Supes back 'Airbnb law’ to allow short-term rentals, with limits

Pro house sharing members of the public react to proposed amendments during a Board of Supervisors meeting which discussed David Chiu's proposed legislation to regulate Airbnb and other short-term rentals in San Francisco on October 7th 2014. less Pro house sharing members of the public react to proposed amendments during a Board of Supervisors meeting which discussed David Chiu's proposed legislation to regulate Airbnb and other short-term rentals in ... more Photo: Sam Wolson, Special To The Chronicle Photo: Sam Wolson, Special To The Chronicle Image 1 of / 44 Caption Close Supes back 'Airbnb law’ to allow short-term rentals, with limits 1 / 44 Back to Gallery

The San Francisco Board of Supervisors voted Tuesday to legalize the growing trend of turning homes into ad-hoc hotels by passing the “Airbnb law,” which places some restrictions on the controversial practice.

“The status quo isn’t working; we have seen an explosion in short-term rentals,” Board President David Chiu said in introducing the law he spent more than two years crafting.

San Francisco has long barred residential rentals of less than 30 days. The new legislation now allows them, with several caveats.

The law allows only permanent residents to offer short-term rentals, establishes a new city registry for hosts, mandates the collection of hotel tax, limits entire-home rentals to 90 days per year, requires each listing to carry $500,000 in liability insurance, and establishes guidelines for enforcement by the Planning Department. The measure, which passed 7-4, is slated to take effect in February.

Chiu and other supervisors said they sought a balance between preserving affordable housing — by making sure landlords can’t convert permanent units to more-lucrative vacation rentals — and allowing residents to earn extra income by renting to travelers. “We can protect our city’s housing units from being converted to hotels, while also allowing short-term rentals on a limited basis to help residents afford to stay in their homes,” Chiu said in a statement after the vote.

Airbnb praises law

For Airbnb, a 6-year-old San Francisco startup worth more than many major hotel chains, the passage came as a huge validation, legalizing its business model in its hometown and clarifying the rules by which it must abide.

It was also a victory for Airbnb that several proposals to toughen the legislation failed to pass. Supervisors grappled with ideas including limiting “hosted rentals” — in which the resident is present — to 90 days, barring temporary rentals of in-law units and requiring Airbnb to pay back taxes, but ultimately rejected them.

In an upbeat statement, Airbnb said the law “will give regular people the right to share the home in which they live,” underscoring its contention that most hosts are community members trying to make ends meet.

Scores of Airbnb hosts spoke at public meetings and rallies over the past several months, supporting the version of the law that the supervisors green-lighted.

But housing advocates, landlords, neighborhood associations and labor groups also showed up in force to express concerns that vacation rentals were diverting housing units, raising prices, threatening tenant security and interfering with residential areas.

Ted Gullicksen, head of the San Francisco Tenants Union, was disappointed that more-stringent requirements didn’t make the final cut. Allowing people to rent rooms to travelers year-round removes a source of affordable shared housing, he said.

“Bedrooms in houses, condos and apartments, which normally would be made available to permanent roommates, will now be put on the market as tourist rentals, making housing less findable for San Franciscans,” he said. Another issue is how the city can distinguish between hosted and non-hosted rentals, making enforcement more challenging, he said.

Little enforcement of ban

The city’s ban on short-term rentals has been lightly enforced, even while thousands of residents turned to Airbnb, HomeAway/VRBO, Flipkey and other websites to rent their homes and rooms to travelers. Airbnb, the dominant short-term rental site in San Francisco, has about 5,000 listings here, two-thirds of them in entire homes, according to a Chronicle analysis. HomeAway/VRBO has about 1,200 in San Francisco, all entire homes.

Proposals to beef up enforcement of the law by allowing housing nonprofits to quickly sue violators had some support but must go through additional hearings. That concept will be introduced as “trailing legislation” in the future. Supervisors Jane Kim and London Breed both introduced proposals to give nonprofit housing groups “private right of action” against those who flout the law.

Allowing fast-track lawsuits for nonprofits would be “an effective and cheaper means to do enforcement,” said Kim, saying the city hadn’t demonstrated that it had the resources to investigate issues.

Vacation rental site HomeAway, which also owns the VRBO brand, decried the legislation as tailored for Airbnb and “wildly unenforceable.” HomeAway/VRBO listings are mainly vacation homes, so many won’t meet the residency requirement.

Supervisors amended Chiu’s law in several ways, mostly minor. They added building owners to those with standing to file lawsuits, agreed to tell complainants if no violations were found, and agreed to notify neighbors in certain residential areas of registry applications. A proposal to bar vacation rentals in units where tenants had been evicted under the Ellis Act will undergo future hearings.

Supervisor David Campos, who is vying with Chiu for an Assembly seat in next month’s election, proposed the most sweeping changes to the legislation. He called for the law to be frozen until Airbnb paid $25 million in back taxes — dating to when the city treasurer ruled that vacation rentals are liable for the city’s 14 percent hotel tax. “It is only right that Airbnb make good on its overdue taxes before this legislation becomes law,” he said. “We should ensure a multibillion-dollar company pays its fair share of taxes just like everyone else.”

That amendment failed 6-5.

Taxes to be collected

Airbnb has said it will start collecting and remitting the hotel tax this month, something Chiu said was spurred by his legislation. It should bring at least $11 million a year to city coffers. Chiu said the law doesn’t exempt anyone from paying taxes, whether retroactive or forward, but that back taxes are the purview of the city attorney and treasurer.

Voting in favor of the law were Supervisors Chiu, Kim, Breed, Mark Farrell, Malia Cohen, Katy Tang and Scott Wiener. Supervisors Campos, John Avalos, Norman Yee and Eric Mar voted against it.

San Francisco ordinances require two votes for passage; the second vote, which is expected to be pro forma, is slated for Oct. 21. The measure would then move to Mayor Lee, who is expected to sign it.

Carolyn Said is a San

Francisco Chronicle staff writer.

E-mail: csaid@sfchronicle.com Twitter: @csaid