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Santa Monica debates tough restrictions for AirBnb, VRBO

The Airbnb app is displayed on a smartphone on April 21, 2014 in San Anselmo, California. Online home-rental marketplace Airbnb Inc. is about to receive more than $450 million in investments from a group led by private-equity firm TPG. The new investments will value the startup at $10 billion, significantly higher than some publicly traded hotel chains.
Justin Sullivan/Getty Images
The Airbnb app is displayed on a smartphone on April 21, 2014 in San Anselmo, California.

Property owners in Santa Monica, who rent out their properties using sites like AirBnB and VRBO, may soon find it's hard to do business in the city.

The Santa Monica city council will debate a proposal Tuesday night that would do away with most short-term rentals, often referred to as vacation rentals. Hosts in Santa Monica would only be allowed to rent their property to short-term guests if they stay on the premises with them. Those hosts would also need to obtain a city business license, and collect a 14 percent hotel tax, which they would pass on to the city.

The proposed ordinance would also require rental sites like Airbnb, Home Away, and VBRO to share information with the city regarding the Santa Monica properties using the site.

Officials in Santa Monica estimate there are 1,700 short-term rental units within city limits - those units previously provided long-term housing to local residents. 

"What happens when an otherwise affordable housing unit is turned into a money maker? A defacto hotel room?” said Mayor Kevin McKeown, who has spearheaded the proposed ordinance.

McKeown wants many of the city's short-term rentals converted back into long-term housing for residents.

The ordinance provides some exceptions. Timeshares would still be allowed because they have multiple owners, not renters. Home swaps would be allowed since no money changes hands. And rentals over 30 consecutive days would be allowed.

Nearby Los Angeles has yet to take similar steps at regulating sites like AirBnB and VRBO, and its city council members are closely watching the developments as they craft their own proposals.

Tuesday's meeting will primarily be an opportunity for debate. A final version of the ordinance could be voted on by May 12.