A court forced Hermosa to allow short-term rentals. Now the city wants $5 million in back taxes.
June 2026 · Published: June 20, 2026
If you've been renting out your Hermosa Beach place on Airbnb or VRBO, the city has a bill coming: up to four years of back hotel taxes — an estimated $20,000 to $70,000 per owner — with the clock to avoid penalties running out August 1. An estimated 180 to 250 owners are on the hook for roughly $5 million all told. Here's how a court ruling nobody on your street asked for became a tax bill nobody expected — and the live fight over whether the city can actually collect it.
How a ban became a mandate
For nearly a decade, Hermosa banned short-term vacation rentals — any stay under 30 days — everywhere except a few nonconforming homes in commercial zones. That ban traced to Measure H, which voters approved in November 2015. Then last March a court ruled the ban illegal in the coastal zone — the blocks west of Valley/Ardmore — in cases brought by attorney Frank Angel, who won the parallel fight against Manhattan Beach's ban. California's Coastal Act protects public access to the coast, and courts have repeatedly found that banning short-term rentals there, without the state Coastal Commission's sign-off, runs afoul of it.
So as of early June, Hermosa is doing the reverse of what it did for nine years: licensing short-term rentals in the coastal zone (plus the commercial-pilot zones it opened in 2019). They remain illegal across the rest of the city's residential neighborhoods. The scale of the gray market the ban never actually stopped: the tracking site AirDNA counts about 300 short-term rentals operating in Hermosa — and as of September 2025, exactly nine were licensed.
The $5 million question
Now the 14% Transient Occupancy Tax — the "hotel tax" paid by visitors, not residents — applies to those rentals, and the city is reaching back four years to collect it. A June 4 press release told every operator to register, get a business license, and pay the TOT owed since May 2022. Administrative Services Director Brandon Walker built the $5 million estimate two ways: California's four-year tax lookback, and data from Deckard Technologies, a platform that scrapes Airbnb and VRBO to document who's actually been renting. He called the figure rough — the top 25 to 30 properties, mostly along The Strand, account for an outsized share, and one councilmember pegged the likely haul closer to $4 million.
There's a carrot and a stick. Register and pay the back taxes by August 1, 2026 and the city waives all interest and penalties; miss it, and interest, penalties, and fines (Hermosa has charged $5,000 for a first violation) come into play. Owners who dispute their lookback amount can request an administrative hearing — and Walker said he "would not be surprised" if many do.
Can the city even collect?
This is the part the budget is quietly counting on — and it may not hold. Frank Angel, the same attorney who beat the ban, argues Hermosa can't levy the back taxes at all: its TOT ordinance applies only to permitted rentals, so it can't tax operators it never permitted. In March the council tried to fix that by striking the word "permitted" from the ordinance — but Angel contends they had no authority to, because the tax rule lives inside voter-approved Measure H, and an initiative can only be undone by the voters who passed it. If he's right, a chunk of that $5 million is uncollectible, and a budget leaning on it is leaning on air. Residents have raised a sharper version of the same logic: if the 2016 ban was illegal the whole time, what about the fines the city did collect while enforcing it?
Four ways this lands on you
If you rent your place out: a surprise five-figure bill — but the August 1 amnesty caps the damage to the tax itself, and from here you're a licensed, taxed business instead of a target. If you live next door: a home on your block can now legally host a rotating cast of weekend guests, at least in the coastal zone. Mayor Mike Detoy named the tension plainly: "Coastal Commission says we need STVRs. But the Hermosa Beach lifestyle, schools and small businesses are why we love it here." If you rent long-term: every unit that flips to nightly stays is one fewer for the people trying to live here year-round. If you've played by the rules: the legal operators who collected the 14% tax were undercut for years by neighbors who ran quietly and didn't — which is why a level playing field has support even among hosts.
What happens next
The council split into two instincts at its June 9 meeting. Michael Keegan wants to "do nothing for a little bit, and see how we do on collecting the previous monies," citing Manhattan Beach's hands-off path after it lost the same fight — and arguing the city should "digest" the back taxes and the new revenue "before we do anything." Ray Jackson wants to collect what's owed first and then design a permanent program deliberately: "you can't be reactive." Either way, the rules that will actually decide how many rentals Hermosa allows, and where, run through a full Coastal Commission process still to come, with public and council input along the way.
The only hard date on the board right now is August 1 — the line between paying the tax and paying the tax plus penalties.
General information, not advice. If a back-tax notice affects you, talk to a tax professional or attorney about your specific situation.
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