Short-Term Rental Laws in California: Regulations, Airbnb & More

A short-term rental (STR) is typically defined as a residential unit that is rented for 30 days or less. A short-term rental may be advertised as a vacation rental. In many California cities and counties, local governments have passed short-rental ordinances to reduce noise, parking, partying and trash issues associated with short-term rentals.

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California cities and counties are particularly seeking to restrict short-term rentals that involve companies like Airbnb and VRBO, which stands for Vacation Rental By Owner. Yet local governments are also working out deals with property owners and technology platforms to legitimize the practice of short-term rental. For years, cities and counties missed out on capturing the Transient Occupancy Tax (TOT) that could be gathered from short-term rentals.

The rise of short-term renting appears to be closely tied to tourism and a rising interest in vacation rentals, as well as to California’s shortage of affordable housing. The number of units available for short-term rental is tied to California’s housing crisis. Property managers retain homes to use them exclusively for short-term rental. Prospective buyers would otherwise purchase these properties as a primary residence.

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Generally, cities and counties require those who offer properties for short-term rental to register their units and pay taxes on the rental income. The information regarding city-specific ordinances is current as of late February 2020. For more up-to-date information, a renter, owner or landlord should look up her city’s current ordinance, any related amendments and associated court cases.

As of November 2019, the city of Los Angeles has been enforcing a home-sharing ordinance. An individual must register with the city to offer his rental unit. He must have a valid registration number and include it in the rental listing for the unit. An individual who is not in compliance with this rule may be subject to daily fines.

The property to be rented must be the host’s primary residence, where she lives for over six months of the year. The residence cannot be subject to the city’s rent stabilization ordinance (RSO), which applies to most non-single-family rental units built before 1978. The property must be approved for residential use and have no pending citations. The host must have received a Transient Occupancy Tax Registration Certificate from the city’s office of finance or agree to exclusively list the unit on a hosting platform that has a platform agreement with the city of Los Angeles. Participating in home-sharing beyond 120 days a year is called extended home-sharing. In order to engage in this practice, a host must meet additional criteria.

Since October 2019, the city of Santa Monica has been enforcing its home-sharing ordinance. Home-sharing is defined as the rental of 30 consecutive days or less of one or more bedrooms in the home that is the host’s primary residence, while the host lives on-site throughout the visitor’s stay. The ordinance also covers vacation rentals, defined as the rental of 30 consecutive days or less of a home, in whole or in part, for exclusive transient use. The owner is not on site during this stay. The city of Santa Monica prohibits vacation rentals. There is not a maximum number of days that a property owner or landlord can offer a home share. An individual must apply for a home-sharing permit and a home-sharing business license, which both have fees.

As of January 2018, a San Francisco resident may only host short-term rentals in the same home where they are present at least 275 nights a year. Accessory dwelling units are not eligible for short-term rental. To become a host, an individual must register with the city as a business and then register to become a certified host. An individual who is not certified and advertises the unit for rent is subject to penalties. An individual must have property liability insurance of at least $500,000 or provide proof that the platform or website provides property insurance of this amount or more. A new resident must have lived in the dwelling for at least 60 consecutive days prior to submitting an application to be certified. An owner or renter of a multi-unit building may register only the unit in which she lives.

San Francisco’s regulations are among the strictest in the state. This is because the city had seen homes start to be operated as tourist "hotels" in manners inconsistent with residential use. Neighbors had complained about guests coming and going at all hours, as well as a lack of parking and an increase in trash. San Francisco explicitly states on its website that an individual may not host more than five simultaneous distinct renters in the same residential unit or no more than five individual beds as separate, bookable listings at the same time. An individual is also prohibited from renting areas in the home that were completed without building permits. In addition, a renter in a rent-controlled unit may not make more than his monthly rent from short-term rental fees that he charged in the same month to guests.

As of July 2018, an individual who wants to rent out property or a portion of a property located within the City of San Diego for less than one month must apply for a Transient Occupancy Registration Certificate. The City of San Diego limits short-term rental to a renter or owner’s primary residence. If an individual has units on the same property as her residence, like a duplex, she may get a license for a second vacation rental.

A renter, owner or landlord who wants to offer a short-term rental should take these steps:

• Read the city and/or county ordinance regarding short-term rentals.
• Read the city or county-specific help page of the STR booking company like VRBO he may use on offering short-term rentals. 
• Determine how he will advertise the unit as an STR and for how long.
• If the individual is a renter, he should review his lease to determine whether he is allowed to sublet his unit for short-term rentals. If the lease does not allow this practice, the renter could face eviction for violating the terms of the lease. This is true even if the city or county ordinance allows STRs. 
• If the lease is vague, the renter should get explicit, written permission from his landlord to engage in this practice. As an example, the city of Los Angeles requires that a renter or lessee obtain a notarized affidavit signed by the property owner or landlord that authorizes the host to participate in home sharing.
• Apply for all necessary licenses and engage in all necessary registrations. 
• Develop a system to retain and pay the Transient Occupancy Tax he will owe the city or county.  

An individual who is curious about what a renter, owner or landlord can do with a property under a local ordinance should contact a real estate attorney experienced in short-term rentals. The attorney should be familiar with the local ordinance, as well as the procedures to register a short-term rental as a business and obtain the appropriate licenses.

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