Proposed Short-Term Rental Tax Would Fund Affordable Housing in California

According to a story by Alexei Koseff for CalMatters, a proposed new tax on short-term rentals would fund affordable housing projects in California.

“Senate Bill 584 by state Sen. Monique Limón, a Santa Barbara Democrat, would impose a 15% tax on short-term rentals — the homes and rooms that owners rent out like hotels for 30 days or less at a time — starting in 2025.” The tax could generate an estimated $150 million per year.

After years of anecdotal evidence and complaints from neighbors, data is starting to show that short-term rentals can have an impact on the local housing market.“Recent research has found a reallocation of long-term housing units into short-term rentals, leading to an upward pressure on prices. A 2020 study by a team from the National Bureau of Economic Research; California State University, Northridge; and the University of Southern California pegged the number at an annual increase of $9 in monthly rent and $1,800 in home prices in the median neighborhood.”

While only 1 percent of California’s overall housing stock is short-term rentals, meaning the industry “cannot be considered a meaningful driver of California’s housing shortage” as a whole, that number is higher in popular tourist destinations and urban neighborhoods, putting pressure on housing at the hyper-local level.