Palo Alto profiting from unauthorized short-term rentals

PALO ALTO — Palo Alto is collecting taxes on Airbnb rentals in the city even as a zoning ordinance technically prohibits their operation in single-family residential districts.

Palo Alto is collecting taxes on Airbnb rentals in the city even as a zoning ordinance technically prohibits their operation in single-family residential districts.

The city – which has collected between $800,000 and $1.6 million in transient occupancy taxes on Airbnb rentals in the past year, according to city officials – could profit even more if Measure E on the November ballot passes. The measure would increase transient occupancy taxes on hotel stays and short-term stays provided by vacation rental websites in the city from 14 to 15.5 percent. The transient occupancy tax is charged for lodging rented for 30 days or less and it is collected by Airbnb for the city.

“Essentially our rules and our practice are not currently aligned,” Councilman Cory Wolbach said in an interview. “We asked a couple years ago for this to come back on our agenda, and it just hasn’t gotten on our agenda, so I’m going to push our mayor and city manager to bring this up again.”

“Basically, we say you can’t do it, but we generally don’t enforce it, and we collect taxes on it,” Wolbach added.

Redwood City, Menlo Park, Mountain View, Half Moon Bay, Cupertino and Santa Clara have either considered or passed new zoning laws to regulate or began taxing short-term rentals. But while Palo Alto’s City Council talked about updating zoning ordinances in 2015, 2016 and 2017 no changes were made.

At an Oct. 4 Palo Alto City Council candidate forum, a questioner asked whether the city should have and enforce additional restrictions on Airbnb.

“I think somebody occasionally renting out a room is not a problem,” Councilman Tom Dubois said at the meeting. “What’s a problem are you know when an entire building is rented, and there are bunk beds put in and it’s basically a hotel.”

Some critics of short-term lodging services say they contribute to the affordable housing crisis by taking units that could be rented out longer term off the market.

“We’re seeking long-term housing in the area,” Amy French, Palo’s chief planning official in the city’s code enforcement division, said in an interview. “It would be best if people are providing long-term rentals for the housing needs we have. That’s my opinion.”

According to AirDNA, a database that collects global data from Airbnb, 390 houses are active rentals on Airbnb in Palo Alto. In addition, 491 number of rooms within homes are available for rent. William Riggs, an assistant professor at the University of San Francisco’s School of Management, who sits on the city’s planning and transportation commission — acknowledged services like Airbnb take longer-term rental housing off the market, but said short-term rentals are also necessary and homeowners can make extra cash in an expensive part of the country.

“Maybe that’s the additional revenue you need to be able to afford that home,” he said referencing short-term rentals. “But also, it, long-term, actually provides an additional unit. Doesn’t matter whether or not it’s a short-term immediate or a long-term unit, it is an additional housing unit.”

According to French, only 27 complaints were submitted in the last three years about short-term rentals. And while Wolbach said he was eager for the council to discuss regulating short-term rentals, other members were less inclined.

“Sometimes I think, you know, government’s trying to solve problems that aren’t necessarily problems,” Councilman Adrian Fine said in an interview. “We have to be careful of that. I don’t really hear of a problem, and I don’t think we should go changing things if they’re not important to residents.”

The Code Enforcement Division regulates these units on a complaint-basis by telling owners their units violate city ordinances. With only two officers, however, French said it is hard to enforce the zoning laws.

When her son left for college, Veronique Rasky listed a room and bathroom in her home on Airbnb. The house was so quiet and she said the extra income was important. Over the past four years, she’s had more than 90 occupants.

If the city decides to make any changes to the laws regarding Airbnb, Rasky hopes they differentiate between those who rent a room and those who rent a house.

“Now, I’ve read in the paper, on forums and other places from people complaining about Airbnb hotels invading their neighborhood, multiple cars being parked and blocking parking spots for neighbors, and people coming and going without the owner being there,” she said in an interview. “So, I think that’s a totally different way of handling Airbnb and I can see why some people would have complaints about that.”

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