Can California HOA restrict short term rentals?

As short term rental services like Airbnb grow in popularity, it can be helpful to understand the legal restrictions on such rentals. These short term rentals allow homeowners to open up their homes and put up spare rooms or even couch space on rent by advertising them online – in a bid to earn revenue on the side. These boardings usually work out much cheaper than hotels in tourist areas, thereby adding to the popularity of these platforms.

While allowing paying guests to stay for under 30 days is illegal in New York City, California enjoys relatively liberal rules on short term rentals. In 2012, California ruled to allow short-term rentals. The state allows short term rentals, provided the owner contains a license and is prompt with paying his taxes and other fees. A 9% transient occupancy tax was levied on these rentals.

However, the south Californian coastal town of Santa Monica, which sees heavy tourist footfall, clamped down on these short term rentals in May this year. In what is expected to set the precedent for other towns, Santa Monica has announced a ban on housing units that are rented out for below one month.

The new ordinance demands that property owners cannot rent out rooms on a short-term basis without first applying for a business license. The ordinance also requires that the property owners must remain on the property throughout the duration of the rental.

In addition to this, these rentals have been slapped with a 14% occupancy tax, which is also paid by the hotels. Under the new rules, all short term rentals that do not adhere to these requirements are illegal arrangements. Those in violation of the ordinance can be slapped with a fine of $500. Law enforcement personnel have been trained to track down violators. Under this strategy, home-sharing sites are also required to report to the city about the host and the rates of the rental.

The stringent measures follow complaints that the rise of short term rentals in tourism-oriented destinations like Santa Monica were negatively affecting the real estate market. Reports suggested that apartments were being dedicated to these short term rental services, adding to an escalating housing shortage and in turn, sending rents sky high. Those in opposition of short term rental services also claim the influx of tourists into previously residence-only areas has resulted in a disruption of peaceful neighborhood environments.

Even as the public hearings on the legality of short term rentals get underway this week, the most popular of these platforms has stated that a clampdown would take away the opportunity each resident has to turn their home into an economic asset.