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Uncategorized The Airbnb files -- how a friend of the...

The Airbnb files — how a friend of the mayor avoids law-enforcement

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Ron Conway, an investor in Airbnb, is one of the mayor's leading fundraisers. And his company gets a pass on the rules
Ron Conway, an investor in Airbnb, is one of the mayor’s leading fundraisers. And his company gets a pass on the rules

By Tim Redmond

JUNE 16, 2014 — The San Francisco Chronicle has finally noticed that Airbnb is having a huge impact on housing in the city, and although others have been talking about the problem – and the numbers – for some time, it’s good to see the city’s major daily lay out the figures.

But what’s remarkable about all of this – and goes entirely unaddressed in Carolyn Said’s story – is how San Francisco, a city often criticized for its labyrinthian system of permits and requirements for new businesses, allowed an entire industry based on illegal uses and violations of zoning codes to explode … without any real efforts at enforcing the existing laws.

In fact, documents obtained by 48hills through a Public Records Act request show that City Planning Department officials were aware of the problem at least since 2011 – and did essentially nothing about it until earlier this year.

And even as press reports and complaints began to put pressure on the department, enforcement was, and remains, extremely limited.

Over and over, the documents show that the enforcement process was entirely “complaint driven” – that regulators made no effort to do what the Chronicle (and before that, the Anti-Eviction Mapping Center and tenant groups) have done through easily accessible records: Find out who is breaking the law, taking housing off the market, illegally operating a hotel in residential areas, and make an effort to shut the operations down.

And when planners and City Attorney Dennis Herrera finally took on the most blatant cases, they involved other short-term rental companies, and not Airbnb – which has as a major investor the mayor’s close ally and biggest campaign donor, Ron Conway.

It’s as if the Mayor’s Office sent word over to planning not to mess with a local company that is now worth more than the Hilton Hotel chain – even if its entire business model is based on its users violating local laws.

A couple of weeks ago, at a Land Use Committee hearing, Sup. Scott Wiener complained about what he called “ridiculous” rules that make it hard for a small business that wants to sell beer at an entertainment place in the Mission to get the necessary permits. Whether a place that serves alcohol also has poetry readings is hardly a dramatic issue for the city’s housing stock, but city planners are careful to monitor and demand that every possible rule is followed.

And yet, Airbnb, which by almost all analyses has taken thousands of housing units off the market and made the housing crisis worse, gets nearly a complete pass.

And now Sup. David Chiu is working on legislation that would give the lawbreakers a pass in the future – and front-line city planners who have analyzed his bill think it doesn’t go far enough.

Ignoring the problem for years

I asked for all communications, internal and external, between anyone at City Planning and anyone else around short-term rental enforcement between 2011 and 2014. I still haven’t received every document, but I’ve been given access to several thousand pages, and a careful review shows some clear trends:

  • While city officials were starting to flag the problem in 2011, there is almost nothing in the files that shows any serious efforts at enforcing the laws or even talking about it until early 2014.
  • City planners have made every effort to say that they are not looking for violation, not “trolling” short-term rental websites, and only responding when somebody files a complaint.
  • The number of actual enforcement actions is pretty slim: City planning staffer Adrian Putra noted in an April 4, 2014 memo that only three cases currently had violation letters out and fines accruing, only 15 had been closed since 2012 – and that in 75 percent of those cases, the units had been converted to permanent short-term use.
  • City planning staffers have proposed that if short-term rentals are legalized, they should be limited to a few areas of the city, the number of permits should be limited, and companies like Airbnb should be held accountable for collecting and reporting information to the city. The current legislation by Chiu would apply citywide and would not have any limits on the number of units involved.

The first mention in the documents of any serious effort to get a handle on what by then was already a rapidly growing industry is an October 19, 2011 memo from Malcolm Yeung, who was then a senior staffer in Lee’s office, to the Planning Department’s enforcement folks.

“I would like to pull together a meeting next week to develop a briefing for our office on issues related to ‘illegal’ vacation rental conversions,” Yeung wrote. “Topics I would like to cover with you would be:

Overview of regulators, enforcement and monitoring scheme from each of your perspectives;

Estimated scope of loss of rental housing stock and estimated loss of hotel tax revenue

‘Problems’ with policy around this issue

Any proposed next steps.”

I haven’t been able to reach Yeung, who has since left the Mayor’s Office and is now deputy director at Chinatown Community Development Center, but there is nothing in the documents I’ve been given to suggest that anyone followed up after the meeting.

In the winter of 2012, an intern in the Code-Enforcement Division named Samuel Siegel did a detailed report on the short-term rental issue. His report found more than 2,500 Airbnb listings in the city, noted that most of them were illegal, and stated that enforcement was difficult.

In fact, all over the memos are arguments that it’s hard to enforce the laws against short-term rentals. “The Zoning and Complaince Division has struggled to bring short-term rental violations into compliance utilizing current enforcement tools,” a Feb. 25, 2014 memo from Audrey Butkus to Planning Director John Rahaim notes. “The cases are extremely difficult to prove and the profits from short-term rentals have proven too lucrative to prevent hosts from re-listing their short-term rentals on a different website.”

Part of the problem, as Said notes in her article, is that the Airbnb listings don’t give addresses. Other sides, like Vacation Rentals By Owner (VRBO) give more information, including pictures.

But it’s hardly impossible. The Anti-Eviction Mapping Project has turned over to city officials a significant number of cases where it’s clear that a housing unit is illegally being used as a hotel room – and that group is staffed by a couple of volunteers who do the work in their spare time.

The city’s enforcement staff is small and overwhelmed – but the activists who are watching this freely share their information. It’s hard to see why more hasn’t been done.

 We don’t look

Except for the fact that City Planning has a policy not to look for lawbreakers.

On April 9, 2014, Scott Sanchez, the zoning administrator, who oversees enforcement of the Planning Code, went on KQED’s Forum to discuss Airbnb and short-term rentals in the wake of a Chron article saying that the city was cracking down on short-term rentals. He was pretty cautious; in fact, he said, “I would challenge the notion that there’s a crackdown.”

Every single enforcement action, he noted, was the result of a complaint. There were no city staffers looking for violations.

Yet within hours, Christine Falvey, the mayor’s press secretary, was on the phone to the department demanding an explanation. Gina Simi, a communications person with City Planning, noted in a 10:44 am memo that day (just 44 minutes after Sanchez was off the air):

“Hey, per C Falvey’s request, I’m summarizing Scott’s comments on the show this morning. I’m saying that he did not speak to anything other than our priority being preserving existing housing stock and our primary concern being long-term rental units being taken off the market. That penalties are not our goal, we’re concerned with compliance. Anything else I should add?”

Christine Haw, an enforcement person, chimed in: “I would add that we are totally complaint-driven and do not troll websites.”

In fact, a few weeks earlier, Haw wrote to Planning Director Rahaim to say: “Since July 1, we have sent 17 Enforcement Notices and 4 Notices of Violation and Penalty. We anticipate sending more in the coming weeks. These notices are standard practice. We are totally complaint driven. We are not trolling through Airbnb or other hosting platforms. We don’t need more cases!”

I sent Haw an email to ask why she didn’t need more cases; I haven’t heard back.

Wow, that’s shocking

If you take the figures in the Chronicle as true, and while some say there are way more than 5,000 units taken off the market, we can agree that 5,000 is a lot, then a significant part of the city’s rental housing stock has been converted to hotels.

In one Jan. 13, 2014 email, city planning staffer AnMarie Rodgers responded to reports of the growing number of illegal rentals, saying: “Wow, that’s shocking, grain of sand and all: Approximately 1.3 percent of housing units are now listed as ‘entire unit’ vacation rentals on airbnb.”

While some of them are people actually “sharing” their homes with paying guests, the majority are apartments and homes that are no longer available for San Franciscans who desperately need a place to live. They are tourist hotels.

“The vast majority of our cases are entire unit rentals where the property has been permanently rented for short term use,” Haw noted in an April 8, 2014 email.

In a May 16, 2014 email, planning staffer Audrew Butkus notes “The are several companies right here in town who are managing over 50 properties through one of the larger hosting platforms. When we have a complaint case in which we find one of these agents to be managing the listings, it becomes all the more difficult to obtain leases, schedule site visits, etc as they are not considered a responsible party.”

Chiu has proposed legislation that would legalize the practice, with limits – only owner-occupied units would be allowed to use Airbnb, and the owners would have to live there 75 percent of the time.

At this point, his bill includes no limits on which parts of the city could become tourist hotels, or how many would be allowed.

There are city planning staffers in the middle of this. Let me say: Many are trying to do their jobs with limited resources. Some are probably not happy that they are getting so carefully watched by the Mayor’s Office, where Mayor Ed Lee is close to one of the people who stands to make a huge sum of money off Airbnb (and stands to lose a large sum of money if the entire business plan is shut down by cities like San Francisco).

When they analyzed what the city ought to do, they suggested strict limits on both the number of these short-term rentals and their location. A May 27 memo from Rodgers to Rahaim argues for “limiting the number of permits issued” and “limiting the types of zoning districts in which short-term rentals are permitted.” The memo also suggests “the ability to revote short-term rental permits if the holder is found to be in violation of the permitted conditions” and fines of up to $1,000 a day for repeat offenders.

Chiu may include some of that in his legislation by the time it gets to the final stage. In the meantime, an initiative that would pretty much end this game is likely headed for the November ballot.

And while that debate is going on, I wonder: Will every small business owner and homeowner who has tried to get a permit for the most harmless and modest stuff and has faced high fees and strict rules stand up and say:

Why is Airbnb, rich with investment capital and with a pal in the Mayor’s Office, getting away with ignoring all the rules – with full impunity?

Next: Are landlords using the Ellis Act to clear building for Airbnb?

Tim Redmond
Tim Redmond has been a political and investigative reporter in San Francisco for more than 30 years. He spent much of that time as executive editor of the Bay Guardian. He is the founder of 48hills.

11 COMMENTS

  1. If you read the story, they can only find about 150 homes that are actually potentially “off-the-market,” and you can assume fewer than 100% of those would be full-time rentals.

  2. Damnit, Tim, stop lying! Or to be very generous, hyperbolizing. After reading dozens of articles on the airbnb situation in SF, the Chron’s article is the first to finally provide the crucial bit of information: how many units listed on airbnb represent units being rented full-time to short-term tenants. The answer: 160 out of 2984, or 5.4%. That means 94.6% of airbnb units — 18 out of every 19 units listed — are people who occasionally rent out their unit short-term when they leave town, that is, NOT units that would otherwise be on the rental market. I would agree that 160 is 160 too many in a city with rent control, but it’s a far cry from 5000.

    PLEASE STOP LYING AND SAYING THERE ARE 5000 UNITS TAKEN OFF THE MARKET! You discredit (and, one would hope, embarrass) yourself by spreading misinformation and fomenting hysteria. Seriously: please stop saying what your own sources clearly say is not true.

  3. I agree with Sam that The city’s housing policy is making housing more scarce and expensive. In the long run Rent Control creates distortions like AirBNB, 5 figure payments to tenants to move, landlords not having enough money to maintain buildings due to 1% rent increases etc.

    However Mr Chiu’s legislation has some major flaws in it that just make the situation worse for landlords once they understand that their tenant is defined as an Owner in this legislation.

    1. Allowing tenants to game the system even though lease says NO
    Subletting by not getting evicted for subletting for any violation until the landlord catches them. (oh no landlord I am not subletting they are just friends who happen to have keys to my apartment, building doors, garages etc).
    2. A very novel definition of “Owner” to include tenant / lessee as an “owner”. They are not an owner by any definition I have ever seen!
    3. Property owner is liable for violations by tenant / lessee (caused by #2) since a lien can not be placed against the tenant since they do not really own the property.
    4. Property owner will not be able to consult the data base to see if their property is listed due to “unidentified privacy laws” Surprise Property Owner here is your lien for violations since you are not a donor to Mayor Lee’s campaign!
    5. Insurance for property in legislation does not mandate short term rental insurance (which is more expensive than homeowners or renters insurance) with enough liability. Insurance companies tend to frown on using personal insurance for money making ventures. Therefore property owner becomes the ‘deep pocket’ if anything goes wrong (like a fall on front steps).
    6. Do we really want to re zone the entire City to allow short term rentals? The legislation rezones everything from SRO (low cost subsidized housing) to apartment buildings in ALL neighborhoods.
    7. How can either the landlord (real property owner) or tenant prove that they live in the property 75% of the time? Or are only renting 25% of the time? Security cameras, bed checks, card keys. It is an unenforceable provision that Mr. Chiu must know this is a bogus ‘red herring’.

    I own a 2 unit building for a long time that is my home and retirement income. So don’t cast me off as a speculator or big time property owner. I am neither!

  4. SJ, your problem wasn’t that people are doing short-term lets. Your problem was that the city has made long-term lets so unprofitable and risky that many owners would rather change their business model than deal with that.

    Given that these owners could have gotten a market rent from you and yet they still preferred overnight visiting German tourists, with all the extra hassles of laundry, cleaning etc., surely shows you that we have created in this city a massive disincentive for people like me to rent to people like you.

    And it’s not that I think there is anything wrong with you, nor that I am prejudiced in any way. It is simply that if I agree a 30-day. month-to-month rental agreement with you, it could end up being 30 years with negligible rent increasdes, and there is little I can do about that.

    So my choice is Airbnb or TIC. The city’s housing policy is making housing more scarce and expensive.

  5. I *occasionally* rent a unit via AirBnB in the building that I own and occupy. Most of the time it houses friends and family. It will NEVER be rented to a long term tenant for as long as I own it – unless the laws are reformed beyond what effectively creates a lifetime lease.

  6. jjfieber, since no case has gone to court on this, we are all speculating about whether or not the city’s official position on this has standing. The same applies to applying the hotel tax to share-lets. As as often been observed, the existing legal and taxation structure was designed for traditional corporate activity and doesn’t seem naturally relevant to the sharing economy.

    And as I said before, this isn’t about Airbnb at all, because share-lets can be done in many different ways, and have been going on for decades without anyone seeing a problem.

    Of course Tim wants to protect tenants from evictions. That doesn’t means that it should somehow be OK for tenants to do this but not owners. In fact, it should be exactly the other way about, for obvious reasons.

    The myth that Tim is operating under here is that if short-term lets were banned, that 5,000 affordable rentals would somehow magically materialize. They would not. We need to find ways of making the provision of housing more attractive. Short-term lets are an indicator that our current system of rent control is driving landlords to bypass its provisions.

  7. as a recent apt hunter in SF, the vast majority of 1br units listed on CL and Padmapper in April were “short term” listings (ie people either illegally subletting their rentals/AirBnB). It took 5 months to find an apartment. So yes, this activity is making it even more difficult for SF residents to find new housing if/when they need to move/find new digs.
    You can say what you want about numbers but I personally experienced this first hand for those 5 months, replying to ads only to find out I’m looking at renting someone else’s apt instead of being able to find my own! Some of these folks are all about greed, don’t even get me started in the HUGE illegal sublet problem (folks renting room for more than the total rent due to rent control, yup it’s illegal to charge more than the sq ft % used by ‘roommates’)

  8. There really is no gray area about the illegality of these, Sam. Don’t confuse people using Airbnb’s PR–they have something to gain thru non-enforcement. San Francisco has a restrictions about renting less than 30 days. They also have zoning restrictions about where you can operate a commercial business (ie not in residential zones.) You cannot, for example, open up a bakery in your garage in a residential zoned area–much as you want to believe it falls under your g*d-given property rights.

    IF the city wants to allow these arrangements the owner would still have to request a conditional use permit from the planning dept. I bet 99% of the folks on the vacation sites have not looked into that. That is why it should be quite easy for Planning and DBI to stop these illegal rentings. Simply ask for a conditional use permit.

    I believe Tim is seeking to protect tenants from evictions actually, and preserve the rental stock.

  9. Oh the 5,000 is every one of the total Airbnb listings assumed to be a unit taken off the housing market? That would seem bogus, sorry….I would think that the number of units lost is more like the low hundreds cited in the Chronicle study.

    Which should be looked at, don’t get me wrong. But the difference in scale is a major consideration in how cities play this.

  10. Just curious…where do you get the 5,000 number from in the following?

    “If you take the figures in the Chronicle as true, and while some say there are way more than 5,000 units taken off the market, we can agree that 5,000 is a lot, then a significant part of the city’s rental housing stock has been converted to hotels.”

    Because the Chronicle article estimated the number of full time Airbnb hotels to be 307, of which only 160 were entire homes and 140 were shared units:

    “”Critics fear that some Airbnb hosts run full-time hotels, thus reducing the city’s housing supply and changing the character of residential neighborhoods…

    However 6.4 percent — 307 listings — had more than 50 reviews, implying heavy or constant visitor traffic….

    These popular properties included 160 entire homes or apartments, 140 private rooms and seven shared rooms.”

  11. It is highly misleading to infer from the fact that there are 5,000 bedrooms or homes rented via Airbnb, that those homes are “taken off the rental market”, They are in fact being rented and therefore satisfying demand.

    Also note that the question of whether such lets are legal or not is highly debatable. One can construct a reasonable argument that these are not “hotels” at all but simply regular lets. Indeed, I know of some cases where homes are let through Airbnb for periods of between one month and six months. They do not qualify as short-term lets at all, and are therefore not illegal by any measure.

    In another case I know, a lady is making 80K a year from “week-by-week” furnished lets of a property she owns. Those lets are often renewed and so, again, are nothing like hotel stays.

    Again, many of these Airbnb lets are by tenants. Is Tim arguing those cases are fully disclosed, proving their landlord with the evidence to immediately evict?

    How many of these 5,000 homes would be returned to long-term, rent-controlled tenancies if Airbnb was outlawed? None, probably, since escaping rent control is a primary driver of such activity. They’d just become TIC’s instead.

    Finally, there is nothing special about Airbnb. There are many ways to do short-term lets that don’t use Airbnb, and I was doing them 15 years ago via CraigsList. Should the city go after Craig as well?

    The correct solution here is something more like Chiu’s idea of legalizing temporary lets. After all, the city turns a blind eye to illegal in-law flats, and has done for decades. How is that any different? I do not see any problem here. And why is Tim seeking to protect the big hotel chains from competition?

Comments are closed.

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