Newport looks at how to collect taxes from short-term rentals such as Airbnb

While some of the most sought-after coastal properties remain just a click away, Newport Beach city leaders are working to keep track of short-term rentals and collect taxes on them.

The City Council kicked off discussions with staff and the public during a study session Tuesday about how to enforce city laws on short-term lodging that have been on the books for more than two decades.

Websites such as Airbnb, HomeAway and Vacation Rentals by Owner have swelled in popularity, enabling virtually any property to become a vacation rental. The sites also have made it more difficult for cities like Newport to keep track of who should be paying taxes.

The city imposes transient occupancy taxes on short-term rentals, charging 10% of the price of each rental, like it would for hotel guests.

Since before the 1950s, weekly vacation rentals have thrived in Newport Beach, bringing in a variety of tourists — and revenue.

In the early days, vacationers often would look to rental companies and real estate agents to help them find a property. The city was able to more easily regulate the rentals and ensure that the property owners were paying taxes to the city, according to city staff.

Cities across Orange County have been grappling with a host of quality-of-life issues stemming from such rentals, including trash, excessive partying and parking headaches.

Laguna Beach has placed a moratorium on new short-term rental permits, while Huntington Beach has chosen to ban them completely.

“I think we need to be part of the solution for this and part of making sure it fits comfortably in our community,” said Newport Beach Councilman Keith Curry.

In 1992, the city adopted short-term lodging regulations that required property owners to have a city-issued permit before they could list their property to rent for less than 30 days.

While short-term lodgings were previously permitted throughout the city, current law prohibits someone from obtaining a permit to rent out a home in areas zoned only for single-family homes. However, 211 properties had their permits grandfathered in by the city when the regulation was passed, according to city Development Director Kim Brandt.

There are currently 91 active permits, the majority of them in Corona del Mar, the Balboa Peninsula and Balboa Island. Owners of unpermitted short-term rental properties often are not aware that they need to pay taxes to the city, Brandt said.

The city hired a seasonal employee last year to help identify unpermitted short-term rentals throughout Newport. At the time, more than 250 non-compliant listings were identified from short-term rental sites, and the city collected about $218,700 in fees and transient occupancy taxes as a result, according to a staff presentation.

Councilman Scott Peotter voiced support for entering an agreement with Airbnb that would allow the company to collect transient occupancy taxes and give the money to the city.

The city of San Francisco recently entered a similar agreement with Airbnb that requires the company to collect taxes in exchange for the city loosening restrictions on where rentals can be permitted.

Newport city staff said that in their discussions with Airbnb, the company has indicated it would seek a similar agreement with Newport.

“I don’t want to give up our information or expand our area to Airbnb or any of these other guys,” Peotter said. “I would like for it to be a level playing field.”

Councilman Tony Petros suggested creating a working group of rental companies, city staff and community members to study the issue.

City Manager Dave Kiff said staff likely would go to the council with a recommendation in about six months.