On January 20, 2026, the Manhattan Beach City Council spent an evening deciding whether to let more homeowners do something a small number of their neighbors have been doing legally for years. Eric Schrader, who owns a home in East Manhattan Beach, told the council he would be glad to open it to visitors during the FIFA World Cup. "I do like the opportunity that this is presenting for us to dip our toes in for a short period of time," he said. The council voted 3-2 against the proposal that would have let him.

The vote wasn't about money. City staff had already reported that the 191 licensed short-term rentals operating legally in the city's Coastal Zone generated $1.7 million in Transient Occupancy Tax for Manhattan Beach in the fiscal year before the vote. It wasn't about public opinion either. Two prior community surveys showed majority support for temporary flexibility, and when residents were polled at a January 6 forum about their concerns, the most common answer was "none." The council said no anyway, because saying yes meant moving a line that has separated legal short-term rentals from illegal ones in this city since a 2022 court ruling drew it, largely along Highland Avenue.

That line, not the more familiar Sand Section versus Tree Section versus Hill Section distinctions that show up in listing copy, is the one that actually determines whether a Manhattan Beach property can generate overnight rental income at all.

A Line Nobody Planned to Draw This Way

Manhattan Beach banned short-term rentals citywide in 2015, after residents raised concerns about traffic, parking, noise, and the character of residential streets. That ban stood until April 4, 2022, when a California Court of Appeal ruled that the city's prohibition could not be applied to properties within the Coastal Zone. The exception exists because state coastal protections overrode a local ordinance, not because anyone at City Hall decided that homes near the water should carry a different investment profile than homes ten blocks inland.

In practice, the Coastal Zone covers the western portion of the city, generally the area west of Highland Avenue. That means two houses built the same year, similar in size and finish, can sit a few streets apart and carry entirely different legal rights. One can host a family visiting for a World Cup match, provided the owner holds a city business license and remits the 14 percent Transient Occupancy Tax that has been in effect since July 1, 2023. The other cannot legally host anyone for less than 30 days under any circumstances, regardless of how the owner wants to use it.

What Happened When the City Tried to Move the Line

The test came from an unlikely source: soccer. With World Cup matches held at SoFi Stadium, less than 10 miles away, and Michael Zislis, who owns Shade Hotel Manhattan Beach, telling the council his hotel was already booked solid around the tournament dates, the pressure to find more lodging was real. Manhattan Beach has roughly 1,000 hotel rooms citywide, which staff and residents agreed at the time would be nowhere near enough for the visitors expected during matches running from June 11 through July 19.

In December 2025, the council voted 3-2 to direct staff to draft a temporary ordinance that would allow short-term rentals citywide for a defined window around the tournament. The draft that came back included a cap of 450 licenses, a number staff chose to mirror the roughly 4 percent density of short-term rentals already permitted within the Coastal Zone, distributed either first-come, first-served or by lottery.

Not everyone wanted the door opened, even temporarily. Resident Heather Kim put the concern plainly in comments to Manhattan Beach News.

"Temporary somehow manages to turn into permanent a lot of times. Once you open the door, it becomes harder to protect the character of our neighborhoods."

On January 20, the council agreed with her, voting 3-2 to reject the temporary expansion. The citywide ban held. The Highland Avenue line, tested under about as much pressure as it's likely to face outside of a future Olympics push, did not move.

The Math That Explains the Vote

Here is the part that should give a buyer pause: the numbers actually supported expansion. A proposed 450-license program, even at conservative occupancy, could have meaningfully added to the $1.7 million the city already collects from 191 units. Public sentiment, by the council's own survey data, leaned supportive. So why did the vote go the other way?

The answer sits in a detail city staff gave the council almost as an aside: parking complaints made up the bulk of calls related to existing, fully legal short-term rentals in the Coastal Zone. Even where short-term rentals are permitted and licensed, the operational friction they generate is what shows up on a council member's desk week after week. Zev Forrest, who manages short-term properties in Manhattan Beach through his company Xenia Stays, argued at the forum that the disruption isn't inherent to the use itself. "It's not the home that is disrupting the neighborhood," he said. "It's the unprofessional amateur hosts that are disrupting the neighborhoods. The difference is not the use. It is the operator."

The council didn't adopt that distinction into policy. There is no tier for professionally managed rentals versus owner-operated ones, no lighter enforcement track for a company with guest screening and a 24/7 response protocol. The ban stayed blunt, which means the calculus for a council weighing expansion isn't really about tax revenue potential. It's about whether the city has the enforcement bandwidth to handle more units generating the same category of complaint, and on January 20, the answer was no.

What This Means If You're Comparing Neighborhoods

For a buyer treating Manhattan Beach as a place to build both a home and some flexibility around it, this changes what questions matter. The Coastal Zone boundary just survived its most serious test in years, tested by global demand, hotel overflow, and majority-supportive survey data, and it still held. That's stronger evidence the line is durable than if it had simply never been challenged.

A few things worth confirming before assuming a property's rental potential:

• Verify Coastal Zone status through the city's interactive GIS map before treating short-term rental income as part of a property's value case. Proximity to the beach is not the same as Coastal Zone status, and the two don't always line up the way you'd expect.
• If short-term income is part of the plan, model the 14 percent TOT and the required business license into projections from the start, not as an afterthought once the numbers already look good on paper.
• Watch the 2028 Olympics as the next likely flashpoint. Mayor David Lesser said explicitly that the World Cup outcome would serve as a basis for evaluating whether to allow something similar for the Olympics, which means this question isn't permanently closed, just closed for now.

The Hermosa Beach Comparison

Buyers who widen their search to Hermosa Beach will find a different mechanism entirely. Rather than a citywide boundary, Hermosa's short-term rental eligibility is parcel-specific, concentrated in select commercial zones near downtown, Pier Plaza, and limited stretches of Hermosa Avenue. There is no equivalent of a Highland Avenue line splitting the city in two. Instead, the question becomes which individual parcels carry the right zoning, which means the research burden shifts from checking one boundary to checking one address at a time.

That distinction will matter again as the 2028 Olympics approach and event-driven rental demand tests the South Bay a second time. A Hermosa property that looks similar to a Manhattan Beach Coastal Zone home on the surface may or may not carry the same rental rights, and the only way to know is to ask the city directly rather than assume based on how close the house sits to the sand.

Whether you're weighing a Sand Section purchase against a Tree Section one, or comparing Manhattan Beach to Hermosa Beach altogether, the line that matters most isn't always the one a listing photo shows you. Understanding which side of it a property sits on, and what that means for how you can legally use it, is the kind of groundwork that pays off long after any single event or vote. Liz Bird Fine Homes helps buyers ask the right questions before they write an offer, not after. Let's Connect.