From its ad, the Downtown North apartment looks clean, spacious and inviting, with a smart TV, a fully equipped kitchen and living room decor described as "sophisticated."
At a time when Palo Alto is struggling to add new housing, the one-bedroom unit would surely be in high demand by Stanford University students, area employees and local seniors looking to downsize.
But like hundreds of other dwellings throughout the city, the apartment is not on the rental market. It is listed on Airbnb by a host, Blueground, which has 52 listings throughout the city. All of them are entire homes or apartments, according to the website Insideairbnb.com, which tracks short-term rentals.
Three other local hosts each have 20 or more listings, according to the site, with rentable homes and apartments scattered around downtown, College Terrace, Midtown and other neighborhoods.
The exact number of short-term rentals is difficult to gauge, but according to websites like Granicus and Inside Airbnb, which track the market, there are between 500 and 1,000 short-term rentals throughout Palo Alto. Many which fetch more than $300 per night. This may represent brisk business for property owners and investors, but city leaders increasingly see these dwellings as a problem that warrants tackling.
Next week, the City Council will consider a proposal from three members — Vice Mayor Lydia Kou and council members Tom DuBois and Greer Stone — to explore new restrictions and requirements for Airbnb and other companies that facilitate short-term rentals of entire homes. In the memo, the three council members note that the city currently has only about 100 vacancies among its stock of 8,057 apartments. By contrast, in September it had 743 Airbnb listings, the memo states.
"We have more units available through Airbnb through short-term rentals than we do as far as just available rental units in the city," Stone told this news organization. "That's a concern. Presumably, every short-term rental unit on the market is potentially a housing unit that someone can be in long-term or permanently."
The memo distinguishes between cases in which a property owner rents out their room or entire unit to supplement their income and those in which investors are "packing in as many bunk beds as possible and advertising these hidden hotels as being 'in a quiet neighborhood near beautiful parks.'"
While Palo Alto already has an ordinance prohibiting rentals for fewer than 30 days, the three council members are proposing additional rules and restrictions. These include requiring property owners to list their rental units in both the city's business registry and its new rental registry, which the council voted to create in September. The memo also proposes that the city revisit its contract with Airbnb, which allows the company to operate but requires it to pay transient-occupancy tax.
Flying under the radar
In Palo Alto, like elsewhere, there are concerns that some of the short-term rentals are falling under the radar and potentially skirting the existing law and using homes and apartments like de facto hotels, though with no taxes flowing to the city and with no accountability to neighbors.
The three council members point to actions that companies have taken in the past to skirt local laws: hiding identities of hosts and locations of illegal listings, failing to verify hosts' identities and refusing to provide data for enforcement.
"The biggest issue is when there's something being rented short term and there's no one on premise," DuBois said in an interview. "If there's an issue — if there's trash, if there's noise — people don't know whom to contact."
The most ambitious proposal in the council members' memo would effectively ban short-term rentals of entire residences, a move that Carmel enacted in its residential districts. Other jurisdictions throughout the state are considering similar action, in some cases adding moves to improve transparency and in others enacting caps on the number of homes that can be rented out on a short-term basis.
Monterey County, for example, is now moving ahead with an ordinance that would limit the number of "commercial vacation rentals" (properties that are rented out more than three times over the course of a year) to 6% of residences in any of the county's planning areas other than Big Sur. The ordinance would also establish new registration requirements. And the city of Pacific Grove has a map on its website showing all the properties that can be rented on a short-term basis.
Not all attempts to regulate short-term rentals have gone as planned. Mountain View enacted in 2019 a new law requiring hosts to register their properties with the city and pay a 10% booking fee. By the following year, only 61 units were registered in a city with 860 short-term rental listings, according to a report in the Mountain View Voice, a sister news organization of the Weekly.
The Palo Alto council last considered the topic of short-term rentals in 2015. While some council members supported imposing new regulations to make sure these properties are paying hotel taxes, the majority ultimately voted not to advance this effort.
DuBois argued that the climate has changed since then, with various companies now specializing in tracking short-term rentals and assisting cities with regulation and enforcement. The memo cites two companies, Granicus and Azavar, as possible partners in the new endeavor.
Stone argued that imposing new regulations would not only increase the city's rental stock and help protect local neighborhoods but also help the city in its economic recovery. The city has long banked on hotel taxes to fund its infrastructure. When people use unregulated short-term rentals rather than hotels, this cuts into a critical revenue source. This is particularly critical at a time when hotels are just starting to recover from the economic pain of the COVID-19 pandemic, which reduced occupancy rates to single digits in some cases.
"It comes down to fairness and economic prosperity," Stone said, referring to the memo's proposal to ban short-term rentals when property owners live off-site. "The (short-term rentals) can be a disincentive for new hotels and they can be competing with hotels. This seems to be a more fair compromise to even the playing field."