Owners of second homes — and Airbnb — are set to receive a windfall under an initiative in Los Angeles Mayor Karen Bass’s new city budget proposal.
Hidden in more than 500 pages of city budget spending, the mayor calls for creating a new revenue stream by allowing people who own a second home to rent it out on a short-term basis, which is currently prohibited.
The mayor’s office says the measure will provide additional tax revenue for the city and additional beds for visitors during the 2028 Summer Olympics, which expires at the end of that year. To take effect, the City Council would need to approve the vacation rental ordinance.
Expanding the short-term rental market from the city’s existing housing stock has been strongly opposed by the hotel workers union and hotel companies, as well as affordable housing advocates, who say it would further reduce the city’s limited housing stock.
City Council members expressed similar concerns at Tuesday’s Budget and Finance Committee meeting.
“I have a list of dozens of (rent stabilized) units in my district … that are currently Airbnb units. It’s happening,” said Council Member Eunice Hernandez.
Council member Bob Blumenfield said such a significant policy change should proceed through the regular council process and not be approved as part of the budget.
“This is a very big policy. It will require a lot of scrutiny,” said Blumenfield, chair of the council’s Planning and Land Use Management Committee, which is scheduled to consider the vacation rental ordinance on May 12.
BASS spokeswoman Paige Sterling said the mayor wants as many beds as possible to be available in the city when the Olympics take place. Under current law, Los Angeles residents can only rent out their primary residence, not any additional “vacation” homes they own.
“They have met with a number of industry partners and believe that enabling additional short-term rentals is a step toward supporting this economic growth,” Sterling said.
The mayor’s budget proposal doesn’t specify how much the new measure would raise, but it stipulates that short-term vacation rental companies — and Airbnb is a leader in the industry — could offer “prepayment” of the transient occupancy tax they owe before the Olympics to help the city pay for major infrastructure projects.
People familiar with the situation say Airbnb has agreed to pay $50 million in prepaid occupancy taxes in negotiations with the city. The Base Office and Airbnb did not respond when asked if the same amount was being discussed, but opponents have seized on that figure.
“They’re bribing the city with $50 million to get an expansion of vacation rentals, which is the last thing our city needs because we already have a severe housing crisis,” said Kurt Peterson, president of Unite Here Local 11, the hotel workers union.
Council Member Nitya Raman, who is running against Bass in the city’s June 2 mayoral primary election, also criticized the mayor’s proposal.
“The idea that the city would entertain speculative tax prepayments associated with the expansion of short-term rentals while we are in an acute housing affordability and availability crisis needs to be properly investigated to consider its full implications,” he said in a statement.
Airbnb is pitching the proposal as an easy way to boost city revenue. The San Francisco-based company has joined a broad coalition of groups advocating for change – including chambers of commerce, trade unions and community organizations.
The coalition launched a campaign last year called “Save Our Services” touting the expansion of short-term rental revenues as a means to increase city revenues.
“We’re doubling our efforts to support Los Angeles’ resiliency and provide critical tax revenue that helps fund essential city services,” said Justin Wesson, Airbnb’s senior manager of public policy for California.
Airbnb has collected and paid more than $370 million to the city in transient occupancy taxes over the past decade, a company spokesperson said.
The LA Planning Department has estimated that passage of the ordinance, which was first proposed in 2018, would likely open up just under 5,500 new potential short-term rentals.
In an April 2 report, the department said allowing second homes to be listed as short-term rentals could take housing units off the market and result in rising rents citywide. This may also have a negative impact on the hotels of the city.
But the department issued another report 13 days later, this time saying that making the program temporary could reduce the impact on housing supply, help generate more tax revenue and open up more short-term rentals ahead of “expected increases in tourism during upcoming major events.”
Los Angeles is scheduled to host a number of major events, including the U.S. Women’s Open Golf Championship this June, the 2026 FIFA World Cup this summer, Super Bowl LXI in 2027 and then the Olympic and Paralympic Games in 2028.
Around LA County, municipalities vary widely in how they handle short-term vacation rentals.
Santa Monica bans them entirely, allowing only home-sharing, while Inglewood allows vacation rentals as long as they are within 1,000 feet of the owner’s primary residence and the person has lived in the city of Inglewood for 10 consecutive years.
Nella McCosker, president of the Central City Association, a member of the Save Our Services coalition, said the budget plan could kill two birds with one stone by generating new revenue for the city, while creating much-needed additional open beds for tourists.
“Is it so scary and unique to say how can we help achieve multiple goals?” he asked.
The mayor’s proposed budget now goes to the City Council, which can make changes before voting to adopt the final budget by June 1.
The Budget and Finance Committee agreed Tuesday that the mayor’s language about the vacation rental ordinance will not be taken out of the budget yet, but will be reconsidered on May 7.
“I have serious concerns about this happening through the budget process when it’s already happening through the normal process,” said Council Member Katy Yaroslavsky, who chairs the budget committee.
