Unregulated rental business takes over housing

The Board of Supervisors is working on a proposal that will make it illegal to turn residential units into year-round hotels in San Francisco.

The law would regulate the ability of tenants and landlords to rent a unit for a limited number of times through the course of a year.

Supervisor David Chiu’s office, in charge of drafting the legislation, expects the legislation to come as early as September, said Judson True, Chiu’s legislative aide.

Regardless of the laws prohibiting short term rentals of units, tenants and landlords continue to use online rental services like Airbnb. Some Airbnb hosts could earn $10,000 per month by renting out to tourists.

María C., who has lived on 24th and Hampshire streets for over two decades, noticed how the apartment above her has been rented out to Airbnb guests on a regular basis.

“They are using a unit that’s rent controlled and they’re taking the space away from people who really need a place to stay in San Francisco,” she said.

María’s next door neighbors, Mel H. and Ryan P., who happen to be Airbnb hosts, are renting out the whole unit above María’s, in addition to a guest room in their own apartment.

Based on the couple’s Airbnb listing, they are renting out an entire apartment for $249 a night, and are booked for 24 nights in August—they expect to make a profit of $5,976 from the endeavor. The couple will earn another $3,069 for renting out their guest room at $99 a night, which is booked for the entire month of August.

“It’s cheating the people that pay taxes,” María said.

While hotel businesses have to adhere to San Francisco’s 14 percent hotel occupancy tax, Airbnb hosts in San Francisco are not legally held accountable to paying this tax.

According to Airbnb’s earnings in 2012, guests contributed $12.7 million to lodging in San Francisco. By avoiding the hotel occupancy tax, the company theoretically owes the City $1.8 million.
There are currently about 4,028 Airbnb listings in San Francisco, with 608 listings in the Mission alone.

“Every single place in Airbnb is illegal,” said Ted Gullickson, director of San Francisco Tenants Union, a tenants’ advocacy group.

Tenants or landlords are required to get approval from the Planning Commission and the Department of Building Inspection in order to rent out property.

But in reality, “people can’t do it legally,” Gullickson said. They cannot obtain permits because there is no set process to do so.

The controversy surrounding Airbnb started last September when Nigel Warren of New York City was sued by his landlord for illegally subletting his apartment for three days. Warren violated his lease by renting out his apartment for less than 29 days and was fined $2,400.

Even with the support of Airbnb during Warren’s trial, the New York judge ruled that it was illegal for him and other New Yorkers to turn a residential space into a bed and breakfast business.

The San Francisco planning code defines short term rental as hotel use, which is a violation of City zoning laws.

While hosts evade the law, more Airbnb guests continue to flock to the Mission for cheaper room and board.

Advocacy groups in the Mission are concerned about how Airbnb’s increase in tourism will affect the Mission’s historical culture and its residents.

“They’re adding to the gentrification, and making it into a tourist destination,” said Erick Arguello, head of the Lower 24th Street Merchant’s Association. “It’s not just a playground for tourists to come in.”

Though bringing in more wealthy people will add to the City’s revenue, it risks pushing native residents out, Arguello added.

As Chiu’s office continues to draft the legislation, San Francisco Board Supervisor David Campos stresses the need for regulation.

“I think that the key for me is to make sure that we strike a balance in terms of allowing Airbnb to do its work and making sure it’s contributing to the city and the community,” he said.