February 14, 2014
Recommendation To Crackdown On Illegal Rentals Goes Missing
As we first reported last month, in response to an executive directive from Mayor Ed Lee, a working group co-chaired by the directors of San Francisco's Planning Department and Department of Building Inspection drafted a list of recommendations to accelerate the production of new housing in San Francisco and protect the city's existing housing stock.
With the estimated number of existing dwelling units in the city currently used for short-term occupancy versus their legal use as permanent housing running as high as 5,000 units, one of the draft recommendations was to crackdown on the enforcement of illegally renting an apartment for less than 30 days in San Francisco.
As we wrote at the time:
While a crackdown on illegal short-term rentals could quickly move the needle with respect to available housing supply and affordability, it would likely put the Mayor at odds with ["sharing" sites such as] airbnb, a site that he has championed. It will be interesting to see which side he favors.
The official list of recommendations has since been put in ink and sent to the Mayor by way of DBI Director Tom Hui and Planning Director John Rahaim. Missing from the official list, the working group's recommendation to crackdown on illegal short-term rentals and the draft list has been removed from the Planning Department's website.
∙ Executive Directive 13-01: Housing Production and Preservation [sfplanning.org]
∙ The Recommendations For Accelerating Housing Production In SF [SocketSite]
First Published: February 14, 2014 3:00 PM
Comments from "Plugged In" Readers
Not that surprising. It would be difficult for the city to actually crack down on this in any meaningful way without just directly going after Airbnb and the like. SF does not have the staff or the interest in going after hundreds or thousands of hosts (though 5000 illegal sharing units seems like a stretch- a lot of the listings are spare rooms).
SF should agree not to enforce the 30 day tenancy rule against anyone who is a genuine host and pays the occupancy tax- which Airbnb could collect. That deals with the complaint about a landlord running an illegal hotel or the neighbor who's not around while guests create a rucus. If you own a 2br and want to rent out the spare room on airbnb that should be okay if you pay the tax and are there to ensure the guest behaves.
Posted by: mission at February 14, 2014 3:20 PM
I admit I have only lived here for three years,
So I don't know all the ins and outs of rent control . I live in a rent controlled building in Cole Valley ( no complaints). Since I moved here we have had one unit turned into a short term AB&B by the tenant . Fortunately that was finally ended after an infestation of bed bugs. Another unit is sublet by the very long term tenant. I have never meant or seen that person since I have been here. And that tenant does not live in SF but does not want to give it up so he could afford to move back some day. The rents new tenants have gone up 50% since I moved in. If I would want or need to move I could not afford it.
What is the benefit of this system?
Posted by: Fraser at February 14, 2014 4:24 PM
@ Fraser: there is NO benefit to this system run by our Socialist/Communist city government.
It fails in so many ways: The City turns its' eyes when it comes to AirBnB.
Rental buildings fall apart because landlords have no incentive to maintain them.
Vacant units continue to enter the market because owners remove them from the system, due to archaic rent control laws.
Welcome to the People's Republic of San Francisco. Enjoy your stay.
Posted by: Futurist at February 14, 2014 4:41 PM
Fraser--keep your apartment forever whether you need it or not. After you buy your homes in Palm Springs and Wine Country you may want pied-à-terre here for a stopover between. There is no means test or residency test for rent control eligibility.
Posted by: Pioneer at February 14, 2014 4:50 PM
anyone choosing to leave 25K/yr on the table because of some fear of the "bad tenant" is either insanely wealthy and doesn't need the money or just plain dumb. i've been a landlord for 14 years with about 10 tenants and no problems during that time.
Posted by: rentier for rent control at February 14, 2014 5:10 PM
Oh what a tangled web we weave when first we practice to pander to special interests and not have strong convictions or a long term policy.
I liked Ed Lee. He helped clean up mid-market, a feat tried by many other mayors to no avail. But, now he's stepping all over himself trying to distance himself from his own success.
SF politicians are so conflicted trying to make a socialist utopian state while struggling with reality.
Posted by: gary belk at February 14, 2014 5:21 PM
It's really an edge case, whole rent controlled apt > rented via airbnb.
On the other hand, there is a HUGE number of "master tenants" who are moving away from adding full time tenants to their multi-bedroom units.
Instead they are renting out the extra bedrooms on airbnb. They make more money and have more control this way.
The law that we need would require these people to share their revenue with the building owner.
Reporting would be for airbnb to handle.
Posted by: Stucco_Sux at February 14, 2014 6:45 PM
Ed lee is as corrupt as they come. He has barely touched Mid-market; it's hardly cleaned up.
Just walk down to 6th and Market on any given day and you'd think you've entered a third world country of drugs, drunks and homeless.
Posted by: Futurist at February 14, 2014 9:08 PM
"Ed lee is as corrupt as they come. He has barely touched Mid-market; it's hardly cleaned up." -futurist
Are you kidding about mid-market? Yeah it's gritty and has crime problems, but it's clearly doing better than it was 5, 10, 20 years ago.
Posted by: cfb at February 14, 2014 11:17 PM
I still don't understand how so many airbnb hosts exist - Most rental leases forbid subletting and most HOA's bar tenancies of less than 30 days in condominiums. How are so many people getting away with this?
Posted by: Fishchum at February 15, 2014 8:11 AM
An owner in my building was renting via airbnb, but no one knew until one of the other owners found it on a search. Our HOA has always prohibited rentals of less than a year.
Nearby at the Clocktower building there are at least 4 units listed on Airbnb. I don't know but would be surprised if their HOA allows it. One unit is listed at $249/night + $50 cleaning fee. It has 29 reviews over the past three years. Rough math, perhaps 40 rentals at an average of 3 nights is somewhere around $30,000 over 3 years plus $2,000 in cleaning fees, and $0 in hotel tax.
If Airbnb reports that payment to the property owner for taxes, it would be easy for SF to at least know who is breaking the law.
Airbnb currently lists 6121 SF properties. That's less than 2% of the housing units, but equal to 18% of the legal hotel rooms. Enough to compete with hotels but spread out so as to be nearly invisible.
Posted by: Jake at February 15, 2014 9:44 AM
"Airbnb currently lists 6121 SF properties. That's less than 2% of the housing units, but equal to 18% of the legal hotel rooms. Enough to compete with hotels but spread out so as to be nearly invisible."
Airbnb is not the only site. There is also vrbo and several others. There are quite a few units not overlapping with airbnb
Posted by: The wolf at February 15, 2014 10:37 AM
Airbnb offers are also much more diversified geographically than the traditional hotels. How many hotel rooms in Glen Park, in Bernal? Even in Nv or the Castro they fill a huge need of people who want to live like the locals, not in Fisherman's Wharf. Many hotels in the Mission are SROs too.
Posted by: lol at February 15, 2014 1:47 PM
I think the mid market "clean up" was a lucky confluence of events for Ed Lee, plus people were afraid to "bitch" about the tax break for Twitter, something that was never done for the major corps that use to inhabit the City.
Anyone see the article about people becoming squatters in the airbnb room? They rent for one or two nights and then they stay and challenge the eviction...
I don't know if it could be done, but wouldn't that be a wild and wooly scenario for Ed Lee to deal with.
Posted by: noe mom at February 15, 2014 2:20 PM
according to an airbnb co-founder Nathan Blecharczyk, "we file 1099s on each of our hosts. So all of our hosts currently pay federal income tax on that money."
btw, a new study of airbnb in nyc found that two-thirds of the listings were illegal.
Posted by: Jake at February 15, 2014 3:10 PM
Why so much mention of Airbnb?
I applaud them.
Remember Napster? Changed a broken music industry.
Airbnb, VRBO exist because they provide more efficient, peer-to-peer transactions; minus broken govt and nimbyism.
Change is what we all voted for. LOVE IT.
Posted by: Tom at February 15, 2014 7:49 PM
Noe mom- can you link that article? Being the paranoid LL that I am ( gotta be in this FU city), I always wondered when someone would try that stunt. I think it's more of a problem for the person who stays over 30 days, legally speaking. For anyone under 30 days I'd just for force my way in and physically remove that person. Change the locks and bye bye.
Posted by: poor.ass.millionaire at February 16, 2014 9:02 PM
Airbnb and Ellis Acted Units are a distraction and a way for Campos and the like to pander for votes.
Seriously - While there are tenants (not to mention homeless) in desperate need of affordable housing, there are probably 100 times the number of annual Ellis acted units that are being held by people in the top 5% of all income earners.
These people do not need affordable housing. In many cases they may be making more than the landlord who is forced to keep their rent artificially low.
Lets stop holding units off the market for people who don't need cheap rent. Its all great if you can have a ski lease and a fat 401K, but I thought this was about housing?
Posted by: me at February 16, 2014 10:45 PM
^ stop being so practical. This is San Francisco!
Posted by: poor.ass.millionaire at February 17, 2014 10:31 AM
Austin, Texas has a ban on daily rentals (they don't have rent control), and people get around it by having tenants sign 30 day leases that are cancellable at any time. So you rent for 3 days and leave. Their major concern was loss of tax revenue and compeition for the hotels.
Posted by: MoneyMan at February 17, 2014 11:00 AM
The wheels are coming off the daily rental issue...just do a quick search for the many problems popping up in these units "Prostitution", "Bed Bugs", "Squatting", etc. etc. There is a reason why the modern hotel was created, and those reasons are now coming back to some users of these other "services".
Posted by: JustSaying at February 17, 2014 11:18 AM
The wheels are coming off the daily rental issue
lol. Hyperbole much?
airbnb has never been so successful and popular. The future is a mix of traditional and non traditional hospitality.
Some people want predictability. Others want the personal touch. As I said earlier, one desire many people have is to live like locals, not like a herd of sheep hauled from one pasture to another.
Posted by: lol at February 17, 2014 4:19 PM
"just do a search for" ?
Those aren't very good words to live by. People say all kinds of stuff.
Posted by: Truth at February 17, 2014 5:07 PM
Airbnb, and every other web platform needs to collect room tax at the point of sale. Yes, it's a pain for them, but too bad.
The fines for failure to comply need to be raised so that the enforcement can be self-funded. If you add a snitch bounty, I'm sure there would be no problem with enforcement.
Posted by: MysteryRealtor at February 17, 2014 6:33 PM
Airbnb is definitely a good remedy for the inflexibility of SFs overly strict rent control. I am not entirely opposed to rent control, but find that as implemented here, it is too one sided. I have two rental units, one of which is happily rented out and makes great income. The other one is upstairs from my own unit, in the building where I live. If I could add and remove tenants at will from that one, it would be on the market. But I don't want to get stuck sharing my yard with some long term guy I can't get rid of. So that one just goes out on airbnb a couple times a month to out of town visitors. Competes with hotels, and keeps a rental unit off the real market. Too bad I can't write more flexible contracts for that one.
Futurist: we all have our bad days, and you are usually a rational sounding if somewhat libertarian guy. But today you sound like a ranting John Bircher. People ignore stuff like that.
Posted by: Jack at February 17, 2014 9:22 PM
All for AirBnB and VRBO, but as I have said, you have to limit it. Otherwise it starts to change the nature of a residential area / neighborhood.
Very disappointed in SF Gov for not trying to address this.
Posted by: DanRH at February 18, 2014 1:14 PM
They are there because of a problem in the way things were done before.
People want to travel to a city to see the sights, and sometimes to experience the city like the locals. You go to the Grand Canyon, you want to sleep in the Park. But if you go to a city you want to go out where the locals are going, you want to have breakfast in the cool spots and not have to drive, etc. Hotels do not always fit this need because they are geographically very limited.
Restrictions such as rent control are the reason this is so popular from landlord's point-of-view. There is an incentive to try and avoid to rent long term.
Solve these 2 issues and airbnb will be just a niche business in SF.
Posted by: lol at February 18, 2014 1:32 PM
@lol, I hear you. And I agree 100% about the rent control fact. But for arguments-sake (and reality), nothing is changing about rent control anytime soon. So I take rent control out of the equation when looking at AirBnB/VRBO issue.
My stance is still the same: allow it but put in some limits. I applaud what Amsterdamn just managed to figure out/do (and AirBnB is even liking it!): http://www.collaborativeconsumption.com/2014/02/04/airbnb-is-to-stay-in-amsterdam/
And key to it, I think: "However, to maintain its ‘occasional character’ persons renting out their property are allowed to do this for a maximum of four persons at a time and for a maximum of two months per year in total. Renting out a property longer than two months will be viewed by the supervisory agency as an indication of possible commercial activity..."
Simply put: I want to see it allowed in SF, but I also want to see total days limit (ie, 2 months/yr).
Posted by: DanRH at February 18, 2014 1:52 PM
I do not agree with this principle.
But I agree that if rent control (and the plethora of added restraints that had to be added to address the negative side effects or rent control) is here to stay, then there is no other option than adding yet more restrictions to all the alternatives.
In theory, we shouldn't even be having this discussion. If too many landlords do airbnb then their ROI would be lower than regular rentals due to lower listing prices and low occupancy rates. They would then turn to the regular rental market and prices of airbnb places would settle towards a value of a regular rental + non-occupancy cost + management cost + annoyance cost.
But this basic math is never allowed to play out. Some landlords are putting their place on airbnb at a crazy price because they're afraid someone will rent for 30 days the claim it as a normal rental! With a crazy price we're sure this will not be the case. This unit is probably gone from the market for a long time, even if the landlord is certain to collect less than he could.
Posted by: lol at February 18, 2014 3:42 PM
Will a normal homeowners insurance policy cover incidents resulting from airbnb rentals?
Posted by: joh at February 18, 2014 4:19 PM
fwiw, California voted in favor of rent control as recently as 2008 (props 98 and 99). The margin was just over a million votes.
Posted by: Jake at February 18, 2014 4:38 PM
"Will a normal homeowners insurance policy cover incidents resulting from airbnb rentals?"
Depends on the policy, but nearly all homeowners policies have an exclusion for claims arising out of commercial use. So if an airbnb renter gets injured or damages something, you are probably on the hook without insurance protection.
Posted by: anon at February 19, 2014 8:36 AM
You can claim that these are guests. The insurance would have to prove that you are making an actual commercial use. Do not forget that all the utilities are still under your name and you are the main resident of the place. Insurance agents would have to search your address on airbnb which is not the easiest thing since most do not know what your place looks like from the inside. Plus if you have a major problem you can remove the listing, not that I would advise it ;)
Posted by: lol at February 19, 2014 10:11 AM
"Remember Napster? Changed a broken music industry."
This is a good analogy. Napster combined a good idea, that of changing how music was distributed, along with a silly idea, that actions on the internet were out of the realm of the law.
Airbnb, like Napster, has popularized a new way to market short term rentals. This has deservedly proved very popular.
But there's this school of thought that just because the internet is involved either laws don't apply or, as illustrated by the first comment on this thread, government will not be able to enforce existing laws. As Napster (and Bitcoin) have shown, this will prove to be completely false. If anything since these sites maintain your address and transaction history which are just a subpoena away, it's much easier to conduct enforcement vs word of mouth renting to friends of friends. And committing insurance fraud is a serious crime which insurance companies are unlikely to overlook. Try getting your standard car insurance to pay out for an incident while driving for a car-share service.
Additionally, the city has actually litigated in the past with the airlines over the practice of cycling crew members through a unit rented to the airline. So the city has shown a willingness to litigate over this type of issue. And the dodge of renting to a legal deservedly for greater than 30 days who then cycles occupants through on a short term basis has already been fixed.
Internet short term rentals are here to stay. Freedom to commit insurance fraud, ignore taxes, zoning and HOA's is going to be fleeting.
Posted by: anon2 at February 19, 2014 12:15 PM
lol - So now you're advocating insurance fraud? I suppose this type of attitude shouldn't come as a surprise from an airbnb "host".
Posted by: Fishchum at February 19, 2014 12:28 PM
Nope. 1 - I said I wouldn't advise it. 2 - This is not commercial use as far as I know, since I am still a resident of the place. 3 - You are providing some level of legal counsel by saying you know what is insurance fraud and what is not. If you are not a lawyer, then that could be construed as impersonating one on the interwebs. Then again IANAL therefore I cannot answer that question ;)
Plus you are favoring Uber and UberX, which are for taxis what airbnb is for the hotel industry: businesses created in a regulatory void or an obsolete monopolistic environment. How do you reconcile the 2?
Posted by: lol at February 19, 2014 12:56 PM
Sorry, the way your statement read it appeared as if you were advising against simply removing the listing.
You're renting out a room and profiting from it. Sounds like commercial use to me.
Your analogy using Uber and Airbnb is flawed. I'm not profiting from Uber or UberX; a correct analogy between the two would make me an Airbnb "guest", not a host.
Posted by: Fishchum at February 19, 2014 1:04 PM
One "can" claim all sorts of things - falsely. One can claim to the IRS that you earned 1/2 what you really did and hope they do not audit you. One can claim to an insurer that the airbnb renter who slipped and broke his back was a "guest" and hope the carrier does not inquire further. But the insurer will inquire further if the claim is at all substantial.
I'm not a big believe in karma or kismet, but for those who are, it is something to think about.
Some practical advice: get a rider to cover risks arising out of commercial use. It will not be that expensive -- few hundred bucks a year. Although you will then have to disclose the commercial (and thus likely unlawful) use. And homeowners policies generally have an exclusion for illegal conduct, so that may still apply.
Posted by: anon at February 19, 2014 1:15 PM
"You are providing some level of legal counsel by saying you know what is insurance fraud and what is not"
If you want to lie to an insurance company in order to collect a payout that you would not otherwise be entitiled to, all the while having your rental history sitting on an AirBnb server, go right ahead.
If you need legal counsel to see how that's going to play out, ....
Posted by: anon2 at February 19, 2014 1:16 PM
I am not renting a room. Technically I am still the occupant since I spend more then 1/2 the year there. It's just one of several residences but due to SF laws I have to make sure this is still my official residence. Commercial use? Debatable.
Using Uber/Uber-X makes you an anti-monopolistic rebel in your eyes, but to another Fishchum you'd be just another participant to a law breaking enterprise.
Posted by: lol at February 19, 2014 1:32 PM
"I am not renting a room."
- People are giving you money in exchange for an overnight stay. How, exactly, are you not renting a room?
Posted by: Fishchum at February 19, 2014 2:05 PM
The entire place, not a room.
Posted by: lol at February 19, 2014 2:11 PM
You can claim that these are guests. The insurance would have to prove that you are making an actual commercial use…Insurance agents would have to search your address on airbnb which is not the easiest thing since most do not know what your place looks like from the inside.Sure, you can claim anything you want, but I'm with Fishchum, this sounds like insurance fraud to me.
But I have a more nuts-and-bolts question for all the hot shot landlords: Is what lol says about the burden of proof correct?
Obviously I'm not a landlord, but if the AirBnB "host"'s insurance policy does have an exclusion clause for claims arising out of commercial use, it seems to me, just from my experience in other areas dealing with insurance adjusters and aggressive claims investigators, that it's the other way around: what would happen is that the property owner would make a claim, or someone suing the property owner (such as an airbnb "guest" that got injured) would get the property owner's insurance company involved in the litigation, and the insurance company would deny the claim, putting the property owner on the hook for any and all damages.
And then it's the burden of the property owner to prove that the insurance company did an improper denial and therefore the property owner's responsibility to prove that the use wasn't commercial.
Posted by: Brahma (incensed renter) at February 19, 2014 3:11 PM
I hadn't seen anon's comment at 1:15 PM before my last one.
But, in addition to all that was written above, even though I am not a lawyer, I've been involved in enough civil litigation to know that this:
Insurance agents would have to search your address on airbnb which is not the easiest thing since most do not know what your place looks like from the inside. Plus if you have a major problem you can remove the listing, not that I would advise it ;)
is seriously naive.
If you think that an insurance adjuster or claims investigator has to be web-savvy to find your listing on AirBnb, you're in for a rude awakening if/when you get sued.
Similarly, it doesn't matter if you delete the listing or not. Once litigation starts, everything posted to the internet is completely discoverable and the opposing party (in this case, the insurance company) can and usually will subpoena AirBnb or VRBO or whoever for production of evidence and get a copy what you posted at the time, regardless of whether you subsequently deleted it or not.
Posted by: Brahma (incensed renter) at February 19, 2014 3:54 PM
How could an adjuster figure that this was an airbnb guest?
FYI: I have a personal liability rider. Which is why I am not too worried.
Posted by: lol at February 19, 2014 4:25 PM
Something I missed: you said "overnight" guest. I do 30+ days only, max 3 months.
So far 8 months of total rental on the market and 3% vacancy. Yessss! Maybe I am too cheap ;)
Posted by: lol at February 19, 2014 4:40 PM
"How could an adjuster figure that this was an airbnb guest?"
"Hello sir, I'm a claims investigator for Persnickity Insurance Corp. and have just a few questions for you. I understand you were at Mr. Lol's home when [expensive event] occurred. Can you tell he how you know Mr. Lol? When did you first meet? Have you ever heard or used an internet service called airbnb?"
Posted by: The Milkshake of Despair at February 19, 2014 5:05 PM
lol - doesn't matter. You're still renting out your place and profiting from it. Still sounds like a commercial endeavor to me.
Posted by: Fishchum at February 19, 2014 9:01 PM