LA.       

The budgeted revenue assumes that there will be no change in the existing policy. But the City Administrative Officer estimated that if the Airbnb hosts were limited to one property and if the annual number of nights booked is capped at 180, then revenue would drop from 46%, from $33.7 million to $18.2 million, a swing of $15.5 million.  

Several organizations such as Keep Neighborhoods First are proposing a 60-day cap that they argue will allow for true home sharing and preserve affordable housing by limiting the incentive for landlords to enter the short term rental market. But this cap may further reduce revenues for the City. 

The Planning and Land Use Management Committee chaired by Jose Huizar is expected to consider the Home Sharing Ordinance that will pit the financial interests of the City and Airbnb and its hosts against quality of life interests of homeowners and apartment renters, the hotel industry and their unions, and rent burdened tenants and their advocates.  

More than likely, the money grubbing Mayor and City Council will put on a show and express their concerns, but the result will be that the Garcetti and the City Council will sell us out and go with the dough.  

As a side note, overall revenues from the hotel tax are projected to increase by almost 7% to $282 million.  This represents almost 5% of General Fund revenue.  But this revenue estimate may be optimistic as international visitors, who spend more than twice as much as domestic tourists, may be turned off by the Trump Effect and the strong dollar. 

By the way, the most dangerous place in Los Angeles is when you are between the campaign war chests of our Elected Elite and cash campaign contributions from real estate developers, leaders of the City’s unions, and other self-serving ring kissers such as Airbnb.

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  He can be reached at: