With hotel-tax revenues on a happy upswing, Palo Alto officials are preparing to take aim at one source of competition for local hotels: Airbnb and other services that allow visitors to rent rooms directly from homeowners.
A new memo from Vice Mayor Liz Kniss and council members Karen Holman, Larry Klein and Gail Price, is calling for the city to hold a meeting to discuss regulation of short-term rentals in residential neighborhoods. The memo calls for the council to consider whether the city's zoning regulations should allow such rentals and whether the city should be collecting transient-occupancy taxes (also known as hotel taxes) from these rentals.
The memo notes that other cities are finding problems with the Airbnb model, including "impact on the availability and cost for housing (San Francisco) and potential traffic and parking impacts in the neighborhood."
Safety is another concern, the council members say.
"Without some form of registration, as a hotel would have, or some means of notification, residents have no way of knowing who is taking up residence, albeit on a short term basis, next door to them," the memo states.
The council will consider the memo at its Dec. 15 meeting and is expected to schedule a meeting early next year to discuss potential regulations. The memo specifies that a study session on the topic should be held no later than March 31.
The proposal comes at a time when the city's hotel-tax revenues are experiencing a period of heavy growth. Hotel tax revenues jumped from $10.8 million in fiscal year 2013 to $12.25 in fiscal year 2014, a 13.5 percent increase. The numbers are expected to grow further in the coming years with new hotel coming on line and with the city's tax rate going up from 12 percent to 14 percent.
The memo notes that Palo Alto now has about 300 to 400 Airbnb listings per night, a number roughly equivalent to San Jose. With San Jose (which has a hotel-tax rate of 10 percent) reportedly losing an estimated $150,000 per year in taxes because of Airbnb services, the council members estimate that with Palo Alto's higher rate, its equivalent number is $210,000.
"San Jose, San Francisco and a few other larger cities have been negotiating agreements with Airbnb and other similar businesses on taxation and other matters," the memo states. "Our situation may be different than these larger cities in some respects, but we believe it's time for us to review what has been done and consider what additional steps Palo Alto should take."