July 25, 2011

The Manhattanization Hotelization Of San Francisco

"We call it the ‘hotelization’ of San Francisco," [executive director of the San Francisco Tenants Union, Ted Gullicksen] said. "Seniors, families and low-income tenants are being pushed out. We have to fight for every affordable unit."

Conversion of Apartments to Rentals for Tourists Is Surging [nytimes.com]

First Published: July 25, 2011 9:00 AM

Comments from "Plugged In" Readers

One solution: get rid of rent control.

Posted by: Ivan at July 25, 2011 9:39 AM

True,

If there's demand for lucrative vacation and short term rentals, why bother with a long term tenant? The tenant population has split between lucky and not so lucky. The lucky rent-controlled ones have poisoned the well for the others.

Posted by: lol at July 25, 2011 9:44 AM

Well, it is illegal in SF (punishable by imprisonment as well as fines) to rent your place for less than one month, so that is one good reason to bother with longer-term tenants!

Posted by: A.T. at July 25, 2011 9:55 AM

Mr. Gullicksen is fighting for every affordable unit, yet spends most of his energy fighting the creation of almost 5,800 units at Park Merced. Granted, these will not all be rent controlled units, but the addition of new units to the marketplace will tend to have a downward pressure on rents.

Posted by: Guest666 at July 25, 2011 10:03 AM

I agree- there are too many residential hotels in San Francisco.

Posted by: sf at July 25, 2011 10:08 AM

the free market wins yet again. put in an unfair rule and we will find ways around it. close the vacation loophole and we'll find another.

i have an old-school neighbor who only rents to young white good looking marina chicks cuz he knows they'll get married off before their rent falls too far below market.

got another neighbor that would rather use one of his units for storage than have an entitled rent controlled tenant.

where did i just see the SF census data for percent of vacant units in D7? it was high. more rules aren't gonna create more housing, Ted.

Posted by: resp at July 25, 2011 10:09 AM

I predict this is going to be a big deal over the next several years.
Going to affect hotel rates, # available rental units, and probably lots of complaints from neighbors not liking a unit going from long-term rental to a new tenant every few nights.
Should be interesting - airbnb, vrbo are leading this change.

Posted by: DanRH at July 25, 2011 10:17 AM

Well, it is illegal in SF (punishable by imprisonment as well as fines) to rent your place for less than one month, so that is one good reason to bother with longer-term tenants!


A.T.,

I am curious...Where is it stated that it is illegal and punishable by imprisonment to do a short term rental?

Many homeowners advertise units for short term vacation rentals in local neighborhood papers, VRBO and others.


Posted by: radar at July 25, 2011 10:21 AM

The real hotels are fighting bedbugs like mad.

Wait til those short term vacationers bring bedbugs into a unit and the entire building gets overrun. The other owners in the building will probably sue the hotelling owner for the cleanup costs.

And that will be the end of that "trend".

Posted by: tipster at July 25, 2011 10:24 AM

Duh !..........just read the link above...sorry.

Posted by: radar at July 25, 2011 10:28 AM

Technically it's not legal, but SF has more or less turned a blind-eye to this practice, unlike New York. I've not heard about anyone being fined, and certainly not arrested even though there are hundreds of vacation rentals throughout SF.

I have unit(s) available for vacation rentals here in SF, and it's absolutely fantastic. I'm booked solid for most of the year and make double the rent than I would from an actual tenant. It's a little more work, but it's a huge plus not dealing with long-term, rent controlled tenants.

Posted by: B&B at July 25, 2011 11:02 AM

Admin. Code § 41A.5. Here it is:

(a) Unlawful Actions. It shall be unlawful for any owner to offer an apartment unit for rent for tourist or transient use.

(b) Determination of Violation. Upon the filing of a complaint by a permanent resident that an unlawful conversion has occurred, the Director shall take reasonable steps necessary to determine the validity of the complaint. The Director may independently determine whether an owner may be renting an apartment unit for tourist or transient use as defined in this Chapter. To determine if there is a violation of this Chapter, the Director may initiate an investigation of the subject property. This investigation may include, but is not limited to, an inspection of the subject property and a request for any pertinent information from the owner, such as leases or other documents.

(c) Civil Action. Except as provided by Subsection (1) below, any interested party may institute proceedings for injunctive and monetary relief for violation of this Chapter. In addition, the owner may be liable for civil penalties of not more than $1,000 per day for the period of the unlawful rental. If the interested party is the prevailing party, such party shall be entitled to the costs of enforcing this Chapter, including reasonable attorneys' fees, pursuant to an order of the Court. If the interested party is a permanent resident, then the interested party shall retain the entire monetary award. Any monetary award obtained by the City and County of San Francisco in such a civil action shall be deposited in the Mayor's Office of Housing, Housing Affordability Fund less the reasonable costs incurred by the City and County of San Francisco in pursuing the civil action.

(1) If the interested party is a permanent resident, such resident, as a condition to initiating civil proceedings pursuant to Subsection (c), must satisfy the requirements set forth in Section 41A.8(b)(2).

(d) Criminal Penalties. Any owner who rents an apartment unit for tourist or transient use as defined in this Chapter shall be guilty of a misdemeanor. Any person convicted of a misdemeanor hereunder shall be punishable by a fine of not more than $1,000 or by imprisonment in the County Jail for a period of not more than six months, or by both. Each apartment unit rented for tourist or transient use shall constitute a separate offense.

(e) Method of Enforcement, Director. The Director shall have the authority to enforce this Chapter against violations thereof by any or all of the means provided for in this Section.

Posted by: A.T. at July 25, 2011 11:12 AM

It's not just landlords who are renting out short-term rentals, tenants too. At a former apt where I rented, my neighbor is a protected tenant who moved in with another neighbor a long time ago but kept her apt and use it as a tourist rental. Another protected tenant rents out her room (while she sleeps in the den) to short-termers.

Posted by: Samuel at July 25, 2011 11:13 AM

We considered this with a rental unit of ours, but ultimately determined that steady income at market rate was better than trying to constantly manage a B&B type operation. Also, we looked at comps and discovered that we would likely be in the $150 per night range (smallish garden-level 2br in the Castro). We would have needed have an occupancy above 60% to breakeven with renting to a traditional tenant. Didn't seem worth it. (I have a day job too!)

As a landlord, if you have a vacant unit for rent you are looking at getting market rate, not some depressed long-term tenant rate. Each to his own, but we did not think that there was that much upside with the vacation rental route.

Posted by: rabbits at July 25, 2011 11:18 AM

We considered this with a rental unit of ours, but ultimately determined that steady income at market rate was better than trying to constantly manage a B&B type operation. Also, we looked at comps and discovered that we would likely be in the $150 per night range (smallish garden-level 2br in the Castro). We would have needed have an occupancy above 60% to breakeven with renting to a traditional tenant. Didn't seem worth it. (I have a day job too!)

As a landlord, if you have a vacant unit for rent you are looking at getting market rate, not some depressed long-term tenant rate. Each to his own, but we did not think that there was that much upside with the vacation rental route.

Posted by: rabbits at July 25, 2011 11:21 AM

Well I guess that it's nice that Pamela Kelley succeeded in bribing the landlord to pay her to move out of a rent controlled unit and then finagled it into a property management job for herself while at the same time reducing the number of rent controlled units for everyone else. I hope she likes it there on that special, lonely circle of hell she'll end up burning on for all eternity.

(Btw, just to head off the inevitable, I personally am a renter but rent a market-rate unit)

Posted by: Brahma (incensed renter) at July 25, 2011 11:30 AM

Heck, if you're worrying about the legality of less than 1 month vacation rentals, simply do corporate rentals 1-6 months. It's pretty lucrative too and less work intensive.

Posted by: lol at July 25, 2011 11:51 AM

Yeah, I agree with Guest 666, Gullicksen isn't looking out for renters' (or buyers') best interests. We need more units here where we can get them.

The short-term rental market is just filling in where regulation has failed us. I applaud these people, although vacation rentals do result in more wear and tear than they are probably accounting for. I wonder how the overall vacation rental market does here -- probably not great statistics on it.

By the way, are we talking about Administrative Code Section 41A? Reading that section, it looks like buildings with 3 or fewer units are exempt from the ordinance requiring 30-day rentals. Am I looking at the right section? Since this is SF, there are probably overlapping code sections that apply. If this is correct, individual homeowners should be fine doing this with in-law units and their own houses, and the enforcement appears to have been almost non-existent for individual homeowners.

Posted by: sfrenegade at July 25, 2011 11:51 AM

I think to avoid the rent control issues my aunt started renting her long vacant second unit for corporate short term people to generate income

I think it was pretty lucrative too (she sold the building in 2007 and moved to Mexico)

they refused to ever rent it to a regular tenant because it was their home and the wanted control over their property

Posted by: Zig at July 25, 2011 12:29 PM

SF prides itself on being a tourist city, and has enacted much legislation that is hostile to families and residents, thus it's not surprising to see yet more housing stock converted for tourism.

all that said: seems a bit silly to have a rule and then not enforce it.
either have the rule or don't.

I have used VRBO all over the world (although never in SF) and love it. great idea.

Posted by: ex SF-er at July 25, 2011 2:57 PM

My building (now owned by Trinity) rents to short term tenants because they're unable to fill it with longer term tenants and it drives me crazy. People who stay here treat the building like a hotel -- basically they don't care about it because they're only here short-term. Plus I hate people coming and going all the time on my floor. I can't wait until I have a down payment together so I can hightail it out of here and into a condo.

Posted by: Lori at July 25, 2011 4:54 PM

In concept I'm ok with the idea. But the actual people doing it are so obnoxious that it makes me turn against them.

Like so many other cool ideas in this city, its the actual people acting on the idea -- and acting stupidly, and being bad neighbors -- that makes opinion swing against them.

Its a natural outcome of the benevolent neglect of city government: let the thing run wild until the backlash comes, usually being worse than the problem itself.

Posted by: Stucco-sux at July 25, 2011 8:28 PM

The Tenants Union and Affordable Housing Activists don't like it because it further limits the pool of housing, yet surely they'll be there to oppose every possible new market-rate development that would mitigate the effect by deepening the pool.

Posted by: Brandonmetal at July 25, 2011 11:49 PM

Have had some experience with this, so I would like to comment. Neighbor did vrbo for his unit. At first, it was fine, but over time (6 months) it got bad. It became clear after time why: long term renters/owners turn into neighbors. Short term renters are just staying for a few days.

More explicitly:
- noise: from minor things like not taking off shoes on the hardwood (though the vrbo owner explicitly detailed that to help with the long-term renter/neighbor below the unit), to late night music (hey, they're on vacation anyway), to parties (again, on vacation). The kicker was when new vrbo renters showed up at 2am on their 3 Harleys.
- # of people: think about it - a 2bd apt would long-term rent to 2-3 people, generally. But via vrbo/airbnb, it wasn't uncommon for 5 or more to show up (vrbo owner wasn't around to 'police' this - how could they really - so then the burden fell on the neighbors to tell the owner). This mainly resulted in more noise and trash and coming/going at odd hours, etc. Only a problem every 4th or so renter, but thus, a problem at least each and every month.

Thankfully we were all on great terms (neighbors/vrbo owner) and after awhile they agreed to stop as it just wasn't worth it. However, if we weren't on great terms, it would have been a *huge* problem.

It's not an easy issue as $-wise I can 100% understand why folks do this. But I think it is really really tricky.

Bottom line I tell folks is to not underestimate what running a hotel is like. The short-term renter doesn't ever have the ability to 'get adjusted' to the unit (shoes on hardwood, doors slamming, unable to park car, figure out the trash, understand what normal volume is on a stereo, etc). Not their fault - they can't. And no amount of posted-warnings by the airbnb/vrbo owner can help.

And likewise, it's hard to sum up the benefits a long-term renter/owner becomes when they turn into a neighbor.

Posted by: John at July 26, 2011 9:47 AM

This is a little off topic but I was wondering what is the current best way to find a rental?

I'm relocating back to SF soon and the last time I rented (2002) craigslist was the best option for finding apartments on the internet. The current listings seem to be mostly from large property management companies and the prices seem a bit high.

Have rental prices really gone up that much? Are the advertised prices negotiable?

Are there better websites for rentals?

I'll be in town in a few weeks to pound the pavement if anyone has any suggestions I'm all ears.
Thanks.

Posted by: djn at July 26, 2011 9:51 AM

@djn: Craigslist. And yes, rentals are up and currently climbing. Advertising prices are sometimes negotiable.

Posted by: Robb at July 26, 2011 10:12 AM

Here's a story that might give one pause before jumping into this business opportunity:

http://ejroundtheworld.blogspot.com/2011/06/violated-travelers-lost-faith-difficult.html

Posted by: A.T. at July 27, 2011 12:19 PM

That's terrible that happened. I've been extremely fortunate, however. Out of almost 1000 guests that have stayed in my units over the past couple of years, only one group of guests ended up leaving the place a mess. Fortunately, I've never had anything stolen. Obviously, I don't leave anything especially valuable and most of the furniture is from ikea and craigslist. The only real downsides are the scheduling, the maintenance, and the occasionally annoying phone calls from guests when they can't figure out really basic things.

Also, I expected some push-back from neighbors, but no one has complained and many have booked rooms for family and friends.

Posted by: B&B at July 27, 2011 1:06 PM

AT, way to jump in with an off topic horror story. Not sure what it adds, since it's talking about apartment trading not a rental property.

Posted by: R at July 27, 2011 4:46 PM

Tenants have and are subletting. Those with long term, rent controlled units have strong incentive if for any reason over the years of their tenancy, they want to go somewhere else for vacation or work -- why not bring in more income if they can? We all know tenants who use craigslist and the rent to sublet, to keep their apt and make money -- whether or not their leases allow subletting. They, too, keep apts off the market which would otherwise come back on since many of the times if they could not sublet, they would have to move (a job six months long in another state, a year long trip they want to do before they die, etc). Enforcing "hotelization" means these tenants couldn't sublet. And since the laws are state, even landlords rules allowing subletting, would often be illegal. Tenants benefit from short term rentals as much as landlords.

Posted by: ray at August 10, 2011 10:12 AM

Post a comment


(required - will be published)


(required - will not be published, sold, or shared)


(optional - your "Posted by" name will link to this URL)

Remember Me?

(you may use HTML tags for style)


Continue Perusing SocketSite:

« Proposed City Center Target Design (And Full Meeting) Scoop | HOME | Dogpatch Development Refined, Ready To Be Approved »