Short-term rentals disrupting SF housing market SHARING ECONOMY Explosion in short-term rentals disrupts market, runs afoul of regulations

Barnaby Thieme and Rebecca Reagan stand at the front entrance to their apartment building in San Francisco, Calif. on Friday, June 1, 2012. Thieme and Reagan discovered that the apartment above theirs had a become an Airbnb rental property after several unfamiliar people tried to walk into their unit. less Barnaby Thieme and Rebecca Reagan stand at the front entrance to their apartment building in San Francisco, Calif. on Friday, June 1, 2012. Thieme and Reagan discovered that the apartment above theirs had a ... more Photo: Paul Chinn, The Chronicle Photo: Paul Chinn, The Chronicle Image 1 of / 7 Caption Close Short-term rentals disrupting SF housing market 1 / 7 Back to Gallery

First came the noisy upstairs neighbors who said they were just "renting the place for a couple of nights" but refused to tone it down. Then came the people who would try to open the front door of the Castro/Duboce Triangle apartment where Barnaby Thieme and Rebecca Reagan live, saying they thought it led to the lobby.

The couple looked online and discovered what was behind the disruptions - a unit in their building was being rented out through Airbnb, the marketplace for short-term housing in private residences.

"The big surprise for us was when we tried to contact Airbnb" to complain, said Thieme, a writer and editor. "The phone tree had no option remotely relating to people in our circumstance - neighbors." When they finally got through, "the first gentleman didn't seem too concerned about our problem."

Their story underscores some unintended consequences of the runaway success of Airbnb, VRBO, HomeAway and other online services for booking stays in people's homes. A growing number of residents - close to 2,000 in San Francisco alone - use these services to sublet their apartments or houses while out of town or to occasionally host visitors in a spare room or sofa.

Ad-hoc hotels

But others, encouraged by lax oversight and lucrative payoffs, use the rental sites to run ad-hoc hotels, which besides annoying neighbors, takes long-term rentals off a market that desperately needs them - and in cities like San Francisco violates zoning regulations.

Now the city is grappling with how to address the problems while still encouraging "collaborative consumption" businesses that let people connect to share assets and skills.

"We're seeing a significant growth in the number of San Franciscans who are utilizing websites to share their homes, apartments or couches with visitors from around the world," said San Francisco Board of Supervisors President David Chiu, who has been meeting with stakeholders before introducing legislation to address the trend. "We need to protect scarce rental housing, make sure visitors are respectful within buildings and neighborhoods, and make sure these practices take into account planning, safety and quality-of-life concerns."

San Francisco's Airbnb said it has 1,600 active hosts in the city and another 5,400 San Franciscans who have hosted and may become active again. HomeAway of Austin, Texas, which owns both the VRBO and HomeAway sites, has 331 listings in San Francisco. Most of its listings are for entire residences (generally second homes), while Airbnb ranges from couch space to whole houses.

Tax dispute

Both services said they require that their hosts comply with all applicable laws and regulations. But in April, city officials felt compelled to make clear that San Francisco's 14 percent hotel occupancy tax applies to Airbnb visitors, something the service didn't collect in the past and fiercely opposes. "The elected family of Mayor Ed Lee, Board of Supervisors President David Chiu and his colleagues are focused on fostering San Francisco's Sharing Economy, of which we and our hosts are a part," Airbnb said in a written response to questions. "We are now and will continue to meet with the various stakeholders, neighbors, property owners and tenant groups as the city's codes and zoning laws are updated to reflect the reality of short term rentals." Carl Shepherd, HomeAway co-founder and chief strategic officer, said: "Our terms and conditions say someone has to have the right to rent the property. We verify listings as much as we can, and we actively police and kick off people who do not comply with our rules." Complaints from neighbors have not been an issue, he said.

Spokespeople for tenants, neighborhood associations and landlords, groups that rarely, if ever, find common ground in San Francisco, agree that the lodging websites are causing problems.

"Many landlords decided they would be able to make more money by renting (their properties) as tourist space," said Ted Gullicksen, president of the San Francisco Tenants' Union, which promotes renters' rights. "We're seeing a big loss of rental housing stock, which we're already losing through other means. This is added pressure."

Jon Golinger, president of the Telegraph Hill Dwellers, an association for residents of Telegraph Hill and North Beach, had similar objections.

"We are very concerned with reductions in available housing for people to live in the neighborhood," he said. "We want to keep San Francisco a place where people don't just visit and take pretty pictures, but where people actually live."

Landlords are equally unenthusiastic, but for different reasons.

"Many tenants in buildings in San Francisco are running illegal bed-and-breakfast businesses out of their rental units (as can be seen) by viewing many of the public listing sites," said Janan New, executive director of the San Francisco Apartment Association, which represents more than half of the city's landlords, both big and small.

'No accountability'

"If you sublet your San Francisco rental unit on a nightly basis, you are breaking the rent-control law; you could be subject to eviction (for violating leases that ban subletting); and you're putting the other tenants in the building at risk," she said. "There's no accountability to the actual owner of the property if there is vandalism or theft or fire or some other catastrophe."

Some building owners have evicted tenants who violated the terms of their lease by subletting to short-term visitors, she said. And San Francisco has a long-standing but little-known ban on renting residential spaces for fewer than 30 days.

"It's become so common that people don't even realize it's not legal," said John Rahaim, San Francisco planning director. His department has received 31 complaints over the past four years about illegal short-term rentals. "We'll look online and see if they're advertising somewhere on a regular basis, and then ask them to stop," he said. "In almost every case they've done that."

San Francisco residents who want to host short-term visitors can apply for a bed-and-breakfast license, which costs thousands of dollars and requires various documents and hearings - but few do.

"It is allowed everywhere except single-family residential districts," said Scott Sanchez, the city's zoning administrator. "If someone is using their building (for short-term rentals), as zoning administrator I would say they need to go through the proper paperwork to legalize the use."

However, he said, the city doesn't see many applications.

"The process is very tedious; there are lots of reviews and requirements," said a woman who has been seeking a B&B permit for two years for her Panhandle Victorian, where she hosts out-of-town visitors. "You have to hire specialized people to provide site plans and floor plans. You have to make modifications such as putting in gates for the driveway."

If the process were easier and cheaper, "absolutely" more property owners would apply, said the woman, who asked not to be identified.

Neighbor complaints

In fact, a streamlined registration system for guest rentals is among the ideas Chiu is considering, along with creating a system to help investigate neighbor complaints.

In the case of Thieme and Reagan, their leasing agent eventually contacted Airbnb and explained that subletting violated the building's rental agreements, and the visitors stopped coming. In general, Thieme has no issues with the service - and in fact has used it himself.

"We used Airbnb happily in Europe last summer," said Thieme. "I want to extend them the benefit of the doubt that they are still evolving their business model and have had explosive growth, but they need to evolve appropriate mechanisms of monitoring and control. They should deal with zoning laws and tax laws more aggressively and realistically, or they will antagonize people."

Chiu said his legislation, which will be introduced in the next few weeks, will try to take all viewpoints into consideration.

"There are hundreds if not thousands of San Franciscans who have benefited from being able to do this once in a while," he said. "We need to create a balance between allowing San Franciscans to take advantage of this creative way of sharing spaces while not permanently displacing (other) San Franciscans from scarce rental housing (and) ensuring that visitors are being respectful."