Into thin air

"Shareable housing" is causing apartments to vanish from SF's rental market — yet popular, profitable sites like Airbnb violate local laws


By Steven T. Jones and Parker Yesko

Airbnb is an audacious corporation, particularly in San Francisco, the city where it's headquartered and where its business model works best. This city is tech-savvy and popular with tourists, but hotels here are expensive, while rent-controlled apartments are still affordable, creating a strong incentive to rent those rooms at a profit through Airbnb.

The problem is that its business model is basically illegal. Its users violate five different sections of laws in San Francisco, from planning codes to tax laws to rent control. Disrupting complex regulatory systems developed over decades, Airbnb has managed to unite traditional adversaries against it: both the Hotel Council of San Francisco and the hotel workers of UNITE-HERE Local 2, both the landlords from the San Francisco Apartment Association and the renters from the San Francisco Tenants Union.

But Airbnb and its young founders just don't seem to give a fuck about any of that. Sure, most of its hosts in San Francisco are violating their leases and land use laws, and a string of them have gotten evicted as a result. But Airbnb is rolling in cash, with Forbes now valuing the company in the billions, with a B, thanks to the double-digit percentage it takes from every transaction, low overheard costs, and venture capitalists who can't seem to throw enough money at the company.

When the San Francisco Tax Collector's Office last year held hearings on whether Airbnb and similar companies must collect the city's transient occupancy tax (TOT), the surcharge of up to 16 percent that hotels charge to guests, the company rallied dozens of its local hosts to oppose the taxation and even enlisted the support of Mayor Ed Lee, who shares a financial benefactor with Airbnb: venture capitalist Ron Conway.

It wasn't enough to overcome the clarity of city tax laws and the equity arguments made by the hotels, and the city ruled that Airbnb and/or its hosts are responsible for collecting the TOT. So what did the company do? Nothing. It just kept making money and stiffing the city, and when the Guardian wrote about how it appears to be shirking that annual tax bill of nearly $2 million (see "Airbnb isn't sharing," 3/19/13), the company and its consultants simply refused to answer our calls or questions — then and now, for months.

As this story was going to press, the company did finally send us a prepared statement that was more self-promotional than responsive to our questions, but it included the line, "Airbnb is committed to working with the City on policies that make San Francisco stronger, promote innovation, and ensure the sharing economy continues to grow."

Really, you almost have to admire these guys' chutzpah. Except for the fact that Airbnb and similar companies — VRBO, Roomorama, HomeAway, countless new upstarts, as well the DIY option of Craigslist — are exacerbating the city's housing crisis by taking thousands of apartments off the rental market, driving up rents, and causing evictions in the process.

Board of Supervisors President David Chiu stepped in to mediate this mess early this year, trying to create legislation that would legalize and regulate the activities of Airbnb and other so-called "shareable housing" companies. But hopes of introducing something in the spring turned into a goal of midsummer, then by the August recess, and now sometime this fall, hopefully.

In the meantime, the money keeps rolling into Airbnb, complaints against it mount (here and in other big cities), its tax bill goes unpaid, and the landlords and tenants, the hoteliers and the workers, are all left to wonder why the city can't or won't enforce its own laws.



Great piece. Great work. Great questions. Keep on it!

Posted by Guest on Aug. 06, 2013 @ 4:41 pm

Complicated. I just wish everything could stay the same.

Posted by Guest on Aug. 06, 2013 @ 8:58 pm

yes, it is somehow complicated, but we should find a solution right now!

Posted by Wedding on Feb. 27, 2014 @ 4:37 am

After identifying the problem, we need to find a solution. Waiting longer is not an answer. How about raising the issue in the local community center?

Posted by Möbel Online on Apr. 04, 2014 @ 1:02 pm
Posted by Guest on Apr. 04, 2014 @ 1:28 pm

Thanks for sharing! great post

Posted by Festa on Aug. 03, 2014 @ 11:37 am

Egith pages but I seriously couldn't be bothered with it after the first one- as predictable as it is tiresome.

You claim the city says AirBnB owes the tax and yet it has made no effort to collect it, indicating that the city believes it will probably not prevail in court. And that seems like a prudent judgment, given that it is surely the host who actually profits from the rent who should pay the tax on the rent, and not some middle-man that takes a small cut. After all CraigsList doesn't pay a TOT if I let my space out thru them.

If a sublimely simple and popular business model like AirBnB's really trangresses five sets of local laws, then the chances are that it is those local laws that are wrong and need chnaging, What could be more basic and harmless than me subletting my home for a few days when I go away? There is something fascist about wanting to take away my ability to do that.

Oh, and why pick on AirBnB just because it is in SF. There are many competitiors and rivals far beyonf SF's jurisdiction, so you pick on the only business of it's type that invests in SF. Will you only be happy when they move?

Posted by Guest on Aug. 06, 2013 @ 10:18 pm

You sound very angry and bitter. Maybe get some sleep down there in Los Ángeles.

Posted by Guest on Aug. 07, 2013 @ 3:42 am

Could be, if he is still angry about being canned.

Posted by Guest on Aug. 07, 2013 @ 3:54 am

I was thinking of you (unfortunately) when I posted that. Why do you care what goes on in San Francisco when you live Los Ángeles? You've been banned from all the forums down there?

Posted by Guest on Aug. 07, 2013 @ 4:45 am

Johnny bans - he does not get banned.

Johnny is dead. Long live Johnny.

Posted by Guest on Aug. 07, 2013 @ 5:09 am

In this way we will see many similar cases for sure! At least that is my opinion!

Posted by Yacht model on Feb. 12, 2014 @ 1:16 am

Obviously a hit piece but much better than the past few dozen which said that the TOT was AirBNB's tax that they were shirking thanks to Ron Conway's relationship with Ed Lee (the SFBG never explained how Ron Conway prevailed on the other 39,999 mayors worldwide to look the other way).

If you go through the 8 pages the basic claim against AirBNB is that they don't provide an estimate of the TOT tax at the time of sale, the way that Expedia, Orbitz and the rest do. Fair enough, but probably not on the short list of issues deserving 8 pages.

Maybe the SFBG could have asked Cisneros' office about creating a web page that explains and simplifies the TOT process for hosts, instead of relying on each individual vendor to do so, accurately, in 40,000 cities.

There is also a legitimate argument that the TOT tax that applies to hotels should be completely reviewed in regard to AirBNB type services. If I pay RE taxes on a 2 bedroom home and my kid moves out to New York I don't get a reduction in RE taxes. Can't I rent out his/her room to a 'replacement' without paying additional taxes? If I rent out the room for 2 weeks I cost the city money in services, but if I rent it out indefinitely I don't?

The rest of the 8 pages are about the need to review existing tenant and home owner laws in light of a new disruptive technology. Yup...things do change which is why we have people working at City Hall.

Posted by Troll on Aug. 07, 2013 @ 7:45 am

backpeddling on his earlier claims. Seems to me the simplest solution is for AirBnB to voluntarily hand over details of their transactions to SF whereupon SF can try and collect their tax if they think a judge will support that.

Good luck with that if the competitors to AirBnB are all based in Latvia, of course.

Otherwise I think this whole thing exists as a problem only because SF has such insane land use laws. This is a wake-up call to the city to update it's rules to fit a modern world. But will they take it?

Posted by anon on Aug. 07, 2013 @ 8:07 am

I know what you mean, I have exactly the same opinion! To bad that we can not continue with the same strategy!

Posted by salaryuniverse on Jan. 07, 2014 @ 6:19 am

dumb city regulations. The whole point of this is that it is a counter-cultural highly personal part-time use of a housing resource that you have decided to embark in. And as a preference to all the hassles of having a long-term tenant.

I ran a rental building almost entirely as temporary rentals for a number of years and it was perfect - nice polite foreigners who don't raise a stink, higher rents and - most importantly - the sure knowledge that they would leave giving me an opportunity to decide each time whether I wanted a new sub-tenant or put the home to some other use.

If I had had to obey all these rules I would have sold the place instead to an owner-occupier and, in fact, I did after a few years anyway to capture buoyant RE prices. I provided shelter to some high value visitors, students and workers, made a decent profit, and "did no harm".

I fully support AirBnB and those who have arrived in the 21st century where a big brother government no longer tells us what we can do with our own homes. The city needs to back off and Steven needs to find a new pet cause.

Posted by anon on Aug. 06, 2013 @ 10:31 pm

"I ran a rental building almost entirely as temporary rentals for a number of years..."

LOL. YOU run a building? You, the model of willful-ignorance and hate and your "foreigners" [sic] shit? I can't imagine you running anything, including water.

Posted by Guest on Aug. 07, 2013 @ 4:49 am

I've run eight rental businesses, all profitable.

See, I can scribe and make money at the same time. It's called multi-tasking.

Posted by Guest on Aug. 07, 2013 @ 5:10 am

I have the same opinion, it is real what you said and for sure we will see improvements if we will continue in the same manner!

Posted by Anwalt on Feb. 27, 2014 @ 1:06 am

If this is truly a "sharing economy," then the cities in which the big tech companies, like Google, Apple, Cisco, Facebook, are headquartered, need to share in the boom and build more housing so that workers live NEAR where they work. These communities need to be built up with the critical mass of amenities and leisure and dining options, so that they keep these workers within their geographic boundaries. The saving-the-world mentality doesn't go far when thousands of workers are Google-bussing it from SF to peninsula cities--despite the cars "being taken off the road." This is not sustainable progress. And some of these companies have the vast amount of cash to invest in and manage worker housing complexes in these peninsula cities. Then workers can walk or bike or take short shuttle rides to their cubicles or collaborative workspaces. Service workers who live in the suburbs can then be closer to their work and not to have to pay 1 hour's wages just for daily commuting. Instead, traffic just keeps getting worse every year and cross-city commuting (including Google buses) keeps increasing.

Posted by Guest on Aug. 07, 2013 @ 11:43 am

live in socialist workcamps.

It is none of your business where i live or how I get to work.

Posted by Guest on Aug. 07, 2013 @ 11:57 am

Actually, I prefer to think of it as "almost" Leninist. And we're not talking grey cinderblock housing here, but full amenity digs for a privileged class. Google can can the driverless car fiasco and plop down several hundred semi-luxury apartments in transit-oriented areas. If they already offer free laundry, food, gyms,etc., they can spring for income-producing apartments with their employees as favored tenants. It is OUR business when the effect of having so many workers commuting long distances, creating pollution and gridlock leads to unhealthy living for us all. Outfit the apartments with the latest Google technology like operating everything--toilet, sink, toaster, closet door, thermostat with Google glass. Sorry if the concept of them creating housing is too cutting edge for you. We have to hear ad nauseum how they are saving the world through their creativeness. How about creating enough housing?

Posted by Guest on Aug. 07, 2013 @ 5:34 pm

The concept of forcing workers of certain companies (but not all) to live together in specially built communities near their office is a bit of a stretch for me.

But yes, there should be some type of law saying that Google employees are not allowed to live in the City and County of San Francisco. The BOS should stand up to Edwin Lee and get that one passed ASAP

Posted by Guest on Aug. 07, 2013 @ 6:05 pm

wherever they damn well want, and it's none of anyone else's business.

Posted by Guest on Aug. 08, 2013 @ 8:50 am

It is our business when their choices start to cost us.

Posted by anon on Aug. 12, 2013 @ 11:07 am

damn thing about it.

That's why we like money in this country.

Posted by anon on Aug. 12, 2013 @ 11:39 am

I agree that Google should be required to build housing for either it's employees or the people those high paid employees have displaced. Why not have them build affordable housing for the displaced working class folks. The bay area will soon become affordable only for the rich and those of us who work in service related or blue collar jobs won't be able to afford to live here so we can "serve" them. No person, no matter how rich, is going to want to pay double for food, coffee, plumbers, hairstylists, baby sitters and the like, but that is what is destined to happen if those of us who earn less than $90K a year can no longer afford to live here.

Posted by Guest on Sep. 28, 2013 @ 3:42 pm

And how could they possibly compel their staff to live there?

I can see a case in certain very specific cases e.g. an ER doctor who has to work nights might be given a flat near the hospital. But otherwise it's a horrible idea. What happens if you lose your job? You lose your home too?

Posted by Guest on Sep. 28, 2013 @ 4:29 pm

And what about the people from the surrounding suburbs who work in the SF? Should they still be allowed to keep coming here? Do you mean to say that you want them to all be forced to live in the city and try to turn us into Walnut Creek?

Or, for that matter, what about my girlfriend who lives with me here, but works over in Oakland?

Many people don't want to live in the suburbs, other people do. Increasingly jobs are moving out to the suburbs because, in part, they have more space available and at a much lower cost than the premium of city real estate. If anything it's a more efficient use of space: keep services and goods aimed at residents local, but large office parks that can be located anywhere outside of the city.

Posted by Belgand on Nov. 05, 2013 @ 5:55 pm

Where is the outrage over legal and illegal in-laws? Illegal in-law apartments take housing resources away from potential home owners, by converting them into commerical real estate - revenue producing businesses. Since more rent revenue can be generated by splitting a single family dwelling into multiple units, potential owner-occupiers of single family homes are outbid by developers and speculators. No additional property taxes are generated (no re-assessment) when a property is converted from single to mult-unit occupancy, even though they drive higher demand for city services, nor do they provide funds for affordable housing. Off-street parking is converted to yet another apartment, while simultaneously doubling and tripleing the number of cars and people, adding to congestion. If every house that was converted to a non-owner occupied multiple unit dwelling was reassessed to market rate, it would make AirBNB's tax avoidance look miniscule.

Posted by Richmondman on Aug. 07, 2013 @ 12:23 pm

Yeah, having relatives living in that dingy garage space that you converted with the help of your uncle and distant cousin, in order to help each other out a bit, sure is a rotten crime. Cough.

Posted by Harry Muff on Aug. 17, 2013 @ 1:43 pm

blind eye to them because they house tens of thousands od residents.

Unless the city gets serious about allowing more new homes to be built, then in-laws are here to stay - get used to it.

Posted by Guest on Aug. 17, 2013 @ 1:49 pm

News? Really? There were more opinions in that article than a NY Times op/ed! Seriously, though, I use Airbnb to sublet my room, the same way I would on Craigslist in the “old days”. Nobody seemed to care then, because nobody was “rolling in cash” and it wasn't a company headed by “young founders”. And, for those who rent my room, it's more than a cheap room. In fact, it's often more costly than they'd pay normally, but these folks want to live with locals, instead of being alone. Bottom line: if it weren't for Airbnb me and my artist husband would have had to leave the Bay Area a long time ago. It helps us defray the high rent. PS All the suspicions and complaints by nosey neighbors in SF is typical. Seems there's rarely a “live and let live” attitude here (one more way Oakland has ya'll beat ;)

Posted by Guest on Aug. 07, 2013 @ 12:39 pm

What about the many, many senior owners with paid-off mortgages that are sitting on empty units because they don't like the noise or nuisance from tenants? Do we go after them for reducing the city's housing stock? My unit was empty for 5 years before i moved in. The two units on either side of me were empty, one for the whole 18 years I've lived here, the other for a good 10 years. My landlady's unit has been empty for 7 years because her son had no desire or need to rent it. Her best friend also had a two-unit with an empty unit for decades. The priest next door had a friend across the street with an empty unit above her for decades. Of course, when she died, the building was bought and converted to condos—so no renters benefitted there either.

If the tenant's union wants to complain about inaccessible housing stock, then they need to create a plan for locating and penalizing seniors that are sick of the hassle of tenants and sitting on empty units. What I listed above amounts to FOUR empty units for over 10 years on my ONE block.

Seriously, David Chiu, and Gullickson better be prepared to go after the seniors if they're going to come after the average Joe and Jonie looking to supplement the HIGH cost of living in SF with a little hospitality and goodwill.

This is all especially funny because I would NEVER tell visiting family to stay down in Union Square where ALL the hotels are. It's gross and scary (especially if they take a wrong turn and run right into a transient pooping or shooting up on the sidewalk) and services suck. As a former tour guide I was often asked where to eat by folks that had arrived at night and walked blocks and blocks and blocks in the dark looking for food at 10pm (or later). At least in my little neighborhood, there's a 24-hour grocery they could've hit up—if they were renting one of the seniors' empty units via Air BnB.

Posted by Guest What about...old folks? on Aug. 07, 2013 @ 12:49 pm

The Board of Supes does not have the power to force seniors (or anyone else) to rent out property they own. Renting private property is a business and seniors (or anyone else) are allowed to retire from this business whenever they see fit. The Ellis act gives California property owners the right to "go out of business" at any time they choose EVEN if tenants are occupying units. This is state law so the Board of Supes cannot pass any laws preventing property owners from exercising this right.

That being said the tone of your comments smack of entitlement. You own something - you must let me use it, even if it creates hassles for you! If the Board of Supes were allowed to pass a law that all property in the city must be rented, what is to prevent a landlord from asking an outrageous sum (say 3 times the going rate) for a unit. The unit would be on the "rental market" forever. The fact that you have been a tenant in the same unit for 18 years (I am assuming under rent control) is exactly why many seniors (and other property owners), who can afford to, choose to exit the business of being a landlord.

Rent control has a purpose - to provide affordable housing for as many SF tenants as possible. Rent control's purpose is NOT to enable tenants to turn profits at levels that they themselves would cry "greedy landlord" about. Yes, there are tenants charging $100 a night (that is $3,00 a month) for someone to stay in a one bedroom apartment they may be paying only $1,800 a month for under rent control.

This article made me go to Airbnb and look for units in my mothers Valencia st building. The majority (10 out of 12 units) of her tenants are benefiting nicely from rent control, and she doesn't have a problem with that, but if I find any of them trying to reap profits off of rent control I will see to it that a 3 day notice is sent immediately.

Posted by Guest on Aug. 09, 2013 @ 2:23 pm

“ … making more efficient use of existing resources” has a dissembled relationship with the neoliberal-based “shareable economy.” It practices deregulation, privatization and eventual government realignment as pilfered, undeclared income starves governments of tax revenue and rent-seeking corporatists rapaciously expropriate all resources for exclusive consumption. Just as human destruction of its only biosphere renders the same unsustainable, so does the neoliberal business plan supported by San Francisco mayor Edwin Lee, many serving as “The Board of Supervisors” and others. I still want to know the relationship between supervisor David Chiu and Airbnb; neither do I share his “less materialistic” falsehood. Less for someone means more for opportunists and those engaged in the unregulated neoliberal zero-sum game—gaming the system to its imminent demise.

Posted by Awayneramsey on Aug. 07, 2013 @ 1:25 pm

If I rent out an empty bedroom to someone who needs a place to stay, everyone wins. San Francisco has plenty of tax revenue.

Posted by Guest on Aug. 07, 2013 @ 1:44 pm

You're kidding me, right? We're privatizing our parks, cutting library hours, talking about ending Healthy SF, our roads are full of potholes, MUNI is overcrowded, pensions and healthcare benefits are being slashed, City College is being torn to shreds, parking ticket prices and meter hours are increasing... and you're saying San Francisco has enough tax revenue? What planet are you living on?

Posted by Greg on Aug. 08, 2013 @ 7:55 am
Posted by Guest on Aug. 08, 2013 @ 8:15 am

and give them insane healthcare and pension benefits.

Posted by Guest on Aug. 08, 2013 @ 8:42 am

And spend 40% of the city budget on unaccountable nonprofits (aka The NonProfit Mafia)

Posted by Guest on Aug. 08, 2013 @ 10:11 am

The article asks "How can you protect rent control and still allow tenants to profit from their units? Can you prevent landlords from using Airbnb or VRBO to bypass rent control?"

San Franciscans are made homeless because we desperately need reasonably-priced housing in SF. Most of us are frantic because we need a place to live. If the issue is the right of tenants to PROFIT from their rental units (thereby living elsewhere, while they make money on their possibly rent-controlled residence), then there clearly is no rental housing problem, is there?

Rent control and eviction protection do not exist to protect the right of renters to essentially remove a property from the market to make money. It is the nature of our economy that owners may do so, but not, I believe, renters of so precious a commodity as SF housing.

Thank you.

Posted by sfrenter on Aug. 08, 2013 @ 5:49 am

They want tenants to be able to profit from subletting their rented homes but wish to deny landlords the same ability even though, as the OWNER of the property, they have far more right to do this.

But I am not sure we really need reasonably-priced housing in SF. Either you can afford to live here or you might be happier elsewhere. Nobody has a right to live in a place they cannot afford any more than we have a right to drive around in a Rolls Royce if we cannot afford one.

Posted by Guest on Aug. 08, 2013 @ 6:12 am

@Guest: Who decides who has rights to live in a particular location on earth, given that the question begins at nascency? I was born in America now consisting of fifty-states, a republic on the only known human biosphere, earth. I am a citizen of America on earth and in any state I choose to live, I may. Yes or no? A Rolls Royce is non-essential for birth, but an earthly biosphere is absolutely essential, in the present, for human mammal life support. Location of birth on earth yields a habitable place for sustained existence beyond maturity of the human mammal, usually, notwithstanding, the location. Human contrived methods to limit location of human mammal birth is cruel at best and it is irresponsible for those who form governments to allow a bigoted few “divine right,” as it were, to decide the location of human mammal birth by price-gouging housing stock pricing structures, whether or not for profit.

Posted by Awayneramsey on Aug. 08, 2013 @ 9:35 am

What you have is a desire to live somewhere, a hope perhaps, an aspiration, and so on.

But no right. If you want to live in an expensive place, then start saving and working hard, Nobody owes you a million dollar home anywhere. You earn it.

Posted by Guest on Aug. 08, 2013 @ 9:55 am

@Guest: No doubt if you are one who is a “landed gentry” or renter then you will Airbnb, sublet, pimp, speculate, purchase and corroborate prices with your peers because government will not regulate you. Alternatively, although you construct any unnatural obstacle you wish to make it impossible for others, not like you, to exist, we will coexist in San Francisco, whether-or-not rights form the basis of any arguments.

A fallacy that one hears repeatedly in America is that one “start saving and working hard” and success will follow. A presumption and a bold lie. This possibility ended with the Industrial Revolution. My great-grandparents were landed gentry born in the 1890s and were productive agronomists—not capitalists. The next generation, about the 1900s also lived on the fumes, as it were, of the Industrial Revolution and possessed land, but lived a “middle class” existence. The following generation, that of my parents born during the 1920s, were field hands, without land, neither adequate remuneration from hard consistent work—money, to purchase, no matter how hard they worked, and had no disposable income to save. During Praetor Eisenhower's golf tour of the U.S. White House, I remember my dad drove his old used car about 30-miles one night to his brother's home (this belonged to his wife) to ask him for food for his family of four at that time. I remember times without heat and adequate clothing. Neither could dad afford to give me a-quarter to purchase a school lunch—there was not in my grade school days, subsidized lunches. I began to wash dishes in the school cafeteria for food. I just did it. I was hungry.

I worked 32-years and did the best I could. I have no land, no disposable income and now, I am old and waiting to die as are so many similar to me. I believed the lie that you continue to tell the naïve.

Posted by Awayneramsey on Aug. 08, 2013 @ 12:19 pm

You need to take a hard look at your family. America is not to blame for generations of failure in which your family managed to become ever poorer while most Americans got much richer.

Posted by Guest on Aug. 08, 2013 @ 12:48 pm

I do.

Posted by Awayneramsey on Aug. 08, 2013 @ 2:00 pm

That's nobody else's job.

Posted by Guest on Aug. 08, 2013 @ 2:04 pm

He probably never stopped washing dishes in the school cafeteria in exchange for lunch...

Posted by Harry Muff on Aug. 17, 2013 @ 2:13 pm