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Will David Chiu Let You Rent Your Apartment on Airbnb?

Board of Supervisors President David Chiu introduced legislation yesterday that would clarify regulations around short-term apartment rentals through sites like Airbnb, VRBO and Craigslist.  “My legislation creates limited flexibility for permanent residents to earn the additional income they need to help pay their rent and every day bills, but not at the expense of converting our limited supply of housing into hotels or vacation homes,” Chiu declared in a press release.

By requiring residency by hosts and registration of listings with the city and providing enforcement provisions for violators, the bill could signficantly affect the supply of units in San Francisco, where Airbnb and Craigslist are both based, restricting or even rolling back inventory growth right in their own backyards. It essentially holds Airbnb to the message of the company’s “sharing economy” marketing and lobbying message—that the service helps individuals and families make ends meet—by permitting some tenants and most individual homeowners to use the service while restricing units taken off the long-term rental market for use on the short-term rental market, which may be the bigger business and definitely presents the bigger threat of displacement.

In a statement, Airbnb called the proposal “an important first step,” but “not perfect,” specifically citing the registration requirement as problematic. So how, exactly, would this affect a typical San Francisco tenant who might already be making a few bucks on the side even at the risk of losing their home? Currently the practice is often illegal for both tenants and landlords, no taxes are collected and city enforcement is basically nonexistent. In New York’s far larger market, estimates peg the share of illegal listings at more than two-thirds, and even Airbnb admits that city is missing out on $21 million or more in tax revenue.  Tenants in SF have received eviction notices related to short-term rentals listed on Airbnb for violating their leases, and the San Francisco Tenants Union has begun going after landlords who have evicted tenants only to rent the units out illegally online—including two who combined the Ellis Act and Airbnb to empty their buildings and convert them into defacto hotels.

The proposed bill only applies to short term stays (less than 30 days), and mostly applies to multi-unit buildings, because single-family homes are generally treated separately in city codes, and one of Chiu’s primary goals is to protect rental stock from being “hotelized.”  So the bill calls for tenants and owners to apply to a registry maintained by the Department of Building Inspection every two years and establish that they are a permanent resident, which means living in the housing unit nine months out of the year.

So no, you can’t move to Costa Rica and turn your old rent-controlled apartment into a VRBO timeshare when you’re not using it as a pied-à-terre, at least not if you’re booking stays less than a month.  And if you’re a landlord, you can’t leave units empty year round and hire a service like Guesthop and Urban Bellhop to manage the unit, or become a speculative master tenant by leasing multiple units across the city. You can, however, list an apartment you own or rent and live in for short stays totaling no more than 3 months in a year, and if rent-controlled, you can not charge more than your own rent in any one month to prevent scenarios like a tenant who’s pocketed profits.

When asked at the press conference announcing the legislation if that meant that someone could conceivably rent the couch in their living room for enough nights to make their monthly rent at the press conference announcing the legislation, Chiu and San Francisco Tenants Union President Ted Gullicksen concurred that scenario was acceptable.

But that’s all based on the assumption that you have a landlord’s permission to sublet in the first place, which is not at all a safe assumption.  Standard leases generally include an absolute prohibition against subletting or assignment, so you could still ultimately be evicted on those grounds. But if you have a handshake deal with your landlord or a provision allowing you to sublet with permission, you have notified your landlord of your intent to host paying guests and they don’t turn it down within 14 days, and you’ve secured $150,000 in renter’s liability insurance coverage, you’d be good to go.

Even if you still decide to take the risk, the bill does address the incurable illegal use violation eviction notice that has become a strategy among landlords and their attorneys by changing the Rent Ordinance’s Just Cause eviction protections to make the first offense (and only the first offense) curable.  While signing up for the registry would not be a lease violation, the registry will still be a public record with only names redacted.  But the landlord will theoretically still have to prove repeated violations occurred in order to formally secure an eviction.  And it also opens you up for potential nuisance violations if, say, somebody decides to host a brunch munch in your unit.

Uptown Almanac chatted with someone known to have rented their unit out on Airbnb, who for obvious reasons wished to remain anonymous.  “It’s about time city law got on board with something the city power brokers are wholeheartedly supporting.  Allowing renters to take advantage of the demand for San Francisco — just as property owners are — is not only fair, it’s crucial for middle-class earners to be able to survive, let alone save, in this completely unreasonable market.”

They said that while they are allowed to sublet under the terms of their lease, they took a photo of their building off of listings because “I dont want an enterprising lawyer to contact my landlord.”  Hence they don’t like the registry requirement, especially since it doesn’t seem to provide any benefit to the host, and also wanted to know what the city planned to do with the new tax revenue collected through the vacation rental sites.  “I’m not convinced it protects me, as someone who lives in my home full time and rents out a room from time to time to pay bills and save money. And I’m not sure why it’s necessary… It conflates me with people who use their properties in a vastly different way. I don’t see why I would benefit from being on a list and paying tax.”

As for Airbnb, Craigslist and other such sites, they’ll be required to educate hosts on the local law and help enforce violations by blacklisting units that are found not to comply.  They will also be responsible for collecting the 14 percent Transient Occupancy Tax from customers. An estimate from the San Francisco Bay Guardian says that the city has been losing out on about $2 million a year on revenue based Airbnb’s own publicly released data. However, there are not yet proposed standards for informing customers of the proposed regulations, something Airbnb doesn’t currently make very obvious, as Valleywag’s screenshot illustrates above.

In the end, the legislation would have to cross the desk of Mayor Ed Lee, who might not want to piss off wealthy political supporter, sf.citi impresario and Airbnb investor Ron Conway by signing the restrictions as proposed into law, especially as the company—valued at $10 billion—is predicted to go public this year.  So far the Mayor’s office has accommodated the status quo.  “We were focused on helping an industry begin, but I believe with some smart regulation — particuarly now that Airbnb and perhaps others have indicated they want to pay the taxes associated with those rentals — I think we have a way forward. But we’ll get into all the details,” Lee told the SFBG.  

Presumably, the next stop for the legislation will be before the Land Use and Economic Development Committee for a hearing and public comment.  If recommended, Chiu will need six votes to pass the bill with Mayor Ed Lee’s support, eight without it.  Pass or fail, Chiu may have already won some political points in any case for confronting the issue as he campaigns against fellow Supervisor David Campos for a seat in California’s State Assembly this year.

Comments (5)

Dude on the right looks like it’s his first day in a suit. Needs to be introduced to collar stays.

A great proposal from Chiu!  This is the sort of common-sense legislation that I more expect from Avalos or Campos, not a relative moderate like Chiu.

We need legislation that curtails landlords and building owners from using AirBnB exclusively, unless they register as a hotel. The building next to mine has six units, all rented out on AirBnB instead of rented out to tenants in our housing crunch.

Also, with regard to the insurance requirement in this bill, I hope it’s enforced and increased throughout the years. Very few tenants purchase $150,000+ of renter’s insurance coverage, fewer are even aware how expensive a policy is which covers $150k plus timesharing.

Speaking as a landlord, I would never allow this. I saved for so long to be able to buy my property, and found really nice, responsible tenants to share that house with me. Opening my property to random strangers who have no legal contract with me and are only covered by a crappy 150k insurance policy (which no doubt has a huge deductible) sounds like a bad bad idea. This is why everyone has a sublet clause. I highly doubt this will ever fly with landlords, who stand to gain nothing but a headache from this.

If people can’t afford the rent-controlled leases they signed up for, they should appeal to their landlords to add a permament roommate. One who is a legal subtenant and has gone through a credit check. If my tenants were to fall on hard times and need to add a roommate, I would gladly permit it. Having strangers running in and out of my property while my tenants are gone. HELL. NO.

ps. really great reporting on this!

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