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COVID-19 pandemic has created a “new normal” of limited mobility, minimal tourism and economic strife. State and local governments nationwide are facing steep budget deficits as a result of decreased tax revenues. It is uncertain what the year ahead holds, but it is likely that following the pandemic the “staycation” will become more popular. For California, this likely means more visitors to the beaches, and more demand than ever for accommodations – especially low-cost accommodations that offer increased privacy and safety.
Rising housing costs and stringent regulations have reduced the number of affordable accommodations along the coast, already making it harder for Californians – particularly communities of color and middle- and low-income families – to visit.
While the California coast is one of our most precious public resources with access guaranteed by the California Coastal Act, a 2017 UCLA survey found 75 percent of respondents cited the high cost of accommodation as a barrier, and 62 percent of respondents felt that a coastal visit is too expensive. The issue has been compounded by the high cost of development and loss of nearly 25,000 lower-cost hotel rooms since 1989. Over the last decade, increasing numbers of visitors have turned to short-term rentals as an alternative to supplement this loss.
Despite their historical presence along the California coast, short-term rentals have not been thoroughly evaluated as a means to help meet the state’s demand for lower-cost accommodations.
Rather than embrace short-term as a means to expand affordable accommodations along the coast, many jurisdictions have taken a hardline approach to regulating the industry. In doing so, these restrictions effectively limit access to the coast, particularly for lower-income households and underserved communities.
Prior to the pandemic, Airbnb commissioned a report to evaluate this issue and the impact on affordability. Our report examines short-term regulations in a number of coastal communities across the state, and found communities with the highest housing prices for long-term residents are also those that have the most restrictive regulations on short-term rentals. These restrictions lower the supply of overnight accommodations and drive up the price, making access even less affordable for most Californians.
We found similarity between restrictions on housing and short-term rentals, where communities with high housing costs (and limited development of affordable housing) tend to have severe short-term rental restrictions. These areas, such as Santa Barbara and Del Mar, have fewer lower-cost accommodations along the coastal zone. In contrast, communities with lower housing costs that have adopted more balanced short-term rental regulations – such as Oceanside and Carlsbad – have more lower-cost accommodations along the coast.
Our report illustrates a persistent problem: the use of regulation to restrict access to beachside towns and cities in California. These regulations reduce the affordability of these areas, excluding lower-income visitors.
Too frequently local regulations are designed specifically to restrict access to short-term rentals and thereby effectively limit the supply of accommodation, increasing prices and reducing access for middle-class and underserved communities who not only have been priced out of the residential market but now find themselves restricted out of the short-term rental market as well. Access for all has now become access for the affluent only. The Coastal Commission has repeatedly recognized this need for balance (and the requirement of access guaranteed by the Coastal Act), and this is now repeatedly being backed up by the courts.
In addition, expanding short-term rentals not only increases access, but also increases financial resilience through increases in transient occupancy taxes revenue. The COVID-19 pandemic has wreaked havoc on state and local governments. By one estimate, California will lose $2.5 billion in taxes this year, and local jurisdictions will lose over $1 billion. Unlike the federal government, state and local governments cannot borrow money to make up for budget deficits, so budgets will need to be cut. For local governments, short-term rentals can provide a significant new source of revenue without raising taxes, while also increasing access to the coast.
To meet these challenges, the state and local coastal communities must embrace change and encourage policies that increase access. Short-term rentals are one possible solution. A well-regulated supply of short-term rentals can address legitimate community concerns and simultaneously increase access to the coast and provide significant revenues for local communities.
Particularly now while we are experiencing a pause in travel and tourism during the COVID-19 pandemic, this may be a good time for us to take a closer look at these barriers to determine how to improve access once broader travel and gatherings are allowed. Coastal communities need to be aware of and sensitive to these barriers – many of which are economic – in their local coastal plans and policies. With many low- and middle-income Californians living inland, providing affordable overnight accommodation is crucial for inclusive coastal access. The status quo and business as usual will not work for communities. Regulatory change will not be enough alone, but coupled with dedicated programs and outreach, the coast could become more open to all.
Philip King is a professor and former department chair of economics at San Francisco State. He has published numerous peer-reviewed papers on sea level rise and has worked on the economics of beaches for state and local governments in San Diego County and elsewhere for over 25 years. Sarah Jenkins is a recent graduate of the University of the Pacific and has worked with King on numerous projects, largely focused on equity in coastal access and the application of California Coastal Act in policy and litigation.