On the 12th of May, 2015, the City Council of Santa Monica adopted the “Home Sharing Ordinance,” which clarifies prohibitions against short term rentals and imposes regulations on home-sharing. The Home-Sharing Ordinance permits qualified residents (owners and long-term residents) to apply for a Home-Sharing Permit and Business License to home-share their primary residence. The following is a complete guideline for Santa Monica’s short term rental regulations so that anyone can be a responsible host when using platforms like Airbnb, VRBO, and other similar services. This rundown should give you a good start in understanding your local laws.
Home-Sharing Ordinance
The City Council intended to clarify the long-standing prohibition of vacation rentals in Santa Monica; in response to the rise in vacation rentals due to the popularity of Airbnb and other online platforms. They also wanted people to be able to rent out a spare room in their houses. Thus the City changed the law to allow for home-sharing. The Home-Sharing Ordinance regulates short term rentals in two ways:
- Home-Sharing – The Law permits home-sharing, which is defined as the renting of one or more bedrooms in the host’s principal residence for a period of 30 days or fewer, provided the host resides on-site in the home throughout the guest’s stay.
- Vacation Rental – A short term vacation rental is a whole or part of a dwelling unit that is rented for 30 days or less for exclusive transient use. In a vacation rental, the residence is available for the private use of the guest. However, the law maintains the City’s long-standing ban on short term vacation rentals.
Home-Sharing Permit Application
A host must obtain both a Home-Sharing Permit and Business License. There is a single application that hosts must complete to obtain both. The application for a Home-Sharing Permit shall include the following:
- The address of the proposed home-share.
- Type of dwelling unit (e.g., condo, apartment, single-family residence, duplex, triplex, ADU/guest house).
- Whether the applicant is a long-term resident or owner.
- Proof of the applicant’s status as a long-term resident, if applicable.
- Proof that the proposed home-share is the applicant’s primary residence
- The name and contact information of any other eligible residents of the proposed home-share who will be serving as hosts, coupled with verification that each designated host is an eligible resident of the proposed home-share.
- The proposed home-share residence’s square footage.
- The number of bedrooms in the proposed home-share.
- The maximum number of guests per night must not exceed the number allowed under Section 6.20.020(a)(6).
- Proof of insurance.
- Certification that the host will comply with the provisions of this Chapter and all short term rental regulations or be subject to the revocation of their Home-Sharing Permit and Business License.
- Any additional information required by the regulations issued under this Chapter.
Application Fee
Hosts must submit the initial application accompanied by a non-refundable $100 fee. Additionally, there is a State fee of $4 for the Business License. The annual cost to renew the Home-Sharing Permit is $50.
Hosts should ensure all checks or money orders are payable to the City of Santa Monica.
Occupancy Limits
The maximum occupancy of the home-share including the host, anyone else who resides in the home, and the visitors may not exceed the lesser of:
- A total of ten people.
- One person every 200 square feet of the dwelling unit.
- Two adults (excluding minor children) per bedroom.
Visitor Vehicle Limits
Visitors to home-shares are limited to, whichever is less
- No more than one vehicle per bedroom rented as part of the home-share.
- If the home-share is located in a preferential parking zone, no more than two vehicles must use the visiting permits available under SMMC Chapter 3.08.
Business License Tax
The City classifies Home-sharing activities as services and assigns them to Tax Rate Group III. Hence the first $60,000 in Gross Receipts is subject to a $75 annual tax. In addition, a 0.3% tax is imposed on every $1000 above $60,000. For example, if you earn $75,000 in home-share rent in a calendar year (without any deductions for expenses), the Business License tax you owe is:
- $75,000 Tax on the first $60,000 of Gross Receipts, plus
- $45.00 Tax on the remaining Gross Receipts of $15,000
- $120.00 Total Tax due on $75,000 in Gross Receipts
Note: Taxes on Business Licenses are not the same as income taxes. The total amount of receipts collected through rentals are the Gross Receipts. Unlike an income tax, no deductions may be taken for expenses.
Small Business Exemption
A host with gross receipts of $40,000 or less can qualify for a Small Business Exemption (SMMC 6.04.025). To be eligible for the exemption, a host must pay their tax on time; otherwise, the minimum tax of $75 plus any relevant penalties would be due.
Transient Occupancy Taxes
The total amount paid for a home-share rental is subject to a 14% tax imposed by the City per month. However, this tax does not apply to Federal, State, or City of Santa Monica employees on official business. The guest and the host pay this tax, or in some situations, the hosting platform collects and remits it to the City. If you utilize a hosting platform, make sure to ask if the platform collects and remits these taxes on your behalf.
Penalties
Administrative fines for advertising, facilitating, or operating a vacation rental begin at $1000/day per violation and increase if the violation is repeated. In addition to administrative fines, there may be other penalties and expenses, such as the cost of the investigation. Failure to comply with administrative citations may result in prosecution by the City Attorney’s Office or other legal options.
Other Regulations
As a responsible host, you must comprehend and abide by other contracts or regulations that bind you. These include leases, community rules, HOA rules, or other guidelines set up by tenant associations. Feel free to reach out to your landlord, housing authority, or community council to find out more. To get more information about other short term rental regulations, you can also visit Santa Monica’s official website or contact us.