Airbnb, Other Apartment Rental Sites Struggle With Legality In San Francisco

Throngs of out-of-towners will swarm San Francisco for Fleet Week, the Hardly Strictly Bluegrass Festival, the first Giant post-season games and every other ridiculously awesome thing going on here this weekend. But as many of those visitors opt to book rooms using innovative apartment sharing sites like AirBnB, VRBO and HomeAway, questions swirl about the legality of a practice critics charge depletes the city's precious housing stock.

A 1981 amendment to the San Francisco administrative code made it illegal for the owner of an apartment to offer the unit for rent for a period of under 30 days. Penalties for violating the law are fines that can run up to $1,000 per day.

As a result, one local legislator is looking to crack down.

Board of Supervisors President David Chiu has proposed legislation that would strengthen enforcement of scofflaw renters by empowering the Department of Building Inspection to hold administrative review hearings looking into the conduct of offenders, something it currently is unable to do. The bill would also close a loophole that's allowed corporate entities to skirt the law by signing a lease on an apartment and then renting it out to customers or employees.

“San Francisco cannot afford to lose any more housing at a time when our families are being priced out of the city,” said Chiu in a statement. “That’s why this reform will restrict residential apartments from being converted to hotels while also ramping up enforcement of the law.”

Chiu is also looking into developing a regulatory structure that would transition sites like Airbnb out of their current legal grey area while giving local residents a mechanism to levy complaints about bad behavior from short-term neighbors.

It is possible for residents to apply for a conditional use permit allowing them to turn their apartment into a bed and breakfast. However, the application costs well over $1,000 and can take years before receiving formal approval--two factors largely antithetical to the cheap, informal business transactions sharing sites like Airbnb exist to promote.

Planning Director John Rahaim explained to the San Francisco Chronicle that bed-and-breakfast conversion applications are rare. "[These online short-term rentals have] become so common that people don't even realize it's not legal," he said. "We'll look online and see if they're advertising somewhere on a regular basis, and then ask them to stop...In almost every case they've done that."

"There are no easy answers for Airbnb," wrote Business Insider about the popular, multi-billion dollar, San Francisco-based startup. "Hosts promise Airbnb that they have the right to rent out their places. But a lot of them simply don't. Some renters are violating terms of their leases--like a friend of ours, who just got a cease-and-desist letter from her landlord."

The issue has also raised of the hackles of housing advocates, who worry that treating apartments like hotel rooms will constrict the supply of available units and drive up the price of apartments in what's already the most expensive rental market in the country.

"We began working on this issue a few years ago when we saw a big number of tourist conversions," said Ted Gullicksen, executive director of the San Francisco Tenants Union. He discovered thousands of apartments--sometimes even entire buildings, usually those covered by rent control laws--were being taken off the rental market for use by tourists, sometimes after evictions to clear them of tenants. If I could use these sites to make money, unscrupulous landlords could as well.

"It shouldn't even get to a tax issue because much of this is illegal," Gullicksen said, noting that landlords opposed legislation a few years ago to give tenants more rights to sublet their apartments or add additional roommates. "This talk of shared economy strikes me as the wealthy asking the less wealthy to sacrifice."

This isn't the first time Airbnb has brushed up against San Francisco's formidable bureaucracy.

Only days after Mayor Ed Lee announced the formation of a working group aimed at bolstering the city's "sharing economy," Treasurer Jose Cisneros made his own announcement--that rooms rented through companies like Airbnb would be subjected to the city's hefty hotel tax.

"The message that Airbnb was sending was that tourists don't need to pay their fair share," then-local Democratic Party Chairman Aaron Peskin told the Chronicle, "which means that those of us who live here are getting taxed more for services that they impact."

"We are now and will continue to meet with the various stakeholders, neighbors, property owners and tenant groups as the city's codes and zoning laws are updated to reflect the reality of short term rentals," said Airbnb in a statement.

Chiu's bill, which received support from a rare coalition of groups representing both tenants and property owners, was unanimously approved by the Board of Supervisors' Land Use Committee on Monday and is expected to be voted on by the full Board later this month.