Is Airbnb's day of reckoning in SF on its way?

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Airbnb facilitates short-term stays all over San Francisco, most of which violate local laws.

The San Francisco City Attorney’s Office is finally preparing to take action against the illegal short-term housing rentals facilitated by Airbnb, something we’ve been hearing that the Examiner also reports in today’s issue, an action that would address the company’s apparent stall tactics.

Despite a business model that violates a variety of San Francisco laws — most notably zoning, planning, and tenant regulations — and Airbnb’s flagrant flouting of a two-year-old city ruling that it should be collecting and paying the city’s transient occupancy tax, the city has appeared unwilling or unable to enforce its laws or address these issues.

“We’re aware of multiple housing allegations, including some that community leaders have brought to us,” City Attorney’s Office spokesperson Matt Dorsey told the Guardian today, confirming that the office is considering taking legal action to enforce local laws governing short-term housing rentals but refusing to provide details.

Board of Supervisors President David Chiu took on the problem over a year ago, working with the company and its critics to develop compromise legislation that would legalize and tax the activities of Airbnb and its hosts, but the multi-layered legal and logistical challenges in doing so have so far proven too much for the otherwise effective legislator.

"My staff has held meetings with Planning staff and its enforcement team to discuss enforcement and related challenges. We've also been in touch with the City Attorney's Office on these issues," Chiu told the Guardian, saying he and his staff have recently been focused on other tenants and secondary unit legislation, but they "plan to refocus on our shareable housing efforts soon." 

Sources also say there has recently been some behind-the-scenes progress made in getting the company and/or its hosts to pay their taxes, which the Guardian found amounts to almost $2 million annually, although details aren’t clear because of pending negotiations and taxpayer privacy laws.

Airbnb has been shielded by unqualified support from Mayor Ed Lee, who shares a financial benefactor with the company: venture capitalist Ron Conway. But complaints about Airbnb being used to remove apartments from the market and to violate rent control laws have prompted increasingly frustrated complaints from groups representing tenants, landlords, neighborhoods, and hotel workers and operators.

The Guardian has been covering issues arising from Airbnb’s business model for years, often the only journalists highlighting this illegal behavior, and neither the company nor Mayor Lee has been willing to offer substantial responses to us for a long time. But if you want to read their hollow replies to this latest development, you can find them in the Examiner’s story.

Dorsey told us that City Attorney Dennis Herrera has a proven history of taking on powerful corporations, from Pacific Gas & Electric to CitiApartments (which once controled more apartments in San Francisco that any other landlord), but that the office has just been trying to be deliberate in how it approaches the complicated issues arising from Airbnb’s business model.  

Comments

Because there is no illegal behavior on AirBNB's part.

If I use eBay to sell something that I stole from my neighbor, is that illegal behavior on eBay's part?

If I use the SFBG to arrange for prostitution, is that illegal behavior on SFBG's part?

If I use craigslist to sublet my rent controlled apartment to tourists, is that illegal behavior on craigslist's part?

And despite what you write here, nobody, nobody expects AirBNB to pay the transient taxes any more than they expect Priceline or Expedia or Travelocty to pay the taxes.

Those web sites do break out the amount on their sites, which is good, but the hotels actually pay and file the taxes. AirBNB should add the tax line item to their site but saying that they need to 'pay' the taxes indicates a significant misunderstanding of the business process.

Posted by Guest on Mar. 06, 2014 @ 2:52 pm

Some backroom deal will be done. As you say, this isn't about airBnB at all but about wicked short-term hosts like, er Steven.

Posted by Guest on Mar. 06, 2014 @ 3:26 pm
.

Yawn.

Posted by Guest on Mar. 06, 2014 @ 7:53 pm
Posted by Guest on Mar. 06, 2014 @ 8:12 pm

Wasn't this topic covered in the papers a couple of years ago...?

Posted by Guest on Mar. 06, 2014 @ 10:46 pm

No, they don't pay the TOT taxes. Look at any of their TOS pages. They all say that they are not responsible for paying local taxes.

Here is how Expedia explains the process at http://www.expedia.com/p/info-other/legal.htm :

"the Expedia Companies do not collect taxes for remittance to applicable taxing authorities. The tax recovery charges on prepaid hotel transactions are a recovery of the estimated taxes (e.g. sales and use, occupancy, room tax, excise tax, value added tax, etc) that the Expedia Companies pay to the hotel supplier for taxes due on the hotel's rental rate for the room. The hotel suppliers invoice the Expedia Companies for tax amounts. The hotel suppliers are responsible for remitting applicable taxes to the applicable taxing jurisdictions. "

AirBNB should do the same thing. But Steven's constant ranting about AirBnb not paying their taxes is simply childish nonsense.

Posted by Guest on Mar. 06, 2014 @ 11:35 pm

There's one big difference, though - airbnb manages the financial transaction and takes a cut, whereas craigslist is just an online classified ad.

Posted by Guest on Mar. 07, 2014 @ 9:11 am

model? Or holiday-home sites who organize people to pay to live in your home while you are on vacation?

Why does Steven ignore them? Because those other sharing economy businesses are not based in SF, so there is nothing SF can do about them anyway.

That is why the city, if it believes such lets are illegal (I doubt this) should go after the hosts, because they are in the city and can be pursued. But those hosts include tenants, of course, so Steven wants to give them a pass.

Posted by Guest on Mar. 07, 2014 @ 9:23 am

VRBO and HomeAway, to whom you refer, are are sites like Craigslist that are basically online bulletin boards and do not process payments. AirBnB, not only takes money, it takes a hefty cut and also does not pay up until after the guest has checked in for the night.

This is why they need to be withholding the bed tax and forwarding it on to the City.

Posted by Guest on Mar. 08, 2014 @ 7:57 am

city tax authority. No court has ratified it and it seems improbable that it can be enforced. What if airBnB was in France? How would SF collect?

Posted by Guest on Mar. 08, 2014 @ 8:37 am

Oh my gosh THANK YOU! You said it so succinctly. I totally agree. No illegal activity whatsoever. Also, WHY should we not be allowed to share our home with other people? In Europe they've been doing it for hundreds of years, maybe more. Lots of people get by this way. It's win-win!

Posted by Guest on Mar. 10, 2014 @ 7:02 am

Although it's AirBnB's "hosts" who are actually breaking the law, AirBnB provides the marketplace that allows hosts to do so. On top of that, AirBnB's hosting system allows AirBnB itself to avoid paying taxes, which is also illegal.

Although I have a fair number of problems with what we refer to as the "sharing" community (paying money for something is not "sharing" by definition), I would like to see AirBnB's business model become legal. However, it's AirBnB who should be brought into accordance with the law, rather than the law being brought into accordance with AirBnB.

Make sure it's regulated, make sure it's licensed and taxed, that people are renting out their rooms legally, and that's enough for me. I don't know if AirBnB can remain profitable and legal at the same time, though. Being your own service is expensive, and a lot of the people who become hosts or drivers for ride-sharing services often skip the legal necessities like proper insurance, and that's problematic.

Posted by bassguitarhero on Mar. 06, 2014 @ 3:17 pm
Posted by Guest on Mar. 06, 2014 @ 3:36 pm

If I have an overnight visitor in my home and they give me some cash, that is not something that the city would ever even know about let alone care about.

There might be some tax due but the idea that I cannot take in a temporary paying guest is nonsense.

Again, it's possible that tenants cannot do that if their lease prevents it, but if you own your own home then you are free to stay who can live there. And if I would not in any event have rented it out short-term, it has zero effect on SF's housing shortage.

Posted by Guest on Mar. 06, 2014 @ 5:25 pm

Homeowners have the right to rent out their homes for two weeks out of the year TAX FREE and that's federal tax law. So all those homeowners who rent out their homes for two weeks at the Masters tournament are breaking the law? I don't think so.

Posted by Guest on Mar. 07, 2014 @ 9:28 am

it is illogical for the city to pick on only one provider of services. In any event, it is the hosts who are "guilty" of any regulatory issue here, not an intermediary.

Aside from the question of whether a hotel tax applies, which no court has confirmed yet, I do not buy the argument that such activity is illegal. It's a fairly fundamental property right to have paying guests in my home.

Posted by Guest on Mar. 06, 2014 @ 3:25 pm

Re: "It's a fairly fundamental property right to have paying guests in my home" -- But that's "subletting" [def: to use (an apartment, house, etc., that is rented by someone) in return for payment, Merriam-Webster] which is not permitted by my lease. My landlord gets any money for my flat. I'm lucky I can have a friend stay without paying him more for it, that's not permitted in many leases.

Posted by Guest on Mar. 06, 2014 @ 3:56 pm

their own home are free to do short-term lets.

Posted by Guest on Mar. 06, 2014 @ 4:03 pm

That's just not true, it's considered an illegal hotel conversion under city law. Most properties in the San Francisco are barred being leased to renters for less than 30 days, after which other laws protecting tenants kick in. 

Posted by steven on Mar. 06, 2014 @ 4:11 pm

that doing shorter-term deals is so appealing.

Please cite a court case where a judge has upheld that a property owner cannot have a guest for a day or a week?

Posted by Guest on Mar. 06, 2014 @ 4:39 pm

There are dozens of other intermediaries who arrange short-term lets, including newspapers, time-share companies, foreign-domiciled websites.

Yet you only ever mention AirBnB. Sounds like a witch-hunt.

Posted by Guest on Mar. 06, 2014 @ 4:47 pm
Bs

Seems pretty obvious to me what the difference is. Newspapers and craigslist advertise only. And craigslist is free. They don't collect the money from the renter and then take a commission of the rental total before passing the rest to the property owner/manager/sub-tenant.
Your argument would make sense if Airbnb charged a flat one time listing fee, but in reality they are business partners with the owner, not just a vendor.
People think you can do whatever you want with your property but that's never been true in cities, at least not for a long time. All property has a long list of restrictions, laws, zoning that help keep the city operating smoothly. One of those things is not allowing people to setup a commercial hotel in a residential area or building without going through proper channels. Or maybe you think a motel 6 would be a lovely addition to the border of Delores park?

Posted by Guest on Mar. 06, 2014 @ 5:20 pm

They could still arrange short-term lets in SF as it is all done over the internet anyway. But SF would have no jurisdiction. For that matter, nor would the US.

And there is your problem right there. The internet and the sharing economy render such concepts moot. AirBnB just happens to be in SF but it could go anywhere.

So the only logical way for the city to proceed is to go after someone who is in SF, i.e. the host.

Posted by Guest on Mar. 06, 2014 @ 5:30 pm

If it really was a sharing economy, AirBnB would share some of its revenue with the community in the form of paying their taxes.

Posted by Greg on Mar. 06, 2014 @ 6:29 pm

would SF enforce it's claim.

AirBnB's main crime here is being in SF, leaving it exposed to the wild, punitive behavior of the envy mob.

Posted by Guest on Mar. 06, 2014 @ 6:48 pm

these shared rental ads.

I don't recall the SFBG complaining then.

Posted by Guest on Mar. 06, 2014 @ 3:52 pm

I own a home in South Lake Tahoe. I rent it out on Airbnb. Airbnb doesn't collect the tax for me. Nor does VRBO. I'm responsible for reporting it myself and for paying it myself. Pretty much every other city in the world that charges home rental taxes work that way. Why is it Airbnb's fault that people aren't paying their taxes? If I don't pay me income taxes, is that my employers fault, or mine?

Posted by Evan Goldin on Mar. 06, 2014 @ 6:19 pm

AirBnB except that they are in SF and there is a tenuous connection to Ed Lee - a popular mayor who Steven hates.

Posted by Guest on Mar. 06, 2014 @ 6:36 pm

Small property owners have found yet another way around the ridiculous rent control system. Bravo!

Posted by Guest on Mar. 06, 2014 @ 7:04 pm

No rent control, no pesky tenants lingering, freedom to raise rents whenever I want, and a great opportunity to make new friends and get reciprocal invitations to visit other nations.

I still have some longer-term tenants but, for me, it's either short-term lets or Ellis.

Posted by Guest on Mar. 06, 2014 @ 7:16 pm

Ellis your illegal in-law -lol

Posted by Guest on Mar. 06, 2014 @ 10:25 pm

Then an eviction can be given.

Also a Costa-Hawkins declaration can be made if it is the only unit in a SFH apart from the owner.

Posted by Guest on Mar. 07, 2014 @ 6:57 am

A SFH with an illegal in-law counts as a two-unit building, and has full rent control protection.
http://www.sftu.org/rentcontrol.html

"note that a single family home with an illegal in-law unit counts as a 2 unit building"

"Some Units Have Full Protection But Many Tenants Don't Realize It
—Illegal Units are covered by rent control Illegal units. such as in-law apartments, are covered by rent control."

Posted by Greg on Mar. 07, 2014 @ 8:26 am

A property owner can file a petition to the Rent Board claiming a Costa-Hawkins exemption. A determination is then made about whether the in-law qualifies for rent control or not.

Some owners have bypassed that and gone straight to the courts and, in some cases, have won.

So it is more complex than you claim.

Moreover, an owner can always go to the DBI, admit to the illegal unit, and get it condemned, whereupon an eviction follows.

But this rent control issue means that some owners do not rent out their in-law, or only do so via AirBnB, to avoid such problems and risks. Another example of how rent control harms tenants.

Posted by Guest on Mar. 07, 2014 @ 8:44 am

In-laws are mostly illegal and so there's always a question mark over how they can be regulated, or even whether they can be at all.

Posted by Guest on Mar. 07, 2014 @ 9:24 am

Castro is (in his own words) silent on whether rent control applies. His position is that state law prevails, which of course is true.

State law says that any unit that has never been under rent control before cannot be brought under rent control. So it's moot whether these new in-laws will be rent controlled.

More importantly, even if it is ruled that they come under rent control, owners will simply not rent them out long-term. They will use them for family use or for short-term lets, completely failing to meet the whole idea of them, which is to provide more rental homes.

Posted by Guest on Mar. 07, 2014 @ 9:14 am

Say what you want about what a host can or can't do with a unit they are offering, but revenue is revenue and the gov wants its share. I could easily see a compromise that would compel Air B and B to either withhold the gov's tax share from the payment to the hosts or issue an W-9 of some sort. Air B&B would hate this to happen as hosts would would migrate back to the shadows of craigslist and it wouldn't take long for potential guests to follow.

Posted by Sean on Mar. 06, 2014 @ 10:17 pm

income tax, of course. But the idea that the activity is itself is illegal is just wishful thinking on Steven's part.

And either way, the host has the primary responsibility to declare this. If AirBnB was located elsewhere, SF would have no power over airBnB anyway.

Posted by Guest on Mar. 07, 2014 @ 6:58 am

question about why he is ONLY criticizing AirBnB here and not all the other sharing economy intermediaries who provide this same service?

Posted by Guest on Mar. 07, 2014 @ 6:59 am

If I remember correctly his logic (and I use that term advisedly) is that AirBnB is the biggest. So I guess that to Steven only Coke should be faulted for producing sugary drinks, not Pepsi.

Of course the real reason is that Ron Conway was an early investor, and therefore (in Steven's mind) Ed Lee turns a blind eye. Which doesn't explain why the other 34,999 mayors do the same thing.

Even when legislators look at the short term vacation rental thing (which has existed for decades) their approach is to look at how the laws should be modified for the 21st century.This is the approach that David Chiu is taking.

Even the SF Tax Commissioner's opinion that Steven clings to so tenaciously was accompanied by a statement that 'All we are doing is stating our position on the current law as starting point'. They then said that they were part of a task force looking at reviews.

And that was 2 years ago, btw, and obviously they have never tested their position.

The whole thing is an example of how Steven needs to make up his own imaginary world. Which is his problem, my only concern is that people stumble upon this stuff and may believe that it is the reality that the rest of us live in.

Posted by Guest on Mar. 07, 2014 @ 8:58 am

distinct impression that he is really just going through the motions.

He just cannot get his hands around how much the new sharing economy has changed the rules and the ability of jurisdictions to make and enforce rules.

He's a blacksmith complaining about the invention of cars.

Posted by Guest on Mar. 07, 2014 @ 9:09 am

This will create more rentals and less headaches for renters and small property owners.

Campos - how about doing something productive?

Posted by SF Resident on Mar. 07, 2014 @ 10:30 am

The rent board itself employs dozens. Then there are the lawyers, the non-profits, the Ellis speculators and so on.

Tenants think they are getting a good deal because the benefits are obvious but the disadvantages of it are subtle.

And a shrewd landlord can make more money out of a RC building than a non-RC building.

It's a win-win for all the vested interests, and the people who really suffer are the new arrivals. And who cars about them?

Posted by Guest on Mar. 07, 2014 @ 10:43 am

That is why price controls are generally adopted only as short-term measures in war-time or during natural disasters.

As a long-term strategy it is self-defeating. After 35 years of rent control, we have sky-high rents, almost no homes available for rent, and thousands of rental units converted to owner occupation, used for corporate, academic or tourist short-term lets, or simply left vacant rather than risk being stuck with a tenant for decades.

Rent control is a disaster.

Posted by Guest on Mar. 07, 2014 @ 10:46 am

An emergency 12-month moratorium on rent control for all new leases (on units with no history of evictions) would instantly add supply. It would not effect tenants who currently receive rent control, but would incentivize property owners to enter the market.

Posted by Guest on Mar. 07, 2014 @ 11:13 am

But what's to prevent Campos and crew from simply reinstating RC on those leases a few years later? It would certainly buy them some votes.

But I suspect many LL's would be extremely wary. I know I would be.

Posted by RemyMarathe on Mar. 07, 2014 @ 9:24 pm

I've read that some tenants are renting out their units (in violation of their leases) when they're out of town. I wonder if the City Attorney will go after those tenants, too.

Posted by The Commish on Mar. 07, 2014 @ 12:46 pm

because he knows that half of the hosts are tenants and would risk eviction if their landlords found out via, say, public tax records.

Steven's wet dream is that AirBnB pays all the taxes and tenants get away with their scam.

Posted by Guest on Mar. 07, 2014 @ 12:58 pm

"David Chiu took on the problem over a year ago...but the multi-layered legal and logistical challenges in doing so have so far proven too much for the otherwise effective legislator."

Aww, how bromantic.

Posted by RemyMarathe on Mar. 07, 2014 @ 9:30 pm

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