San Francisco Board of Supervisors President David Chiu announced legislation this afternoon that aims to regulate the short-term rental ecosystem in the city. In doing so, Chiu demonstrated keen balance in walking the fine line between economic development and citizen’s grievances. It’s one of a series of ongoing attempts at City Hall to bring the city’s regulatory system up to date with developments in the sharing economy.
It remains to be seen how this legislation would affect the bottom line of companies like Airbnb if passed, but from the point of view of Airbnb hosts, it will go some way to providing legal protection and a means to keep their short-term renting completely above-board.
Importantly, today’s proposed legislation would provide clear guidelines for tenants and homeowners using platforms such as Airbnb, VRBO and Craigslist in order legally rent their homes or apartments. As we’ve reported and Chiu acknowledged, the legality around using these platforms in San Francisco has been ambiguous, with tenants too often paying a dear price for renting out their homes without fully understanding their risks.
Under the proposed law, Airbnb Hosts would need to register their unit with the Department of Building Inspection, and provide proof that it is their primary residence and that they have liability insurance. The registration would last for two years, after which the users would need to provide proof that they had complied with rent control laws and paid the applicable hotel tax.
Airbnb and other short-term rental platforms will be forced to push out information to prospective hosts that provides details of the legal guidelines for renting in San Francisco.
Residents or landlords who use these platforms without registering would be blacklisted from using their platform of choice and forced to pay fines. Tenants who run afoul of their lease agreements in using Airbnb, et al., would be given the opportunity to “cure” the situation after their first violation. Under the current system of enforcement, a landlord who discovers that a tenant is renting out their unit short-term can legally evict that tenant, because this illegal use is considered “incurable just cause.”
“This legislation will make it more difficult for landlords to evict tenants,” said Ted Gullicksen of the San Francisco Tenants Union, who contributed to the proposed legislation and joined Chiu at the podium along with Planning Department Director John Rahaim.
Gullicksen said that the proposed bill would also allow the city to deal with “evil” landlords who have evicted tenants in order to illegally hotelize their real estate, driving down precious housing stock and circumventing rent control laws.
Under Chiu’s legislation, short-term renters would not be able to earn profits off their homes, as the city would set cap the acceptable income from short term renting to match the unit’s monthly rent.
The announcement comes after years of work by Chiu’s office to develop a consistent regulatory structure amid the surge of short term rental platforms. Two weeks ago, Airbnb announced that it would begin paying hotel taxes, and Chiu acknowledged that that agreement had paved the way for today’s rollout.
The proposed legislation has four main components. It distinguishes between “bad actors” and legitimate renters, and provides standards for enforcement, regulation and the collection and remittance of taxes.
Gullicksen said there is not a problem with residents who want to rent their apartment out for a few weeks out of the year while they travel. Otherwise, he said, those units would remain vacant. And Chiu noted that Airbnb-ing can be an important source of supplemental income for residents struggling to pay their bills and put food on the table.
The target of the legislation are landlords who have skirted rent-control laws and created de facto year-round hotels in private homes throughout the city. By making a distinction between acceptable and illegal practices in short-term renting, the city will be able to more aggressively pursue bad actors.
Until now, there was no clear pathway for dealing with these sorts of grievous violations, and enforcement by the city has been infrequent and piecemeal. Gullicksen and the Tenants Union have filed several lawsuits on behalf of individual tenants in an effort to “shame the City Attorney into dealing with the situation.” If the new legislation is passed, violators could be fined and blacklisted immediately without recourse to the court.
According to Chiu’s press release today:
The proposal represents a balanced approach relative to cities like New York that have fully banned short-term housing or cities like Malibu that permit all forms of short-term housing by right.
A press release on Airbnb’s website today applauded Chiu for taking “a critical step towards recognizing the benefits of home-sharing for everyone in San Francisco.” During his statement this afternoon to a room full of reporters in a City Hall conference room, Chiu said that the sharing economy was great for San Francisco, but that the city needs to adapt its regulatory codes to make sure its growth doesn’t violate standards of fairness.
This legislation won’t be going live for at least three months, as it has to clear the Planning Department before being brought before the Board of Supervisors for a vote. And there are certain aspects that various stakeholders will oppose. Airbnb, for instance, takes unction in its press release against the registry component, citing fears that it will violate user privacy because the registry will be public record.
It’s a complex piece of legislation that makes a lot of sense, but will be difficult to put into action. Enforcement will still be complaint-driven, meaning those who violate the regulations will be able to operate under the radar until they get caught. And although tenants will be made aware of the risks they incur by renting their units in violation of their lease, the law doesn’t prevent them from doing so.
The best bet, then, for a tenant who’d like to rent their apartment while they travel, would be to come to some arrangement with their landlord before putting their apartment up on VRBO or Airbnb.
San Francisco’s affordable housing crisis is the 800 pound gorilla-in-residence at City Hall these days, and while today’s proposed legislation doesn’t confront the beast head on, it does manage to sneak up and file down its incisors just a bit.
[Photo via Dan Raile for Pando]