Sponsored short-term rental bill sails into second house

By Brian Hendershot, Cal Cities Advocate managing editor, and Ben Triffo, legislative advocate

A key short-term rental bill sponsored by Cal Cities passed out of the Senate last week. SB 346 (Durazo) would help cities enforce their short-term rental ordinances and ensure they receive the correct amount of transient occupancy taxes.

The measure passed 38-0 with unanimous bipartisan support. Sen. Steven Choi, a former Irvine mayor, described it on the floor as “the bare minimum."

“The bill also respects local control,” Choi stated. “SB 346 doesn't mandate any new taxes or restrictions. It simply requires that when a city like Irvine enacts a short-term rental ordinance, platforms must provide data that allows meaningful enforcement.”

Why it matters

Many cities have ordinances regulating, limiting, or banning short-term rentals. However, enforcing these ordinances is often difficult. Short-term rental platforms do not display the addresses of properties on their listings, making it nearly impossible to tell if a unit is legally licensed or whether platforms are collecting and remitting the correct transient occupancy taxes (TOT).

“Unlicensed operators may be operating in violation of local ordinances or failing to pay taxes, and they create unfair competition for hosts in their area who are operating with licenses and paying their taxes,” Sen. María Elena Durazo said prior to the vote.

Some cities enter into voluntary collection agreements with platforms. However, these agreements usually bar cities from accessing the property’s address or location. If cities want to audit short-term rental TOT, they usually need to file a subpoena.

It’s not just cities that are in the dark either. Some short-term rental hosts may be unaware of the requirements to collect TOT.

A committee analysis earlier this year found that uncollected TOT created an estimated $20.75 million annual revenue loss for the median state. The loss is likely far higher for California, which is a major tourism destination.

What’s next

The bill now heads to the Assembly, where it will move quickly due to a truncated calendar. Cal Cities is urging lawmakers to ensure cities of all sizes have a baseline level of information to enforce the rules for short-term rentals that their residents asked them to put in place.