Why Airbnb Paid $20,000 to the City of Santa Monica

A little over a year after enacting one of the strictest short-term rental laws in the U.S., the city of Santa Monica has issued 893 fines to local property owners and the online platforms that display short-term rental listings, and has collected $20,000 from Airbnb.

Santa Monica's law, which took effect last June, restricts its property owners from renting out their homes and apartments on a short-term basis. Those who violate the law can face fines of up to $500. The online platforms are also prohibited from posting listings for short-term rentals in Santa Monica.

The City Council unanimously approved the restrictions last year after residents complained that Airbnb rentals were spreading throughout the city, leaving fewer traditional apartments available for residents to lease, which in turn brought up rental prices in an already expensive market. Shortly after approving the restrictions, the city set up an enforcement wing to identify people who were violating the law.

Of the 893 fines issued, 618 of them went to the online platforms, which include Airbnb. Councilman Kevin McKeown confirmed that Airbnb has paid $20,000 in fines so far.

While that amount is tiny for a startup now valued at $30 billion, it appears to mark a rare capitulation for a company that continues to strongly oppose the Santa Monica ordinance and has taken a more adversarial route in other cities. Airbnb filed suit against its hometown of San Francisco last month over the city's demand it turn over information about hosts.

Airbnb declined an interview request but issued the following statement about Santa Monica:

While we've responded to the city's notices, we continue exploring all options and remain hopeful that the city will revisit these misguided rules that harm middle-income Californians.

Santa Monica city officials stressed that talks with Airbnb are ongoing, and that since March the company has stepped up efforts to comply with the ordinance, which has resulted in a sharp increase in the number of citations issued to short-term rental hosts.

"They have taken some voluntary measures to inform Santa Monica hosts of the law," said Constance Farrell, a city spokeswoman. "They’ve also included a new field on their website for hosts for legal home shares.” (The city defines legal home shares as when the owner stays in the home with their guest, and the guest stays no longer than 30 days.)

If hosts don't take down their listings or fail to pay fines, they can face criminal prosecution, which is what happened to one Santa Monica property owner, Scott Shatford, who was was charged with eight misdemeanor counts earlier this month. The city says to expect more prosecutions.

Santa Monica told KPCC its enforcement strategy is working, and its analysis is showing that fewer people are advertising short-term rentals online. That is evident if you look at Airbnb and look for Santa Monica listings. They’ve become much tougher, though not impossible, to find. A city analysis showed before the law took effect last June, there were up to 1,700 illegal rental units on Airbnb and other platforms in Santa Monica. Now the city estimates there are about 500 on just Airbnb, according to Farrell.

“While there’s really been a surge in available short-term rentals in neighboring communities, we’ve kept a hold on ours and decreased the number of available units," said Farrell.

Robert St. Genis, executive director of the Los Angeles Short Term Rental Alliance, which represents short-term rental owners, acknowledged a decline in listings in Santa Monica but said the ordinance has done nothing to bring down rental prices.

"It is certainly not helping tourism in Santa Monica, and it is certainly hurting individuals -- from housekeepers to homeowners -- and it is not having a desired impact on affordable housing," St. Genis said.

He said the city should be putting the money it collects from transient occupancy taxes toward funding city services, rather than policing short-term rentals.

"They should be using it for something useful," he said.

McKeown said it was unrealistic to expect the law alone to bring down housing costs, but that the city has had some success in preserving neighborhoods.

"What we have done is eliminate some of the competition from already-scarce housing that was making housing costs even worse,” he said.

What has happened in Santa Monica could provide a template to Los Angeles, which recently reached an agreement with Airbnb to collect transient occupancy taxes, even as the City Council considers new restrictions on short-term rentals.