June 11, 2012

Airbnb Hit List Take Two (Months Later)

As we first reported two months ago:

…Supervisor Chiu's proposed amendment to Chapter 41 of San Francisco’s Administrative Code wouldn’t make it unlawful to rent an apartment, or room therein, for less than a 30-day term of tenancy in San Francisco, for that practice is already against the law and subject to both Civil and Criminal penalties.
The proposed amendment would, however, open the doors for any non-profit "which has the preservation or improvement of housing as a stated purpose in its articles of incorporation or bylaws" to institute proceedings for injunctive and monetary relief against anyone violating Chapter 41, something the City of San Francisco has the right to do as well but hasn't pursued.
Speaking of which, yesterday San Francisco’s Treasurer upheld a clarification of San Francisco’s existing hotel tax law which requires anyone who rents out a house, condominium or apartment for transient use within San Francisco to collect and remit a 14 percent occupancy tax to the City, a responsibility that would fall on any website, such as Airbnb, that acted as the merchant or broker.

As we also first reported, there were 1,938 rooms, homes or apartments in San Francisco listed on airbnb at the time. And now, the Chronicle has taken note as well.

Clarifying, And Perhaps Even Enforcing, Existing Rental Laws In SF [SocketSite]
Airbnb: A Potential Civil And Criminal Penalty Hit List? [SocketSite]
Transient Occupancy Tax: Multiple Party Transactions/Private Residences [sftreasurer]
Short-term rentals disrupting SF housing market [SFGate]

First Published: June 11, 2012 12:00 PM

Comments from "Plugged In" Readers

Yet, another follie of the San Francisco rent control laws in the effort to 'protect' tenants and another 'you own your building, but you can't do what you want with it'.............total B.S.

Posted by: radar at June 11, 2012 12:09 PM

So let me get this straight. Those who rent out their place as a hotel will have to remit the hotel tax that applies to every other hotel? Outrageous! Socialism! Only, um, you know, OTHER hotels should have to pay the hotel tax. ILLEGAL hotels should be exempt!

A building owner should be able to do what he wants with it! I was just given a generous offer to store depleted uranium in my condo, but the SF commies won't let me do it!

Posted by: anon at June 11, 2012 12:35 PM

"As we also first reported, there were 1,938 rooms, homes or apartments"

Add a few thousand for VRBO, few hundred CL .... and others. Let's see, on my one block, I know of 12 short-term rentals, about 6 on the next....and on it goes.

Just sharing that the numbers are more like 10,000 short-term spaces.

So, my 3-month roommate needs to pay a hotel tax too?

Posted by: Invented at June 11, 2012 12:39 PM

As if anybody in America can do whatever they want with their property.

I think there is a tea party happening that you are missing.

Posted by: sf at June 11, 2012 12:44 PM

@invented: I believe short term rentals (executive rentals) are different than Airbnb.. a night or two vs a month or two.

Posted by: Robb at June 11, 2012 12:52 PM

Invented asks, "So, my 3-month roommate needs to pay a hotel tax too?"

No, not unless your 3-month roommate is renting "for less than a 30-day term of tenancy in San Francisco."

Even if he or she were, the law "requires anyone who rents out a house, condominium or apartment for transient use within San Francisco to collect and remit a 14 percent occupancy tax to the City," so that isn't your roommate, that's either you or your common landlord.

Posted by: Ray Baxter at June 11, 2012 12:58 PM

"@invented: I believe short term rentals (executive rentals) are different than Airbnb.. a night or two vs a month or two."

In my host experience with AirBnb, no dif unless I'm overlooking something. A two night 'guest' is treated identically to a four-month rooommate. Roommates, short-term sublets, short-term guests -- it's all one and the same from a financial standpt.

Posted by: Invented at June 11, 2012 1:00 PM

Thanks Ray Baxter, my oversight.

Posted by: Invented at June 11, 2012 1:02 PM

The linked article with quotes from Abnb and the city seem to lay out a spirit of working to find an acceptable solution; and not a FUD based attack on a legitimate business and its customers. That said, it does look that the proposed amendment was promulgated:

http://www.sftreasurer.org/index.aspx?page=215

So the threat is there. Someone let us know when the first case is submitted using this as the underlying argument. The number of formal complaints (31) reported in the linked article is surprisingly low.

Posted by: eddy at June 11, 2012 1:16 PM

Ultimately stuff like this will result in the repeal of rent control, or at least momentum among owners to elect people who are more interested in protecting property rights, so in a way I'm for it: It's shedding light on what is already a stupid law, attempts to make said existing law even worse, so it may be just what is needed to get some sane leadership elected in SF. At least I can dream...

Posted by: lyqwyd at June 11, 2012 1:19 PM

keep dreaming lyqwyd. This is still a 65/35 tenant/owner city (those figures aren't exact, but not far from fact). Currently, any tenant with more than a years residence in a pre-1979 unit has a vested interest in keeping rent control.

Posted by: curmudgeon at June 11, 2012 2:25 PM

The solution here is fairly simple... Airbnb needs to pay the tax... Landlords need to be vigilant about including a no-short term lease or sublet clause in contracts to tenants. These STRs only become a problem in complexes where strangers are given keys to multi-unit buildings... This isn't fair to current renters and presents some minor safety risks. I can, however, see smaller landlords who own 2,3, and 4 unit buildings renting out all units as vacation rentals. Provided the tax is paid, I have no issue with it. It's a really great solution for families who are priced out of hotels and who could really use a kitchen and a slightly larger space during their visit.

Posted by: Denis at June 11, 2012 2:33 PM

so if I exchange my house with another family for two weeks, do they have to pay a hotel tax?

Posted by: RTF at June 11, 2012 2:47 PM

RTF - they would pay the same tax as you would in any other barter situation.

Posted by: The Milkshake of Despair at June 11, 2012 2:59 PM

The interesting thing would be if a ton of landlords ended up using only Airbnb and shrink the traditional rental market, causing incremental rents to go even higher.

Posted by: anon at June 11, 2012 3:15 PM

@Denis - "I can, however, see smaller landlords who own 2,3, and 4 unit...slightly larger space during their visit."

I want to see a solution that works too (I'm a fan of what AirBNB is trying to do), and like the idea of AirBNB collecting. But speaking from experience, even a small unit situation can be a horrible. I own a unit in a 4 unit place (each unit has it's own entrance) and one of the other owners tried going the VRBO route for a few months (w/our permission). Started off fine, but after 2 months, it was a *disaster* for me & the other units. The list of why is long but it all boils down to: there is just something said about how people treat a place that they call 'home' (live in longer than a month) and how they treat neighbors vs. how people treat something they are using for a few nights.
The other owner 100% understood and stopped the practice. However, if he/she hadn't, it would have made our 3 lives horrible, we'd all be fighting over it, and easily made each unit worth less $ in a re-sale, etc.

Posted by: DanRH at June 11, 2012 3:19 PM

@DanRH

It would certainly be unpleasant if your neighbor rents constantly to short term tenants with no regard for your peace of mind, but that seems like something that should be part of the HOA, rather than a citywide law. Some buildings would allow it, others wouldn't and then people can choose what they prefer.

Posted by: lyqwyd at June 11, 2012 3:45 PM

@curmudgeon, your points are very valid, but it's not as cut and dried.

Every year there are a higher and higher percentage of people living in non-rent controlled (post 1979) buildings, and none of them have a vested interest in existing rent control. Now they might vote for extending rent control to newer buidings, but they certainly don't benefit from rent control as it exists today.

Then there are the renters who may be benefiting from rent control financially, but would still vote for ending rent control due to it's unfairness.

Then there are the renters who would like the availability of more updated rental units, but understand that rent control keeps that from happening as owners have no incentive to upgrade their units when they are unlikely to ever be able recoup their investment.

I was a rent control protected renter for 5 years in SF, but I would have voted to repeal rent control had there been the opportunity, and I voted against every measure that attempted to strengthen rent control.

It would certainly be a tough battle to overturn rent control, but it's not as simple as saying 2/3 of SF rents so it can never be overturned. I definitely don't think it can happen today, but maybe someday.

Posted by: lyqwyd at June 11, 2012 3:49 PM

How 'bout we repeal Prop 13 so you rent control haters get a dose of reality?

If you think tenants should be at the mercy of the market, then so should property owners.

Posted by: moz at June 11, 2012 3:54 PM

@Dan, that is why you should have tight condo rules on such practices. If you do not than its fair game. As for renters, subletting their place via abnb this is something a landlord needs to monitor and police. Not sure there is much anyone can do to stop someone from renting their couch while the renter co-occupies the space. The biggest issue seems to be with home owners and landlords using the abnb market and should these owners be subject to hotel tax regulations. If I were in this position (renting my home via abnb) I would certainly be putting 18% of all fees in an escrow account of sorts just for safe keeping. As for needing a "solution that works" - the current solution "works" its just the the city and lots of constituents have an issue with it. :)

Posted by: eddy at June 11, 2012 3:54 PM

I agree with lyqwyd here... It doesn't have to be that complicated... If HOAs forbade short term rentals (or came up with an agreed upon policy), landlords explcitly threatened to evict tenants that violated a no-sublet clause, and the broker paid a tax, this would cease to be an issue. It doesn't have to be a citywide law... And we certainly don't need non-profits (or some other party) hunting down Airbnb users to penalize them. Growing awareness of this issue will help crack down on people who abuse the system...

Like I said, either you operate the entire building as a quasi-bnb, or you don't. You can't really mix long term tenants and short term guests.

Posted by: Denis at June 11, 2012 4:00 PM

@moz, I thoroughly support repealing prop 13 as well.

Posted by: lyqwyd at June 11, 2012 4:30 PM

@moz I very much support repealing prop 13 too, and I own several properties. Also support some kind of serious reworking of rent control though rent control hasn't really affected my rental property for the worse (careful who I rent to)

Posted by: JB at June 11, 2012 8:13 PM

No, no repealing Prop 13. Its part of my retirement plan. When I'm 60 my property taxes on my retirement house will be $713 a year after adjusting for inflation (3%) and the 2% cap on property value increases imposed by Prop 13.

Posted by: Rillion at June 12, 2012 10:07 AM

OK, so let me take it a step further: believe it or not, the 4 units of this bldg are in two separate HOAs (they share one common wall but that's it..long story). So if we use the 'well, just solve it in the HOA' that doesn't work as one HOA has no rights over the other.

Other example: say you bought SFH yrs ago, and now neighbor next door moves out of their SFH and operates it as a full-time business. I think that's an issue. Their place has gone from a 'residential/home' (whether that's a long-term rental or an owner-occupied), to a 'business' with new people checking in/out every 3 days all year long. If you had known that prior to purchasing, that'd affected the purchase, no? Think that'll affect your re-sale?

I don't see how you see the current solution "works". Taking to further extreme: you think if someone could erect a hotel next door at any time, that you'd say 'it works'? No, someone can't just put up a hotel next door to today.

Net net, while I totally agree w/the HOA-handling it when possible, there is still a zoning part of this that you can't walk away from.

Posted by: DanRH at June 12, 2012 10:19 AM

I know there is no way of knowing for sure, but I bet 70% of airbnb business in SF is by tenants in rent controlled apartments in direct violation of their lease agreements - the majority of leases have no sublet stipulations.

Posted by: kathleen at June 12, 2012 11:11 AM

Prop 13 will never be repealed in a billion years. Just forget it! It's not on the table and never will be, sorry.

Incidentally, North Dakota has a November referendum on the ballot to completely eliminate property taxes.

Posted by: anon at June 12, 2012 11:19 AM

@DanRH

Your situation is quite rare. No offense to you, but I don't believe in laws that are only of benefit to a tiny fraction of the population. If HOAs can solve the problem in all but the very few cases where there are 2 HOAs in one building, then that is sufficient for me. And even in relation to your special case, there are probably already existing laws that would allow you to deal with a neighbor that is causing a nuisance.

I'm not opposed to all regulation, unreasonable regulation. There is a place between everybody gets to do anything they want, and sending people to jail for renting out their home for a couple days, and allowing non-profits to hound them for money. Plus it seems to leave tenants completely free to do the same behavior that is criminalized for owners.

The zoning issue is already handled, you can't just build a hotel wherever you want.

Posted by: lyqwyd at June 12, 2012 12:35 PM

@lyqwyd: I hear you.

I don't love the idea of having the non-profits hound. I also don't like the idea of keeping this thing unlawful (ie, I think you *should* be able to rent out a room/house (so long as lease/HOA allow it, and you pay the normal tax)). But I still think you have to clarify a bit 'to what extent'. Speaking from experience, you can't imagine all that goes wrong quickly when a place turns into a hotel. If it's a handful of times every year, it's NO problem. If it's every week or more, it is. And this could be SFH(normal) vs SFH(full-time VRBO/AirBNB); or a 4-unit(normal) next to a 4-unit(full-time VRBO/AirBNB).
If you remove the current law and completely allow it w/no extent/degree, I don't see how a neighbor could complain about the nuisance/stop it?
Personally, I also just fundamentally disagree with the idea that then that house/place turns into a full-time business different than it's original intent, and changing the neighborhood. I'm not against someone doing what they want with their 'home'/'residence', but having them turn it into a hotel is changing that definition, and affects people around them whether they know it or not.

I don't have a proposed solution, and I don't ideally want a lot of gov't here(!), but I think there's an issue here and it can negatively affect the definition of what a neighborhood is.

Posted by: DanRH at June 12, 2012 2:13 PM

Allowing the non-profits to "hound" makes sense. These people are breaking the law, and there are only so many city resources available for enforcement. Tons of laws permit private enforcement - plaintiffs' lawyers exist because of this concept.

Lets take this "anyplace should be able to operate as a hotel" to the extreme. I buy a run-down place in the middle of the Mission. I load it up with bunkbeds and charge drunks and crackheads $20 a night to crash there. I'll fill it easily with 30 people a night. That's 600 a day, 18,000 a month, over 200,000 a year. Quite profitable! Heck, I'll gladly pay the hotel tax! Perfectly okay then? Of course not. So where to draw the line? Only "clean" people allowed? I have a better line - only hotels should be used as hotels.

Posted by: anon at June 12, 2012 2:49 PM

@DanRH: Aren't SFH exempt from the Chapter 41 law? I thought it was noted on a past thread that a four-unit or more is required to qualify as "apartment."

(The hotel tax seems to apply to all residences, however.)

Posted by: NJ at June 12, 2012 3:21 PM

@DanRH, I definitely agree with that. I'm all for a law that says only a hotel can be a hotel, and then defines a hotel, and then has restrictions on how much non-hotels can do actions that are "hotel like".

Example, maybe somebody would be prevented from renting out short term more than 30 days a year, or something like that. I certainly agree that people should not be allowed to do whatever they want without any regard for their neighbors, or neighborhood. I'm mainly opposed to the existing outright ban, and criminalization, but only for owners.

I also support the idea of short term rentals being taxed like hotels. It's only fair to treat similar behavior with similar taxes.

Posted by: lyqwyd at June 12, 2012 3:35 PM

@anon

If all crimes are treated with the same freedom for private action, then I'm sort of fore it. But even then not really as I just see it as legitimized vigilantism. If the laws can't be enforced then either we have too many laws, or not enough police. Private enforcement is not the correct solution.

I'm not sure what you are taking "anyplace should be able to operate as a hotel" to the extreme (or even quoting it), since nobody is suggesting that.

There are already laws that would prevent such a thing, or even things that are not so extreme, so why do we need new ones?

Lastly, the law we are discussing here would allow you to run your flophouse if you rented the house instead of bought it, which is just one of the many reasons the law is bad.

Posted by: lyqwyd at June 12, 2012 3:49 PM

lyqwyd, a tenant who rents out the place as a hotel room is also acting unlawfully under the existing ordinance and as amended. You are misreading it as there is no tenant loophole.

The only real change is that this permits private enforcement of an already unlawful practice. I agree with you that govt enforcement is preferable. But all sorts of unlawful (civil and criminal) acts can be challenged through govt or "private attorney general" actions - employment laws, environmental laws, antitrust laws, etc. This is nothing new, and is really the norm, not the exception, for this type of thing. There is no point to a law that is never enforced, so let the private attorneys have at it.

Posted by: anon at June 12, 2012 4:01 PM

I stand corrected on the owner issue... from Chapter 41 of San Francisco’s Administrative Code:

41A.4. DEFINITIONS:

(f) Owner. Owner includes any person who
is the owner of record of the real property. Owner
includes a lessee where an interested party al-
leges that a lessee is offering an apartment unit
for tourist or transient use.

So a tenant is held to the same standard. So the existing ordinance is not as bad as I thought. Although I still think it's bad as it's over-reaching. Owners (or tenants) should be allowed to rent out for short amounts of time on occasion.

Regarding the non-profits: If it's standard practice, then why the need for the change? They should already have the right across the board to go after illegal activities, whether it's this or other illegal activity. If it's not already allowed, then this certainly isn't a place that needs it.

Posted by: lyqwyd at June 12, 2012 5:22 PM

I like that Airbnb's response to this in the Chron was, in effect, "F*ck the law, we're going to make them change it."

As to my personal opinion: I don't have a problem with homeowners renting out their places, or a room, from time to time. I do have a problem with rental units being taken off the market to become full-time hotels. And if I were a homeowner and my neighboring unit turned into an hotel, I would definitely have a problem. Bring on those civil penalties.

Posted by: Zouaf at June 12, 2012 6:53 PM

Let's be clear: all the penalties already exist.

The only change that is being proposed by Chiu is that non-profits with certain charter provisions are able to go after those penalties.

Posted by: lyqwyd at June 13, 2012 8:44 AM

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