A statewide short-term rental tax won’t solve California's long-term housing crisis

Cal Cities will issue an action alert on SB 584 (Limón) in the coming days

The League of California Cities has adopted an oppose unless amended position for a bill that would impose a 15% tax on the occupancy of short-term rentals. While Cal Cities supports the intent of the bill — providing ongoing funding for affordable housing — the bill takes a flawed approach that would harm local revenue streams.

Under SB 584 (Limón), proceeds from the state tax would go back to local governments as grants for “laborforce housing.” The bill describes laborforce housing as public housing projects built with a skilled and trained workforce or prevailing wage rates.

Cities need ongoing funding for affordable housing. However, a state tax on short-term rentals is not the way to address a decades-long crisis. SB 584 would cripple cities that rely on local transient occupancy taxes.

For cities that rely on tourism and hospitality as economic drivers, a transient occupancy tax is often their primary source of revenue. In some cases, the tax on short-term rentals can represent over two-thirds of General Fund revenues, which funds fire, police, and other essential services.

Imposing a 15% statewide tax on top of existing local rates averaging 10% would both harm critical local revenues and create a prohibitive fiscal burden for tourism and hospitality providers.

Cal Cities is negotiating with Sen. Limón’s office and the bill’s sponsors on an alternative funding and collection mechanism. Cal Cities has proposed levying a tax or fee on short-term rental owners, instead of the lodger. This would provide much-needed funding for affordable housing, protect equally essential services, and ensure the revenue is returned to the community.