Owners of second homes — and Airbnb — stand to reap a windfall under an initiative in Los Angeles Mayor Karen Bass' new city budget proposal.

Tucked away in the more than 500 pages of city budget expenditures, the mayor calls for creating a new revenue stream by allowing people who own a second home to rent it out on a short-term basis, something that is currently prohibited.

The mayor's office says the measure would provide additional tax revenue for the city and extra beds for visitors during the 2028 Summer Olympics, with the measure expiring at the end of that year. To take effect, the City Council would need to approve a vacation rental ordinance.

Expanding the short-term rental market out of the city's existing housing stock is fiercely opposed by the hotel workers union and hotel companies, as well as by affordable housing advocates who say it will further deplete the city's limited housing stock.

City Council members voiced some of those same concerns at a meeting of the Budget and Finance Committee on Tuesday.

"I have a list of dozens and dozens of [rent stabilized] units in my district ... that are currently Airbnb units. This is happening," Council member Eunisses Hernandez said.

Council member Bob Blumenfield said a significant policy change such as this should move through a regular council process and not be approved as part of the budget.

"This is a huge policy. It's going to require a lot of vetting," said Blumenfield, who chairs the council's Planning and Land Use Management Committee, which is scheduled to consider the vacation rental ordinance May 12.

Bass spokesperson Paige Sterling said the mayor wants to have as many beds as possible available in the city when the Olympics take place. Under current law, Los Angeles residents can rent out only their primary residence and not additional "vacation" homes they may own.

"She has met with several industry partners and believes one step toward supporting this economic growth is to enable additional short-term rentals," Sterling said.

The mayor's budget proposal doesn't specify how much the new measure would raise but stipulates that short-term vacation rental companies — and Airbnb is the industry leader — could offer "prepayment" of the transient occupancy tax they owe in advance of the Olympics to help the city pay for key infrastructure projects.

People familiar with the situation say Airbnb has agreed in talks with the city to pay $50 million in prepaid occupancy taxes. Bass' office and Airbnb didn't respond when asked if that was the amount being discussed, but opponents have seized on that figure.

"They are bribing the city with $50 million in order to get an expansion of vacation rentals which is the last thing our city needs since we already have a severe crisis of housing," said Kurt Petersen, the president of Unite Here Local 11, the hotel workers union.

Council member Nithya Raman, who is running against Bass in the city's June 2 mayoral primary, also criticized the mayor's proposal.

"The idea that the City would entertain speculative tax prepayments tied to expanding short-term rentals, while we are in an acute housing affordability and availability crisis, needs to be properly vetted to consider its full ramifications," she said in a statement.

Airbnb is casting the proposal as an easy way to boost city revenue. The San Francisco-based company has been joined by a broad coalition of groups — including chambers of commerce, trade unions and community organizations — advocating for the change.

The coalition launched a campaign last year dubbed "Save Our Services," which touted the expansion of short-term rental revenue as a means of increasing city revenues.

"We're doubling down on our efforts to support Los Angeles' resilience and provide critical tax revenue that helps fund essential city services," said Justin Wesson, Airbnb's public policy senior manager for California.

Airbnb has collected and paid the city more than $370 million in transient occupancy taxes over the last decade, a company spokesperson said.

The L.A. Planning Department has estimated that passage of the ordinance, which was first proposed in 2018, would probably open up fewer than 5,500 new potential short-term rentals.

In an April 2 report, the department said that allowing second homes to be listed as short-term rentals could take housing units off the market and result in higher rents citywide. It could also negatively affect hotels in the city.

But the department issued another report 13 days later, this time saying that making the program temporary could minimize effects on the housing supply, help generate more tax revenue and open up more short-term rentals ahead of an "anticipated increase in tourism during upcoming major events."

Los Angeles is about to host a bevy of major events, with the U.S. Women's Open Golf Championship this June, the 2026 FIFA World Cup this summer, the Super Bowl LXI in 2027 and then the Olympic and Paralympic games in 2028.

Around L.A. County, municipalities vary widely in their handling of short-term vacation rentals.

Santa Monica bans them completely, allowing only home-sharing, while Inglewood allows vacation rentals as long as they are within 1,000 feet of the owner's primary residence and that person has been living in the city of Inglewood for 10 consecutive years.

Nella McOsker, the president of the Central City Assn., which is a member of the Save Our Services coalition, said the budget plan can kill two birds with one stone by raising new revenue for the city while creating much-needed additional open beds for tourists.

"Is it so scary and novel to say how can we help achieve multiple goals?" she asked.

The mayor's proposed budget is now before the City Council, which can make changes before voting to adopt a final budget by June 1.

The Budget and Finance Committee agreed on Tuesday not to strike the mayor's language about the Vacation Rental Ordinance from the budget yet, but will reconsider on May 7.

"I have serious concerns about this happening through the budget process when it's already happening through the normal process," said Council member Katy Yaroslavsky, who chairs the budget committee.

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