California Coastal Commission approves Laguna Beach vacation rental rules

The California Coastal Commission has approved Laguna Beach’s short-term rental law, which was passed last year. The ordinance bans new short-term rental units in residential neighborhoods, but allows residential properties in commercial areas to operate as vacation rentals.

The 117 short-term rentals currently doing business in the city, including 79 in residential districts, will be allowed to continue operating under the new ordinance. Up to 465 short-term rentals will be allowed within the city, including 300 unhosted units and 165 hosted short-term rentals.

Laguna Beach requires short-term rental operators to get permits; follow rules on parking, noise, trash, and occupancy; and have a designated contact who can be available 24 hours a day, seven days a week to respond to issues. The ordinance also bars short-term rentals from hosting commercial events or large gatherings such as weddings.

Short-term rental hosts must also apply for a transient occupancy registration certificate, collect the city’s transient occupancy tax (TOT) from guests, file quarterly transient occupancy tax returns, and remit the tax to the city.

Short-term rental platform Vrbo has an agreement with Laguna Beach to collect TOT on behalf of hosts at the time of payment. Airbnb, however, does not collect Laguna Beach TOT for its hosts. Hosts are responsible for following TOT registration and collection rules, whether or not their platform collects taxes for them. MyLodgeTax can help short-term rental operators with Laguna Beach TOT compliance.

As part of the approval, the city will be required to review whether new short-term rentals are contributing to the loss of lower-cost hotel and motel rooms or affordable housing, and report to the commission in three years.

The Coastal Commission is responsible for preserving public access to the state’s coastal areas and has been involved in several decisions about short-term rentals in recent years. The commission has tended to support short-term rentals as an essential part of access.

A Los Angeles Superior Court judge recently ruled against another coastal city, Manhattan Beach, deciding its short-term rental law violated the California Coastal Act. The judge said the city can’t enforce its ban on short-term rentals in residential areas of the coastal zone unless it amends its Local Coastal Plan (LCP), which was approved by the Coastal Commission. 

Manhattan Beach first banned short-term rentals in residential areas in 2016. In 2015 and 2016, the city started to amend its LCP with the commission, but withdrew its proposal in 2017.

In 2019, the city passed another law that more aggressively enforced the ban, including hiring an outside firm to identify illegal rentals and issuing fines of $1,000 per day for violations, and moved forward without Coastal Commission approval.

The Coastal Commission will also review a new short-term rental law passed by the city of Long Beach that goes into effect October 24. Property owners located in the city’s coastal zone will have to wait for the rules to be approved by the California Commission before they can offer short-term rentals, which could take several months.

Under the Long Beach ordinance, hosts are required to hold a permit in order to operate a short-term rental and permit registration numbers must be included in advertisements. Operators are limited to one primary-residence short-term rental within the city, and the rules also restrict the number of short-term rental units within multifamily buildings.

Currently, the Long Beach ordinance only allows rentals in which hosts are present on site during guests’ stays. The council is expected to change the law to allow unhosted stays next year.

The law also makes vacation rental hosts responsible for collecting the city’s transient occupancy tax from guests and remitting the tax to the city via monthly tax returns. If a short-term rental hosting platform such as Airbnb or Vrbo agrees to collect the tax on behalf of its hosts, the platform and the host share responsibility to collect and pay the tax.

Airbnb collects the city tax on behalf of its Long Beach hosts, while Vrbo does not.

For more on California lodging taxes, see our state Vacation Rental Tax Guide. If you have tax questions related to vacation rental properties, drop us a line and we’ll get back to you with answers.