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Santa Monica Versus Airbnb: A Dramatic Drop in Inventory

The recent culmination in Santa Monica’s battle against the short-term rental industry has dramatically impacted Airbnb inventory in the city.

 

In June 2018, a federal district court upheld the City of Santa Monica’s existing home-sharing law that was previously challenged by Airbnb. The court dismissed Airbnb’s challenge completely, meaning law enforcement could continue clamping down on illegal home rentals.

 

Earlier this year, the U.S. district court for the Central District of California ruled in favor of the City of Santa Monica who brought the case against Airbnb. The City of Santa Monica can now uphold and enforce its Home-Sharing Ordinance that originally went into effect on June 12, 2015.

 

After the ruling, Airbnb inventory fell drastically. AllTheRooms’ unique data shows a 38.9% drop in total inventory from May to June 2018, detailed below.

There was also a steep decline in gross revenue, which decreased by 17.5% over the same period. There is no reason to believe the market size has been altered, leaving consumer demand to increase – in fact, the occupancy rate has grown 17.6% over the past month.

 

As occupancy rates improve, the Revenue per Available Room (RevPAR) will likely also see adjustments. RevPAR, which is defined as total room revenue divided by rooms available, saw a 27% increase from May to June. This is more than double the anticipated seasonality increase, which is based on data from the previous year, of 13%. Perhaps not the worst result for those who home-share legally, benefiting from increased demand.

The ordinance offers a legal framework for home rentals: visitors are permitted to stay for a 30-day period (or less), as long as one one of the primary residents is present during the visitors’ stay. Hosts listing their property on the site will need to apply for a business license and fulfill various tax requirements. Clearly, the ordinance has had an effect on the vacation rental market.

 

The legislation seems to strike a balance: residents can earn extra income through regulated home-sharing, while officials can keep a watchful eye on Santa Monica’s rising housing prices and illegal vacation rentals.

 

The situation in Santa Monica is a prime case study for premier tourist destinations across the country struggling with vacation rental ordinance. Santa Monica, being one of the most popular vacation destinations in California, is capable of charging high room rates, leaving home rentals as one of the more affordable options for many visitors. On the flipside, many locals feel that Airbnb and others are responsible for pricing out long-term renters by offering platforms that avoid the types of regulations and taxes that are imposed on hotels and official home rentals.

 

Regulators have stepped in to try and settle the issue, but the stances municipalities take have varied across the country. Regulation attempts have largely exacerbated divisions in Santa Monica and throughout many cities across the US.

 

On one side of the debate are hosts. Homeowners are cashing in on the demand for accommodation from travelers in order to supplement their income and the high cost of living. Meanwhile, others use it as a lucrative business opportunity, often managing multiple properties as an active source of income.  On the other side lies law enforcement and local government officials who are keen to restrict those operating their vacation rental illegally and collect taxes on law-abiding homeshare properties. There is also a  growing concern from communities due to rising housing prices, many blaming the short term vacation rental market for reducing the supply of affordable housing.

 

Since the regulations have been upheld, some locals are employing innovative methods to game the system, including removing their listing during business hours and falsifying addresses so they don’t list directly in Santa Monica.

 

Santa Monica has followed in the footsteps of other cities that have taken ‘anti-Airbnb’ actions, including the likes of San Francisco and Miami Beach, and only time will tell how this will continue to impact the short-term vacation rental industry.

Santa Monica Versus Airbnb: A Dramatic Drop in Inventory
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