AIRBNB and City of Los Angeles Strike Tax Deal; Neighborhood Groups Outraged

It has allowed people to travel more cheaply and allows tenants to make money off of spare bedrooms. But at the same time it has emptied out entire neighborhoods of homes and replaced families with hotel guests. It is called AIRBNB, short for Air Bed N Breakfast. And it is about to be legal and taxed in the city of Los Angeles.

Airbnb will soon begin collecting a 14% tourist tax for the City of Los Angeles. The deal, announced on July 18, is expected to provide more than $5 million in annual revenue from lodging and rental hosts.

Residents who rent out rooms or houses are already supposed to pay taxes, but the city has found it impossible to locate the homeowners and collect.

Under the new agreement, AIRBNB will collect the tax directly from hosts who rent through their online marketplace. AIRBNB is the largest of several sites that allow travelers and homeowners to connect for short term stays.

The added revenue is slated to go toward city homeless programs. The city estimates it lost $5 million of hotel room revenue last year, while Airbnb says the revenue could be closer to 20 million.

In 2015, the LA City Council rejected a similar agreement because the short-term rentals are illegal in many parts of the city. This year, they determined to collect the money even though a law that would legalize and regulate the business is still under discussion.

"We just want to make sure that while that conversation is taking place, the city is not missing out on millions of dollars in revenues," said City Administrative Officer Miguel Santana, L.A.'s top budget official.

Needless to say, the hosts are not pleased that they are now being forced to pay a tax they could easily sidestep in the past.

Even more upset are critics of the industry who fear that the tax offers legitimacy to a business that is otherwise still illegal. Many neighborhood organizations object to having a commercial enterprise bringing traffic and strangers onto their residential streets.

Dr. Judith Goldman of Keep Our Neighborhoods First, warns that "entire neighborhoods in Venice and Silverlake have been emptied out by Airbnb quote replacing families and permanent residents with transients who have no stake in the neighborhood. This at a time when we have a homeless crisis and a housing crisis. It's just not the best choice for the City of Los Angeles or it's neighborhoods", she said

Housing activists are alarmed at the number of rental units that are pulled from the standard market when short-term stays are allowed. A host can easily double his income by taking advantage of a site like AIRBNB. Reduced availability of traditional leasing leads to housing shortages for individuals or families who are permanent residents of the area, and this can cause the regional housing costs to soar.

The proposed regulations would allow the city to fine an online platform like AIRBNB if they allow an unregistered host to advertise. AIRBNB has sued San Francisco in an attempt to ban a similar law.

The newly-announced tax collection agreement specifically allows for an immediate change if any regulations are passed, but given all of the parties involved, this debate is likely to last for a long, long time.

AIRBNB is an online marketplace that enables people to list, find, then rent vacation homes for a processing fee. It has over 1,500,000 listings in 34,000 cities and 191 countries. Founded in August 2008 and headquartered in San Francisco, California, the company is privately owned and operated.

In October 2015, Jersey City, New Jersey became the first city in the New York metropolitan area to legalize Airbnb, and add it to their existing body of hotels and motels that pay taxes. In the past, businesses were regulated by zoning laws, but Mayor Steven Fulop stated that the city does not have enough inspectors to deal the number of local units being rented out, approximately 300 of which rented through the service as of that date, and that rapid-evolving technology such as Airbnb made doing so impossible.

Under the new legislation, Airbnb pays the city 6 percent hotel tax on the residential properties whose owners rent temporary living space to tourists for under 30 days, which is estimated to bring $1 million in revenue to the city, and expand tourist capacity beyond the city's 13 existing hotels. Airbnb will also provide insurance protection to homeowners in the event damage done to their residence by renters. The new laws will not prevent condominium associations from voting to prohibit use of Airbnb in their buildings