LA’s onerous rental rules threaten consumer privacy
I am the Sacramento-based Western region director for the R Street Institute, a Washington, D.C.-based think tank that has done extensive research on the issue of short-term rentals. Here is a recent study we’ve done on roomsharing throughout the country: http://www.rstreet.org/wp-content/uploads/2016/03/RSTREET55.pdf.
Our study gave cities a grade. “A” cities – such as Savannah, Georgia, San Diego and Dallas – have simple rules that protect consumers, but which are not so onerous that they clamp down on an innovative and growing part of the economy. They certainly don’t invade customers’ privacy. Note that Los Angeles already gets a failing grade with its current restrictions.
R Street definitely opposes the kind of punitive ordinances the Los Angeles Planning Commission is considering. For starters, short-term rentals are sources of income, jobs and economic growth. Rather than have empty rooms or houses languish, STRs let owners promote what these cities should applaud: making it easier for people to come to town, spend their money and enjoy local amenities. They do not contribute significantly to housing shortages.
The Los Angeles proposal has elements that are common in some other cities’ proposals – restrictions on the numbers of days that a property owner can rent out rooms and limiting such rentals to primary residences. Those are problematic for a variety of reasons, but Los Angeles’ ordinance poses a particular privacy threat to consumers. The proposal would collect three years’ worth of customer names, their length of stay and the prices they pay. The city’s Department of Finance would have access to that information and such data could potentially be misused. Furthermore, the potential fines in the ordinance are excessive.
While we understand concerns about neighborhood character, the prevalence of STRs suggests that, quite frankly, the nature of the community already has changed. By putting severe limits on strong demand for short-term housing in residential areas, such laws merely drive the process underground, creating black markets and depriving cities of revenue and the ability to enforce reasonable regulations that uphold the quality of life. In other words, underground businesses are far more difficult to tax and regulate than legitimate ones.
We’ve all seen neighborhoods and houses disrupted by unruly neighbors – many of whom have been long-term renters or even owners. The key with those situations, as with STRs, is to police the bad behavior, not shut down productive uses of property or undermine people’s property rights.
We’ve seen older, decrepit neighborhoods upgrade because of the profits possible from STRs. It can be an admirable source of regeneration in older cities (such as Anaheim, California, for instance). It’s a different story in pricy Los Angeles. But the affordability argument is something of a canard. This is from that recent R Street study: “There’s little evidence the current or near-term-future scale of short-term rentals is sufficiently large to have a significant impact on housing affordability.”
Usually, the affordability problem is driven by regulations and restrictions that make it too hard to build enough homes to meet the needs of a growing population. That certainly is a problem in Los Angeles. These kind of rentals will never account for more than a tiny percentage of Los Angeles housing units. If the city were serious about improving affordability, it would review its many rules that restrict the ability of developers to increase housing supply rather than make one industry a scapegoat.
Los Angeles is considering a policy that would harm local the tourist trade, the local economy and property rights, and that threatens consumer privacy. The proposed policy is overly invasive and punitive. The city should consider less-restrictive language.