Unregistered Vacation Rentals in Palm Springs: How Many Might Exist? Are They a Large Issue?

As part of my research and tracking of Palm Springs Vacation Rental Hotline reports (see my Vacation Rental Hotline Map project page for more info), I’ve been curious about the issue of unregistered vacation rentals in the City of Palm Springs.

Specifically, how many such unregistered rentals might exist? And further, how serious of an issue might they be? Many in Palm Springs have wondered about this as well.

Recently in a post on Nextoor, a neighbor calling for unity and cooperation between Palm Springs vacation rental owners and their neighbors proposed that all of us can agree that unregistered vacation rentals should be identified and cited and/or brought into compliance with Palm Springs requirements. It was also suggested that such an effort represents “low hanging fruit” — that is, unregistered vacation rentals should be fairly easy to find, fine and bring into compliance.

While I heartily agree with the overall sentiment of my neighbor’s post, I did want to clarify the issue of unregistered vacation rentals in Palm Springs as I understand it (based on more than half a year of research at this point).

While unregistered vacation rentals are a serious issue for a number of reasons such as:

• unregistered rentals would be unlikely to be remitting Transient Occupancy Tax (“TOT”)
• such a rentals might be poorly managed (unaware of the various other operating requirements around noise, parking, etc.)
• such rentals would not be paying permit fees (which fund the Vacation Rental Compliance Department (“VRCD”) and its services such as the Vacation Rental Hotline), and
• it’s grossly unfair to the vast majority of VR operators who comply with the regulations, etc.

… The magnitude of this issue in Palm Springs seems to be very small as a percentage of registered vacation rentals (of which there are currently just over 2000). And finding unregistered rentals and this point isn’t “low hanging fruit”, but extremely difficult. Here’s why:

History of Vacation Rental Registration in Palm Springs

Unlike the situation in municipalities that are just coming to grips with short-term rentals, such activity in Palm Springs is pretty much as old as the City itself. And Palm Springs was a leader in requiring registration of vacation rentals, requiring them to remit transient occupancy tax, establishing various other operating requirements, and establishing a hotline for handling nuisance calls related to vacation rentals. The first version of the City’s vacation rental ordinance that required registration went into effect in 2008.

As you might expect, enforcement of those regulations in their early years was focused on raising awareness and getting vacation rentals into compliance with registration requirements. These efforts were extremely successful as compliance efforts go.

History of the Permit-number Posting Requirement

By 2011, the percentage of unregistered vacation rental properties was so low that the City adopted a (then new) requirement that registered vacation rentals post their TOT numbers in “advertisements” such as listings on the various vacation rental marketing sites (VRBO, HomeAway and the like), their own websites, etc. The reason for this was to make it easier for the city’s Vacation Rental Compliance Department (VRCD) to identify unregistered rentals. A letter from the City to registered VR operators from July of 2012 (http://www.palmspringsca.gov/home/showdocument?id=22427) reminded them of this requirement.

The point is: Even by that point, the number of unregistered vacation rentals had become so low that detecting them was like finding a needle in a haystack. The TOT permit number posting requirement was an effort to make unregistered properties stand out more obviously. (These requirements have recently been changed to require the posting of one’s “City ID #”, but the goal is the same.)

The observation (which still pretty much holds true) was that there are a small number of vacation rental sites which are used nearly universally to advertise Palm Springs vacation rentals (at the time, that would have been VRBO — today it’s a combination of VRBO/HomeAway and Airbnb). By enabling VRCD staff to immediately see whether a property was registered, it would save a lot of time and effort in finding unregistered properties.

Current Status of Efforts to Identify Unregistered Vacation Rentals

Fast forward to today: In preparation for enforcement of new vacation rental ordinance 1918 (and ongoing compliance activities in general), the VRCD seems to have reviewed a very large percentage of all Palm Springs listings that were on those sites earlier this year. And the VRCD reviews new listings they find on a regular and ongoing basis.

Those efforts in the first part of the year uncovered a handful (fewer than 20) of unregistered vacation rentals and homeshares. We don’t know how many were traditional “vacation rentals” and how many were “homeshares” — note the requirement to register homeshares (these are short-term rentals where the owner is also present) is new with Ordinance 1918 and is not as widely understood in the same way that VR registration is almost universally understood today.

The results of this effort are briefly summarized in this City press release from June 12 of this year: http://www.palmspringsca.gov/home/showdocument?id=51797

This activity of reviewing vacation rental listings also turned up (much more commonly) registered vacation rentals where the owner or manager had failed to post the required TOT permit number. And many such homes were issued “failure to post permit number” citations as a result.

Those efforts probably had a very positive effect on reinforcing the permit number posting requirements!

The heart of the difficult in identifying unregistered VRs via listing sites is this: The number of vacation rental listings on the various listing sites is very close to as the total number of registered vacation rentals.

The last time I looked closely at this in June of this year, here’s what I had found (I’m using Airbnb as the example, because it’s the easiest to understand and the easiest to get accurate data about):

At the time, there were 2087 registered vacation rentals in Palm Springs. Data from Airdna (which makes a business of providing accurate data about Airbnb) reported that there were 2192 whole-house (non-homesharing) rental listings in Palm Springs in the same month.

Of those 2192 listings, a small number of them would be duplicate listings (these aren’t super common, but they do happen). And some number of them would be not short-term rentals (that is, they are monthly or seasonal rentals, and not available for fewer than 30 days, though these aren’t extremely common on Airbnb).

So that leaves us with, at most, about 105-ish listings that may or may not represent unregistered short term rentals on Airbnb. And, of course, the only way to figure out which ones are is to examine every single listing. (Which the City actually pretty much does!)

The situation is a little more complex to analyze, but very similar on VRBO/HomeAway.

Unregistered VRs and the Palm Springs Vacation Rental Hotline

Another way that unregistered vacation rentals are (fairly rarely) identified is via Hotline calls. Technically, the Hotline is really only able to respond to nuisance/disturbance complaints about registered vacation rental properties. When the Hotline receives a call about an address that is not in the VRCD’s database or list of registered VRs, the VRCD investigates whether there is any evidence of the property being rented short term without a registration.

Sometimes, such investigations are quite brief. For example, the Hotline receives calls about addresses that are hotels, addresses that are other types of businesses, addresses that are not within city limits, etc. Other times they are about addresses already known to VRCD to be long-term or seasonal rentals and not operating as short-term rentals (“STRs”, which is another term for vacation rentals).

However, sometimes the address is one that has not appeared previously. In these cases, Hotline call summaries note that the address is “not a registered vacation rental — VRCD to investigate.” The VRCD/code enforcement staff then works to establish whether there is any evidence that the property in question is being rented short-term.

Since 4/16/17 (when enforcement of Ordinance 1918 and City-first response to Hotline calls began), it looks like City responders have gone out to such addresses in response to calls in nearly all cases. While they’re not required to do that, it’s one of the easiest ways to help establish whether the property might actually be an unregistered VR.

And the number of such calls is really very low. Since 4/16, there have been about 25 such addresses that have shown up in Hotline reports. (Most of them are the subject of only a single call.) So, it hasn’t been a huge waste of resources for responders to check ’em out.

Because Hotline call summary reports come out weekly, often the results of the VRCD’s investigations are not available by the time the report comes out.

One problem this creates is that we don’t regularly find out whether such calls actually uncovered an unregistered VR or not. Recently, the VRCD has been helpful to me in cleaning up my database that tracks hotline calls.

For example, I asked VRCD officials if they could review a list of 15 addresses (from calls that are several months in the past) that I had found in Hotline reports where we did not yet know the results of VRCD investigations. Of those, VRCD told me that 14 were determined not to be unregistered VRs. One is still under investigation (and I suspect is likely to be cited for “failure to register”).

I later found another 11 similar Hotline-reported addresses and have asked for clarification on those, if it’s possible. (I’m still waiting for VRCD’s reply about those — though I suspect we’ll find once again that most of them are not being operated as STRs.)

Since February of this year we are, at present, only aware of 2 unregistered properties that were identified via Hotline calls and these were in the Feb — April 15th time period (before City-first response).

Anyway, the point is: If there were a lot of unregistered rentals, we would see substantially more identified via Hotline reports. I’ll spare you the math, but basically what we see from the Hotline implies that there might be a couple dozen unregistered rentals out there that haven’t been identified yet.

Why Don’t Hotline Calls Discover More Unregistered Vacation Rentals?

Basically, I believe it’s because there are very few vacation rental properties operating without registration full-time or year-round. So, any nuisances that they might create aren’t happening all the time. Further, any evidence of their operation is also not discoverable at all times of the year.

Additionally, though there are certainly some small number of homeowners who begin operation of a vacation rental property without being aware of registration (and other) requirements, many individuals who seek to begin renting their properties short-term in Palm Springs use the services of a professional property management firm.

In fact, about 50% of vacation rentals in Palm Springs use a property management firm to manage their short-term rental activities. These agencies handle property registration on behalf of their clients. And there’s no evidence that any of them have ever failed to properly register a new property (at least in recent years).

My overall sense of the situation — based on my analysis of compliance activities and discussions with VRCD staff — is this:

1. There are a very small handful (we’re talking double digits here) of scofflaws who had operated without registration for a significant length of time. The bulk of these unregistered vacation rentals have likely been brought into compliance (based on the threat posed by the hefty penalties of Ordinance 1918) or have been cited post-Ordinance 1918.
2. Of VRs that may still be operating without a permit, it is suspected that many/most of them are not operating as short-term rentals year-round. That is, they are only listed seasonally or for very short lengths of time (for example, homeowners that get out of town for festival season and rent their homes just over those popular and pricey weekends). Since they’re not approaching this activity in a “professional” way, they may either be unaware of the registration requirements or intentionally ignoring the requirements but are willing to “take a chance.” (What such operators fail to realize is that the VRCD finds such listings every single year. They’ve become pretty good at this!)
3. Of course, getting to 100% compliance with any regulation is really, really hard. There will always be folks who are unaware of requirements. Some of them get identified pretty darn quickly, others escape detection for significant lengths of time. (I guess they are dumb but lucky?)
4. After another six months or so of VRCD enforcement of Ord. 1918, we’ll likely have a much better read on the magnitude of this issue.

“Too Long, Didn’t Read!”

I know, I know! This is a long way of explaining why and how it’s so hard to identify unregistered vacation rentals in Palm Springs. In short: It’s difficult for a variety of historical reasons, not the least of which is that the City has done an excellent job of making homeowners aware of vacation rental registration requirements for many years.

As for the numbers — they seem to be small: While we can’t ever “know” how many unregistered VRs there might be (that’s like asking “how many folks are going fishing without a license?”) — all available evidence points to the numbers being pretty small and, of these, many are not “vacation rentals” as many residents of Palm Springs would understand them (that is, homes that are used frequently as short-term rentals).

While we should desire the identification and removal of such unregistered vacation rental properties, doing so:

1. will not meaningfully reduce nuisance complaints (or actual nuisances) thought to be caused by unregistered vacation rentals. Since April 16th, Hotline calls about properties where the operating status of the property was unclear number just 32 and relate to 26 unique addresses. VRCD has already confirmed that 14 of these are not unregistered vacation rentals. 1 of them probably will be cited as an unregistered VR. The status of the remaining 12 address (while currently unknown) is unlikely to be different (in fact, 1 of them is not a valid address at all).
2. is unlikely to meaningfully contribute to Transient Occupancy Tax (TOT) revenues because such properties, when discovered, are now banned from being operated as short-term rentals, though the City may successfully get back-TOT due from them and
3. will not reduce Vacation Rental Permit fees for a similar reason (and even if all identified unregistered VRs identified so far this year were brought into compliance, rather than being banned, the number of registered VRs would only rise by approximately 1% to 2%).

However, the VRCD very diligently (and commendably) works to identify such properties, as we should expect.

I intend to update this article in the future as we see more information from ongoing Palm Springs vacation rental ordinance enforcement efforts.

Originally published at www.evillapalmsprings.com.