48hillsairbnbreport

By Tim Redmond

AUG. 4, 2014 – So many things happened while we were away – and no surprise, much of it had to do with housing.

Let’s start with Airbnb, VRBO and the short-term rental scam. The City Planning Department is the latest to weigh in on the proposal by Sup. David Chiu to regulate the use of apartments and houses as tourist hotel rooms. Planners suggest – correctly – that legalizing even the amount of short-term rentals that Chiu suggests would eat into the city’s affordable rental housing stock.

That’s confirmed by a detailed report on VRBO use complied by the ant—eviction mapping project. The report shows that vacation rentals are in fact driving up housing costs by reducing the supply of rental housing – and by giving landlords an incentive not to rent to local residents, since there’s more money in the tourist trade.

Check out this case study:

BJ is a leading realtor who has for many years lived and specialized in Noe Valley. Her husband Malcolm is a marketing executive in a software company. They and their 16-year-old Shar Pei, Zelda, split their time between Noe Valley and the Sonoma Wine Country.

BJ and Malcom own a five-unit building in Noe Valley and four of their neutraly decorated units are available year round to rent. They also own and rent out two other “homes” in Sonoma.

At the time of writing, the average rent for a two-bedroom in Noe Valley was $4084 – an increase of $452, or 11 percent, since our first study in 2012.

BJ and Malcom’s rental prices also increased over this time from $1600 in 2012 to $2000 per week in 2014, although their costs as owners probably did not increase.

Their nightly rate increased from $275 in 20123 to $325 in 2014 – and 18 percent increase.

If we assume most tourists rent for the week for their discounted weekly rate of $1000, they will earn $32,000 in four months ($8000 per month/$128,000 per year.) This constitutes 195 percent of what market-rate tenants would pay.

In other words: Why rent to local tenants when you can make so much more by skirting those pesky zoning laws and becoming a tourist hotel?

Anyone of any political stripe has to admit that this is driving up housing costs in San Francisco.

Now then: Airbnb “hosts” are getting together to protect the right to “share.” But there’s another side to this story. In the case of VRBO, 31 percent of the identifiable owners list more than one unit for rent. Airbnb admits that 30 percent of its “hosts” list more than the one unit they live in.

An estimated 783 units are on VRBO that would be rent-controlled if offered to long-term tenants.

In fact, the study found “clear evidence” that owners are buying up buildings with no intention of ever becoming traditional landlords. They just want to turn the units into illegal hotel rooms.

And since the city has done next to nothing to enforce its own laws, the lucrative practice has continued – taking desperately needed housing off the market.

And for all the mayor’s talk of the need to build more housing, the most valuable housing in the city is existing affordable rental housing. It costs far more to build affordable housing than it does to protect the rent-controlled apartments we already have.

There’s another element that plays into the local political scene. Since a significant number of Airbnb “hosts” are themselves renters, some tenant advocates have worked with Chiu to legalize the practice in the name of protecting tenants from eviction.

Subletting is a violation of just about every lease in the city. You rent your apartment out on Airbnb, you face a perfectly legal eviction.

The report raises the critical question:

Is it more important to protect ALL tenants from eviction threats, OR to curb behavior that conflicts with the goal of de-commodifying housing? Do you ban vacation rentals for everyone and watch as tenants who host on Airbnb get evicted? Or do you “legalize it” and let owners and tenants profit off their homes and drive up rents? It also undermines arguments of the importance of rent control; there is a hypocrisy in renters who want their rent to be price-controlled while at the same time seeking unlimited profits themselves from their rented homes.

The Chiu legislation comes up for a hearing this week at the Planning Commission. The planners who reviewed the bill want to see two key changes: A reduction in the allowable number of days that a residential unit can be rented as a hotel room – and a public listing of who is doing it.

Chiu wants to allow people to convert their homes to hotel rooms 180 days a year. The planners want 90. That would undermine the professionals who are simply in this to violate the laws against taking rental housing off the market. And an accurate map of where it’s happening would allow activists to track how no-fault evictions correlate with vacation rentals.

This is going to be one of the hottest political issues of the fall. Particularly since what would have been a huge battle over the city’s commitment to affordable housing was diluted when Sup. Jane Kim agreed to compromise with the mayor around her affordable housing legislation.

 

Wow, the campaign over Kim’s ballot measure would have been epic. What she proposed was something affordable housing advocates have talked about for years – and back when I was at the Bay Guardian, I was able to make an issue in the last mayor’s race. We’re talking about halting the construction of market-rate housing until the city finds a way to meet its own stated goals for the balance of luxury vs. affordable housing.

It turns out that we can’t legally just halt all new market-rate housing. What we can do, and what Kim’s legislation would have done, is mandate that market-rate projectgs go through a more-extensive planning process if the ratio of affordable units falls below 30 percent.

The developers howled, howled all the way to Mayor Lee’s Office, and the mayor put his own “poison pill” measure on the ballot.

Now Kim has backed off, and accepted a much more mild version of her plan. It contains lots of nice language and lots of promises – but there’s no penalty for the private market-rate developers if the city can’t meet its affordability goals.

Which means there is no incentive for the developers to accept lower profits and to build more housing for the rest of us. Which means nothing is really going to change.

See, for better or for worse, we live in a hyper-capitalist society, and until there’s a way to cut some of the profit out of the housing market, condos will continue to be built for and sold to the highest bidders. And those won’t be the majority of the working people who live in San Francisco.

Oh, and for the market-driven folks who still believe that we can build our way out of the problem by increasing the density of the city, you might consider this somewhat academic but interesting paper. In New York, for example,

New Yorkers with garden-variety affluence—the kind of buyers who require mortgages—are facing disheartening price wars as they compete for scarce inventory with investors who may seldom even turn on a light switch. The Census Bureau estimates that 30 percent of all apartments in the quadrant from 49th to 70th Streets between Fifth and Park are vacant at least ten months a year.

That’s what happens when you allow global hyper-capitalism to rule your local housing market.

 

I missed all the fighting over Sup. Scott Wiener’s attempt to tie Muni funding to population growth (which Randy Shaw says is “divisive,” meaning that the mayor opposes it.) One of the interesting elements is that Wiener is pretty typically an ally of the mayor – but in this case, he’s gone after Lee pretty directly.  In an email that he sent me, Wiener is surprisingly harsh:

On Wednesday, in what can only be described as an empty scare tactic, the Mayor’s Office announced that due solely to the transit measure (totaling .25% of the budget), all departments were directed to formulate emergency 1.5% contingency cuts for the 2015/16 fiscal year. The Mayor’s Office further indicated that the cuts will be directed at the “priorities” of the six Supervisors who voted to place the measure on the ballot. For whatever reason, the Mayor’s Office felt the need to issue these emergency instructions now – a full year before the fiscal year at issue, in the middle of an election campaign, without even knowing whether the measure will pass, and regarding an amount of money that is tiny in the context of the budget. Moreover, there will be a full budget process next spring for the 2015/16 fiscal year, and if the measure passes, the $22 million at issue will simply be part of that budget.

What the Mayor’s Office neglected to mention in its announcement is the existence of a $32 million hole in MTA’s budget for the 2015/16 fiscal year. If this gap isn’t filled – and Supervisor Wiener’s measure will fill two-thirds of it – MTA will have to forego plans to purchase new vehicles, rehabilitate run down vehicles, replace failing train switches and signals, rehabilitate broken station elevators, make needed pedestrian safety improvements, and implement the Embarcadero Bikeway.

 

Some of the opponents of the Muni measure say that it’s going to lead to cuts in social programs – and prevent raises for nonprofit workers under city contracts.

But the odd thing about joining the mayor on this is that his current budget already screws nonprofit workers. He refused to put a substantive wage increase in the spending plan. He’s doing nothing to make sure that the people who do a lot of the social service work of the city get paid anything close to a living wage.

So the notion that funding Muni at higher levels cuts into nonprofit wages depends on a false version of political reality. The mayor isn’t giving more money to the low-paid workers right now. He will only be forced to do that if the supervisors (including many of those supporting the Muni funding) mandate it. Whatever happens with the Muni measure, helping the nonprofit workers isn’t a part of the mayor’s agenda. Maybe he can defeat the measure – and I promise, if he does, not one dollar will go for higher wages for the folks who help make this city a humane place.

Also: The big transit bond that everyone likes has nothing to do with funding day-to-day Muni operations. You can use bond money to buy new buses, but not to hire drivers to put them on the roads. And that’s what Muni needs.

So how does this play out? The mayor is almost certainly bluffing – he’s not going to get away with cutting social services in such a boom year. And he’s pissing off his usual allies – all over a fairly tiny part of the city’s budget.

Willie Brown got away with strong-arming the supes, in part because he appointed most of them and could control their money. With district elections, it’s harder to do – and Ed Lee doesn’t have Willie Brown’s political skill.

Seems like a dumb fight to me.

Part of what Wiener is complaining about is the mayor’s failure to support an increase in the local Vehicle License Fee. Lee says he’s backed off on that effort because the polls showed it’s not popular.

Of course it’s not popular — now. Nobody wants to pay more taxes. But this is one of of those moments where political leaders decide to use, or withhold, political capital.

Gov. Jerry Brown is using his political capital to continue the push for high-speed rail, which is getting ridiculed by the mainstream media and is tanking in the polls. Brown has high approval ratings and no credible opposition, so he’s telling the people of the state: If you like me, follow me on this.

He’s right, of course — high-speed rail between SF and LA, even at $68 billion, is a great idea, something that years from now we will all look back at and say: Why did it take this long?

Ed Lee has high popularity ratings and at this point no clear opponent in the next mayoral race. He could say: If you like me, follow me on this. The VLF will save Muni. He could go to his friends in the tech world and say: Give me money and use your social media wizardry to make the case for this plan. He could use his political capital to raise the poll numbers and try to convince the public that this is a great idea.

He has chosen not to. He has abandoned the VLF not because it’s impossible, but because he decided, at this moment, not to use his political capital to pass it.

What makes it all so crazy: We could fund Muni just fine if we forced developers to pay the actual costs of the transit impacts of their projects – every year. How much does it cost to add the necessary Muni service for, say, the Twitter building? Or the Salesforce project? There are actual studies on this. They say that it costs more, much more, than the developers and corporations currently have to pay. This isn’t a new tax; it’s a perfectly legal fee, based on the cost of providing service, and it’s a vast store of money.

The $22 million at issue here? Peanuts.