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UncategorizedPolitics on Tuesday: Feinstein joins Airbnb opponents -- but...

Politics on Tuesday: Feinstein joins Airbnb opponents — but the bill gets final approval anyway. Plus: When is a campaign consultant a lobbyist? And a curious new Chiu IE

Whoa -- Dianne Feinstein is joining the folks who want to limit Airbnb.
Whoa — Dianne Feinstein is joining the folks who want to limit Airbnb.

By Tim Redmond

OCTOBER 21, 2014 – Senator Dianne Feinstein, who hasn’t made a habit of getting involved in local politics of late, threw a bombshell into the Airbnb debate today with an oped in the Chronicle urging the supervisors to reject – and the mayor to veto – Sup. David Chiu’s Airbnb legislation.

It created one of the odder alliances in modern SF political history, with Feinstein – the champion of big business and developers – siding with neighborhood activists and progressives like Sups. David Campos, John Avalos, and Eric Mar.

And yet, the supes – by the same 6-5 majority as we saw two weeks ago – rejected attempts to make Airbnb pay its back taxes and to limit all short-term rentals to 90 days, and then passed the measure 7-4.

It’s very unlikely that Mayor Ed Lee, who is close to Airbnb investor Ron Conway, will veto the bill.

But it sets up an interesting prospect: Would Feinstein join in a campaign for a ballot measure to limit short-term rentals?

All of this is happening at a time when New York is taking a very different approach: The attorney general of that state, Eric Schneiderman, had declared that 70 percent of Airbnb listings in New York are illegal. Even the New York Post is on the story.

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Here in San Francisco, though, we are allowing the $10 billion company not only to operate legally in what amounts to a vast rezoning of the city – but to do so without any guarantee that it will pay some $25 million in back taxes.

Feinstein’s oped is remarkably clear and strong:

This is a shortsighted action that would destroy the integrity of zoning throughout San Francisco, allowing commercial and hotel use in residential areas throughout the city. The board compounded this poor decision by rejecting a number of commonsense amendments that would have vastly improved the legislation.

And:

It’s no secret that San Francisco is one of the most expensive cities in which to live. The legislation approved by the board will encourage property owners and renters to vacate their units and rent them out to hotel users, further increasing the cost of living.

Simply put, this bill will further increase already sky-high rental costs.

And:

Finally, in 2012, the San Francisco treasurer and tax collector ruled that short-term rentals to tourists must incur the city’s hotel tax that all other visitors pay to cover costs of public services and amenities.

The tab for back taxes for Airbnb rentals alone is estimated at more than $25 million. Another commonsense amendment to collect those back taxes prior to this legislation taking effect was rejected by the board.

At today’s board meeting, Campos pointed to the Feinstein piece and noted: “It’s not typical that Senator Feinstein and I find ourselves on the same page.” He pointed out that even Feinstein thinks Airbnb should pay its back taxes. “I find it unbelievable,” he said, “that we rejected this amendment last time around.”

Sup. Scott Wiener, repeating arguments he’s made in the past, said that the tax collector can already go after those back taxes but that the process might lead to years of litigation. Chiu said he wanted to collect back taxes. Sup. London Breed said that Al Capone had gone to prison for back taxes and that the government is good at collecting them. Sup. Malia Cohen, who recently told me that she wants to collect that money, said “we don’t know what is owed and whether we can get it.”

Here’s the reality, as Campos pointed out. The tax collector ruled more than two years ago that hosting platforms like Airbnb were responsible for collecting and remitting hotel taxes and were liable for paying them. But not one penny of that money has been collected.

Sup. Jane Kim added: “If the treasurer had all the tools he needed to collect those taxes, why hasn’t it happened?”

And on the matter of litigation: Airbnb is making tens of millions of dollars every year in SF — and is looking at an IPO that could be worth many billions. If the city were serious, and said that all those illegal rentals would be shut down unless the company (without litigation) paid up what it owes (thus jeopardizing the entire business model), how many nanoseconds do you think it would take before the tax collector got a check?

Kim also made one of the most logical arguments I’ve heard in this entire debate when she urged support for a proposal by Avalos to limit all short-term rentals to 90 days, even if the host is at home.

Others have argued that seniors and working-class people who have extra rooms in their homes rely on hosted short-term rentals for income. But “if you need someone for more than 90 days,” she said, “you get a roommate. That’s what San Franciscans have done for years.” Kim pointed out that she has a roommate; in fact, that type of “shared” housing has allowed generations of new arrivals to live in San Francisco.

And it creates permanent housing stock instead of cannibalizing it.

If you want to run a small hotel in your home, she said, you can go to city planning and get a permit to run a bed and breakfast: “There has never been a B and B permit denied,” she said.

And the only way to enforce the Chiu proposal – which allows unlimited short-term rentals when a host is at home – is to engage in an invasive and expensive investigation process to see where San Franciscans are actually spending the night.

But forget the logic. The votes were lined up. Chiu, Cohen, Farrell, Teng, Wiener, and Breed all opposed the amendments. Kim ultimately voted for the bill, meaning it passed 7-4.

But if there’s a ballot measure on this, and Senator Feinstein sides with the proponents, that could be a mighty addition to what could be a very broad (if unusual) coalition.

 

A District 10 resident has filed a complaint with the Ethics Commission saying that Sup. Malia Cohen’s campaign strategist failed to register as a lobbyist for Airbnb – and while Ethics is slow and often unwilling to act on complaints, this one raises an interesting question: When, exactly, does a campaign consultant become a lobbyist?

The complaint by Jani Musetter alleges that 50+1 Strategies worked to organize Airbnb users to contact supervisors and push for Chiu’s legislation.

Nicole Derse, a partner in 50+1, works both for Cohen and Chiu.

Nobody argues that Derse or anyone else in her firm actually contacted any local officials to lobby for Airbnb. Derse tells me that her firm has a clear policy that separates campaign consulting work from all other work, and that

Esete Assefa is our staffer who was working nearly full time on Airbnb organizing.  She is not involved at all in either the Cohen or Chiu campaigns and spent most of her time over the last few months working on site at Air Bnb and not in the 50+1 office.

She explained:

50+1 are not lobbyists.  We have never been lobbyists on any issue.  We don’t need to register as lobbyists because we do not lobby elected or appointed officials.  You can ask any member of the BOS and they will tell you that we have not lobbied them.  50+1’s work with Airbnb was restricted to helping to organize homesharers.  That is all.

The complaint, though, suggests that organizing homesharers ought to count as lobbying: “Organizing Airbnb users to contact legislators for the purpose of passing favorable Airbnb legislation is clearly a lobbying service.”

It also calls for an investigation into whether Derse discussed the Airbnb legislation with Cohen – in which case Cohen would have to disclose that contact.

City law prohibits campaign consultants from also lobbying their clients on legislation.

Is it “lobbying” to get paid to organize someone else to lobby? I don’t know. I’m not sure it’s ever come up before. Is it possible for a campaign consultant working with Cohen and Chiu while one of the most contentious pieces of legislation in the past year was working its way through the process never once to discuss the bill with her clients, one of whom is the author?

I don’t know. Is it?

 

I got a flier in the mail today supporting David Chiu for state Assembly, and unlike most of what I’ve seen of late, it’s not even remotely negative. Just a simple (predictable) piece that any campaign anywhere could have sent, talking about how Chiu, as a former small business owner, knows how to create jobs.

What intrigued me was the disclaimer: “Paid for by Californians Allied for Patient Protection Independent Expenditure Account.”

Huh?

I knew Ron Conway and Reid Hoffman had an IE supporting Chiu. I knew labor had one for Campos. But what exactly is this organization, and why is it involved in this Assembly race?

Well, according to filings with the Secretary of State’s Office, the Alliance is a group funded largely by doctors, dentists, and health-insurance companies that is working to defeat Prop. 46. It has a ton of money – but also a huge task in fighting against the trial lawyers and consumer advocates who are pushing for higher medical malpractice awards.

Among the donors to this IE: Eli Lilly ($25,000), Norcal Mutual Insurance Company ($55,000), the California Medical Association ($50,000) The Doctors Company (at least $100,000), The Dentists Insurance Company ($50,000) Tenet Health System ($187,000) and the California New Car Dealers Association ($40,000).

And those folks must want Chiu in the Assembly.

 

By the way: I’ve been critical of Chiu’s Airbnb bill, but this is a great idea. I’ve been writing about it for more than a decade now: Every time someone, the city or a company, opens up the city streets, we ought to be laying fiber optic line to create a municipal broadband system.

But if we’re going to do that, why not also lay electrical conduit, so we’d have a distribution system in place for a future public power program?

 

 

 

 

 

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.
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27 COMMENTS

  1. All of this makes me wonder HOW we have a housing crisis. After all, Paris houses 2.2 million people in a smaller geographic area without feeling overcrowded. We can’t fit 800,000?

    Perhaps it’s time we consider allowing buildings over 5 stories tall (yes, I know there are exceptions to this rule)

  2. And yet neither side is entirely correct.

    A city needs a diverse compliment to function smoothly; it seems increasingly unlikely SF can continue as is and house all that they’ve promised.

    And those who provide that housing need the freedom to do that the best way they can, while realizing that they don’t exist in a vacuum. If rents to allowed to float to the surface (ceiling), then subsidizing those who are needed will mean taxes to fund that (truly) affordable compliment. That will mean means-testing of some sort, so that someone with a $600/mth apt doesn’t keep it in reserve so they can spend 9 mths a year in Brooklyn pursuing their true career and jet back every few weeks to ‘vacation’. I think it works best if people know their options and act accordingly; provided they aren’t subject to needless blindsided chaos.

  3. You could make the same argument the other way about. If you don’t like Google buses or new million dollar condos or large high-rise development projects then you should leave SF.

    But if it is right to fight for the changes yu want to see in SF, then it is right for property owners to fight to preserve and increase their property rights. In many ways those who buy property in Sf are making a bigger long-term commitment to the city than those who merely rent here month-to-month

  4. Thx for the spank, Hank Citizen. Not sure my post was of the “whine” vintage, however .

    Increasingly that housing (you’d like to call ‘yours’ but politely say “ours”) is not remaining “rental”, but is being converted to other modes, like ownership, or ‘vacation rentals’ or it assumes other uses such as offices, storage or is simply left vacant. I’d bet you’d do the same thing, given the same circumstances. Wouldn’t you? (Or have you not thought it thru).

    As for how long I’ve been in SF, lets just say that the City has changed around me. Promises were broken. I suspect *that* is the true operative paradigm in our City.

    What strikes me as odd is the bemoaning of long term tenants who complain because their ‘good deal’ has finally gone south. Not a word of gratitude for how long they’ve had it or how good they have it (notice never is the amt of someone’s rent mentioned in stories about people being forced out; I assume it dampens the sympathy quotient). I once estimated that I’d forgone btw a quarter and half a mill in lost rent over the past decade, so to say that tenants of similar vintage have saved a large degree of that is conservative. I once had a tenant, who after 12 yrs of a super-low rent snidely offered to buy me out (unfortunately, its *my* home, sister); only to then buy a place in 946 and lose it to foreclosure (and divorce, domestic violence and custody fights).

    I say “odd” – not in meanness – cuz a loss is always unpleasant and painful, and who wants that; but because they’ve allowed themselves to be lulled into a sense of fantasy that its still 1978 and the Ramones are playing the Mabuhay.

    Stay concerned, amigo.

  5. When you’re gone the housing will remain. So yes, it is “the City’s housing stock.” Your ownership of a tiny part of the city’s housing stock is quite temporary and subject to increasing controls, restrictions and regulations. How long have you lived in SF? The city ain’t Kansas or Mill Valley in case you haven’t figured that out yet.

    It’s always amusing when SF landlords complain about regulations in cities like SF that have been noted for them for decades, especially if the landlords already have made hundreds of thousands of dollars over the years. Can’t they afford to buy a clue? Sell the property and move to a place that better fits your economic sensibilities. Keeping yourself in misery, when you could so easily fix the situation, just so you can continue to whine like a little boy on chatboards isn’t a great indicator of quality mental health.

  6. Are City voters “really that concerned”? Enuf to pay? Ha!

    And how would they pay? Parcel tax on their landlord? City income tax (not much from the controlled-rent crowd probably), sales tax?? Maybe a rent tax imposed on the controlled rent stock (a percentage on rents below a District average price). I guess to be fair, it would need to include taxes on new rentals (on the landlord). But both tread on the delicate nature of tax increases in CA.

    IOW, no one will pay, or could be made to pay. (except some hapless “greedy” landlords)

    “OUR rental housing stock” indeed.

  7. well, AirBnB seems to disagree with you that the tax isn’t owed, as they’ve agreed to start collecting it. I’m just saying that it is B.S. to only call out AirBnB on the tax issue. The people who truly profited from the rental should be called out, as well.

  8. I disagree. The City should go after both – ABnB and “the hosts”. However, from a practical perspective, getting half the determined taxes in one swoop (AirBnB) is just cost effective. Going after “serial-hosters” might also be productive; the one-off advertiser will not be got.

    Of course, like the Parking Tax, some compromise (50 cent on the dollar? dime on the dollar?) might be best for the small fry. AirBnB, as an entity, however knew otherwise – or took the calculated bet.

    And, I’m with DiFi on this one.

  9. I can see an obvious problem with your idea. If a tenant receives the actual difference between his former rent and his new rent, then he will have a massive incentive to find the nicest and most expensive place he can, even it means moving again when his subsidy runs out.

    On the other hand, it would mitigate against doing what is probably the most prudent thing, and moving to somewhere smaller and cheaper, perhaps located further away, so that it is sustainable longer-term.

    I
    m afraid I have the same problem with any attempt to reward evictees by giving them a windfall payment that exceeds their actual moving costs. I think the judge got this right – it’s not your landlord’s fault that rents in general have increased. So it is unfair to impose a loss on him.

    A better approach would be for the city to help Ellis evictees with cash payouts, if the voters are really that concerned. But with relatively few Ellis evictions happening, I just do not see this as a big deal anyway.

  10. Courts don’t usually have a problem when actual damages are awarded to an aggrieved party, but this judge seemed concerned about the lack of a close connection between the way damages were being calculated and the actual costs to the displaced tenant(s). If the ordinance was modified so that damages were awarded based on the actual rent cost differential over a 2-year (or 3-year) period – with the landlord having to put an amount into a trust (or in a city account) based on a bona-fide estimate of the total rent differential over the period – the displaced tenants could access the trust funds as rent payments were made after the eviction. Signed leases and/or rent receipts could be used to confirm the new rent payments, allowing the displaced tenant(s) access to the trust funds. Perhaps a “liquidated damage” provision could be added, allowing the tenant accept a discount (70-90% of total) in lieu of total actual estimated rent payments.

    It seems this approach might meet the judge’s approval: the city operates under mandates to preserve affordable housing and to prevent no-fault evictions; a SF tenant has been harmed by the actions of another (a no-fault eviction); there are reasonably related costs to the aggrieved party (moving costs and the rent difference over a 2 or 3 year period); the damages are closely tailored to the difference between the new rent amount and the prior rent based on a market survey of neighborhood rents for similar units. This approach limits the damages to actual costs, with the evicting landlord also paying moving costs, security deposits and the cost of a survey of neighbor rents of similar units before any eviction notice is served to indicate how much rent help the evicted tenant could receive over the 2 (or 3) year period. It goes without saying there is no amount of money that can truly compensate a tenant for losing their home – especially as people get older and have fewer options – but at least Supervisor Campos was trying to do something for tenants being displaced by predatory landlords and speculators.

  11. Even in cite like NYC and Chicago, where large rental buildings are owned by corporations, the real owners of those buildings are individuals, as you note.

    However the biggest owners of shares in corporations are institutions not wealthy individuals. They are by 401K plans, IRA’s and mutual funds. In other words, they are owned by folks like you and I via our personal investments and pension funds.

    But in SF there are relatively few huge rental developments like that. There are many, many small landlords in SF, many owning just one building, and many of them living in one of the units.

    Sorry but your “one percent” shtick doesn’t pan out.

  12. In reality, all buildings are owned by individuals, even if the nominal owner is a corporation. Corporations are merely a convenient way for individuals to conduct business operations or hold property – just as partnerships and trusts are useful tools – but the actual owners and mangers of these fictional entities like corporations are “real people” receiving the economic benefits from owning rental real estate or operating a business.

    We can debate whether small “mom and pop landlords” worth less than $1 million or receiving less than $25,000 in rent each year should be given some exemptions from some laws, but the vast majority of rents, development profits and capital gains from real estate ownership are funneled to families in the top 10-20% of wealth holders and income earners, not “moms and pops.”

    Why isn’t it surprising that Sam, SFrentier and the real estate exploiters they represent try to hide behind fictional entities like corporations or behind a grandma’s skirt in order to pursue their sole objective of increasing the rents, development profits and capital gains flowing to the wealthiest families?

  13. Not only does Tim want only Airbnb to pay these alleged taxes but he knows that Airbnb never collected them from the folks who should really be paying the tax – the guests. So effectively he wants Airbnb to be fined and take a loss just because he personally doesn’t like them.

    I have no idea whether this tax is really due because no court has ratified that. The SF tax collector claims it is due, but of course he will always make that claim. There seems to be genuine doubt as to whether a private individual’s occasional sharing of his home should be treated the same as a 400-room downtown hotel.

    But even if you accept the city’s position, and I do not, it seems that for back taxes the city should go after the hosts. The city is just trying to be lazy here and collect the taxes without any work or effort. We should all want that gig.

  14. Sorry, Tim, but The Tax Man said that AirBnb and the actual hosts were jointly liable for the payment of taxes. Why you continue to perpetuate a half-truth in simply saying that AirBnB owes the tax is disappointing. If you want to take the stand that the Tax Man should start going after individual homeowners who shirked their responsibility in paying up, feel free, but let’s be honest about the debate, mmkay?

  15. I think a good block of Supervisors knew that the relo payment legislation was likely to be over-turned but moderates all win anyway. They vote for its passage so they score points with the tenant voters (i.e., “hey I tried to go to bat for you Mr. Tenant”) Yet, they can tell their real estate interest voters / donors that it will be overturned and if Herrera has any brains, he won’t want to allocate resources to fight something that was ruled unconstitutional (i.e., “don’t worry about my vote Ms. Landlord, it’ll never become law”).

  16. Newsflash mike…all these unconstitutional laws do not impact big developments one bit. They are all aggressively targeted towards small property owners. Most small and mid size buildings are owned by individuals, not corporations. It’s the Rent Control Industrial Complex ™ that is out of control, and this latest rejection by state court is another reminder of their abuse of power.

    I think that supervisors who willfully pass ordinances that are unconstitutional should be held personally liable for damages. Otherwise there is zero accountability and the BOS has already proven its ability to pass measure after measure that gets overturned in higher court.

    That is shameful behavior, and should have legal and financial consequences to perpetrators.

  17. I expected that ruling. The idea that a property owner might have to pay $100,000 just to get his home back was such an obvious taking that I am surprised that the supposedly “smart” Campos ever thought it would fly.

    Chiu’s Airbnb legislation sailed through and Campos’s extortion law got bounced. Chiu really is the pragmatist of the two, and will win in November.

  18. Those are the politicians that we the people elected. So if you don’t like what they are doing, it’s all your fault.

    Personally I thought the Airbnb legislation was deftly-craftly, and managed the difficult task of balancing competing interests. I think Tim’s complain is that it didn’t give total victory to the interventionists, but that is exactly what I liked about it.

    As I’ve said all along, if nobody likes Chiu’s Airbnb bill, then it’s probably a good compromise. Tim, you lost thing one. Maybe time to move on to a new topic?

  19. I don’t know how many of them sleep at night, including the “Greed-At-Any-Cost” rabid disciples of the Real Estate Industrial Complex with all their corruption, lies and being complicit with their immense greed in helping to destroy this city, with no conscious at all. It’s why some of us accurately refer to this new city as The Lobotomized San Francisco.

  20. I wonder if Feinstein has been back here any time recently to see how the city is being ruined by these corrupt and bought-off politician$, most of whom with no sense of ethics whatsoever. They should hang up a large permanent banner across city hall reading, “We Follow The Money.”

  21. ^ exactly!

    Campos obviously does not respect the constitution. He should take that message to his campaign.

    But we have a busy road ahead, with the buyout ordinance and prop G. Hopefully they will meet a similar fate it court.

    These agressive property restrictions and attempted takings have got to stop. Some of these supervisors are totally out of control and need to get bitch slapped big time!

    All the people who love this leftie blog- you should be ashamed of yourselves for supporting such crap legislation. Why don’t you just come and steal/squat in my properties? San Francisco supervisors reminds me of Alabama in the 60’s after desegregation. Some cities were so pissed off they kept trying to pass local laws that went against core constitutional values. SF has been doing that to property rights for years, throwing whatever they can against the wall hoping something will stick. This is shameful behavior and an abuse of local powers. Campos, how do you sleep at night?

  22. Interesting to see Tim Redmond now writing for Sam’s blog.

    There’s one sentence above that needs to be rewritten to be more accurate (and I’ve done so below):

    It’s very unlikely that Mayor Ed Lee, who WORKS FOR Airbnb investor Ron Conway, will veto the bill.

    Ugh, the corruption and the conflict-of-interests in this city!

    I do agree with Feinstein for the first time in a long time.

  23. What about judge Breyer ruling that the increased Ellis relocation payments are unconstitutional? That’s news. The above is all repetitive drum beating.

  24. Taking in a room-mate does not “create permanent housing stock”. A home-owner may evict a room-mate for any or no reason with 60 days notice,

    Even in a rent controlled unit, a master tenant may evict a room-mate without cause as long as that room-mate was informed of that provision before they signed up.

    Moreover a sub-tenant has no right to the controlled rent if the master tenant moves out (6.14).

    So in fact being a room-mate is a very insecure form of housing, with few rights compared with having a regular lease.

    Finally, there is no reason to believe that if you stopped me from Airbnb’ing a room in my home that I would instead take in a permanent lodger. If having permanent tenants were attractive to me, I would not Airbnb. But the policies that you have supported entail that I no longer want to do permanent rentals.

    Rent control creates a shortage of available rental housing, because it motivates property owners to adopt a different use for their building.

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