Airbnb Report Shows That Users Make Large Contribution To San Francisco Economy

Is Airbnb's Success Strangling SF?

SAN FRANCISCO - A new report commissioned by Airbnb shows that not only does the peer-to-peer hoteling service have a large positive effect on the economy in its hometown of San Francisco, but travelers who use the website have a tendency to stay longer and spend more money then guests at traditional hotels.

The study, conducted by the real estate/economic development consulting firm HR&A Advisors, shows that during the period stretching from June 2011 to May 2012, Airbnb guests contributed $56 million to the San Francisco economy, only about 20 percent of which went directly to lodging expenses. The other two largest industries benefiting from Airbnb customers were the food/beverage and retail sectors.

The average spending of an Airbnb guest was significantly higher than that of individuals staying in traditional hotels ($1,100 per visit vs. $840).

"Airbnb represents a new form of travel," said Airbnb CEO Brian Chesky in a statement. "This study shows that Airbnb is having a huge positive impact--not just on the lives of our guests and hosts, but also on the local neighborhoods they visit and live in."

The report also details that 60 percent of Airbnb hosts earn below the city's median income and over half of them use proceeds from Airbnb to pay their rent or mortgage.

"Hosts really use Airbnb to make ends meet," Molly Turner, head of public policy at Airbnb's head of public policy, told Forbes. "One of the findings that most surprised us is how important Airbnb is to hosts. It's really helping them through tough times."

The success of Airbnb in San Francisco comes partially because, although demand for hotel rooms has increased in recent years, the supply has remained constant. "We don't have any new hotels being opened," explained Hotel Council of San Francisco Executive Director Kevin Carroll. "From an inventory standpoint there's nothing new coming onto the market, and at times, when occupancy is high across the city, Airbnb can soak up that extra demand."

Even so, some remain skeptical as to whether Airbnb's overall effect on the region is a positive one.

Affordable housing advocates, for example, worry that devoting more and more apartments to short-term rentals diverts much of the city's precious housing stock away from permanent residents.

In a city with the both the most expensive rental and housing markets in the country, these arguments are far from trivial.

"We've been working on this issue for years," explained San Francisco Tenants Union Executive Director Ted Gullicksen. "Even predating Airbnb, with companies renting out large blocks of rooms for their employees. But when these Internet sites popped up, the problem spread like wildfire."

In the early 1980s, San Francisco passed an amendment to its administrative code, making it illegal for the owner of an apartment to rent out the unit for less than a month. Under the city's planning code, renting out a private apartment for a short period of time turns the property to a hotel, which requires a conversion from residential to commercial use.

In the past, Gullicksen said, enforcement of these rules has been relatively lax. However, earlier this year, San Francisco Board of Supervisors President David Chiu introduced a law making it easier for the city to crack down on scofflaws. The legislation would give organizations like the Tenants Union the ability to sue landlords for renting out their properties illegally.

"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."

Gullicksen said that if the bill becomes law, he will likely to file complaints against some of the highest-profile landlords currently flouting the rules.

But many Airbnb users don't even realize they might be skirting the law. "[These online short-term rentals have] become so common that people don't even realize it's not legal" Planning Director John Rahaim told the San Francisco Chronicle.

Last year, city officials decided to no longer exempt Airbnb rentals from the 14-15.5 percent hotel tax that funds, among other things, grants to affordable housing projects. Ironically, this policy change was made on the same day as Mayor Ed Lee announced the formation of a "sharing economy" working group aimed at promoting companies like Airbnb.

According to Gullicksen, one possible compromise is to create an exemption allowing individuals to rent out their principal place of residence for a certain amount of time each year. That way no additional housing stock would be taken off the market and people could still earn some extra cash letting guests sleep in their beds and rifle through their medicine cabinets.

He added that the challenge would be crafting the legislation in a way such that this exemption doesn't just become a loophole rendering other regulations moot.

Airbnb has expanded exponentially in recent years. The company grew by 800 percent in 2010 alone and is now used in 30,000 cities in 192 countries around the world.

Update: Representatives from Supervisor Chiu's office have indicated they are working on new legislation that would move more people renting their apartments through services like Airbnb out of the legal/enforcement gray area as part of the the supervisor's efforts to promote the city's "sharing economy."

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