As we first reported earlier this week, Supervisor Chiu’s proposed amendment to Chapter 41 of San Francisco’s Administrative Code wouldn’t make it unlawful to rent an apartment, or room therein, for less than a 30-day term of tenancy in San Francisco, for that practice is already against the law and subject to both Civil and Criminal penalties.
The proposed amendment would, however, open the doors for any non-profit “which has the preservation or improvement of housing as a stated purpose in its articles of incorporation or bylaws” to institute proceedings for injunctive and monetary relief against anyone violating Chapter 41, something the City of San Francisco has the right to do as well but hasn’t pursued.
Speaking of which, yesterday San Francisco’s Treasurer upheld a clarification of San Francisco’s existing hotel tax law which requires anyone who rents out a house, condominium or apartment for transient use within San Francisco to collect and remit a 14 percent occupancy tax to the City, a responsibility that would fall on any website, such as Airbnb, that acted as the merchant or broker.
∙ Airbnb: A Potential Civil And Criminal Penalty Hit List? [SocketSite]
∙ Transient Occupancy Tax: Multiple Party Transactions; Occupancy of Private Residences
So let’s see here. Renting an apartment or room for less than 30 days is prohibited and subject to up to a $1k per day penalty plus legal fees. But if you choose to break the law anyway, then you should also pay a 14% occupancy tax confirming the fact that you have broken the law. I really don’t see why anyone would ever pay the occupancy tax since this would confirm that you broke the law.
I assume the reverse: that when you are caught breaking the law, they will go after you for the taxes, and more importantly, the penalties and interest.
So the penalties for breaking the law will be followed by a lien on the property.
The city is broke. Fun times ahead for anyone with $$ to tap.
And it ups the stakes. Now if you rent out your spare BR for a night, you are criminally liable for tax evasion as well. That’s how they got Al Capone.
The key point is that they can collect the tax from airbnb, not just the small guy renting out his spare room for a night. One stop shopping for the tax man.
By the way, if you report income from illegal activities to the IRS (as you must for tax purposes) the IRS does not share that with prosecutors, so this won’t trigger a criminal investigation.
“Laws like San Francisco’s hotel tax, adopted in 1961, were written long before the Internet or any of these activities were conceived,” said Kim Rubey, an Airbnb spokeswoman. “Innovative new models that allow San Franciscans to generate additional income should be addressed by innovative laws and policies – not stifled by 40-year-old regulations.”
Is the Airbnb response really “we’re an internet company so why should we have to follow the law”? All sympathy lost.
I’m sure the Hotel and hospitality industry are fighting this one.
Anyone ever used airbnb? I’ve only heard shady stories about their use of CL for marketing. But haven’t heard many bad stories from actual users.
I’m still calling FUD until we start to see some non-profit using this law to harm these transient landlords renting their place for less than 30 days.
Here is one solution for the proposed transient landlords, include a provision in each lease that gives the occupant the option to lease the place for 31 days that can be exercised within “X” days where X is the actual expected lease term. And charge a very high fee for those extra days (i.e., 31-x). So you can essentially say that you rented the unit with the expectation it would be for 31 days but the tenant didn’t take the option. Hotels publish their maximum daily rates per room and it is usually much higher than they charge so the landlord could do that as well. It’s also an interesting way to protect against someone deciding to squat in your place since they are agreeing to this very high fee in advance.
In any event, I’m sure these guys will find a creative way out of this paper bag. It hasn’t stopped them yet. It’s also not clear that the burden to collect this tax is on the landlord as some of the posters are suggestion above. Actually, Adam makes it very clear:
…anyone who rents out a house, condominium or apartment for transient use within San Francisco to collect and remit a 14 percent occupancy tax to the City, a responsibility that would fall on any website, such as Airbnb, that acted as the merchant or broker.
So this whole Al Capone, they’ll get you on tax evasion, is more FUD here….
If people are supporting this in the expectation that it will make things easier for lower-income people to live in SF, I think they are misguided. The people I know who do this aren’t rich– they’re generally just scraping by (if you were rich, would you be sidelining as a b&b host?). The possibility of renting out your place for a couple of days is what allows people to gives people the ability to go visit family for a week. The people renting the rooms aren’t exactly the 1% either. Banning the practice is another step toward ensuring that the only people who can afford to buy or rent in San Francisco are people who can easily make their mortgage payments.
Open season on airbnb and their associated property owners, brought to you by Supervisor David Chiu, local hotels, and any and all non-profit focused on the “preservation or improvement of housing”… …or anyone else for that matter. ?
Am I reading this right, ANYONE is entitled to injunctive relief?! As in first to file, or are all complaints entitled to injunctive relief?
There is arbitrage potential here. I envision “interested parties” making reservations on airbnb, just to narc out their landlord/sublessor hosts collect the civil fines.
This is brilliant. There has to be some evil genius behind this one.
Cities have a right to enact zoning; in fact, I wouldn’t want to live in a city that didn’t do so. Why does airbnb–or any other company–get to come in and throw all of that zoning out the window, and effectively convert residential homes into hotel rooms?
The answer is they shouldn’t, and the existing laws should be enforced (and I have no problem with the new proposed law.) Further, they should pay transient occupancy taxes if they do rent out apartments in SF… why should they get such an unfair financial advantage over other purveyors of transient housing?
I’ve got no sympathy for airbnb, they undoubtedly know full well that their service is illegal in many jurisdictions, yet they continue to offer it and hope to fly under the radar – oh, and they want an exemption from paying taxes, too! That sounds less like a business plan and more like a criminal racket to me.
I trust our backwards looking city leadership is doing their best to find a way to ruin another good party. David Chiu is beginning to smell like Karl “Ham” Rove, which ain’t good.
How hard would be to gather the signatures and launch an airbnb ballot initiative that restores the publics right to control their property and explicitly tells the BOS and other corporate stakeholders to STFU?
People said the exact same thing about Napster, about LimeWire, about Megaupload…they all eventually got what was coming to them. Lawyers have a saying: the wheels of justice turn slowly.
mike, I disagree with your point of view, but a ballot measure would be an excellent way to register your dissent and possibly overrule the Board of Supervisors. That’s what it’s available for. I don’t know how “hard” it would be, but it isn’t anywhere near impossible, people do it all the time with enough volunteers or money or both. One of the favorite socketsite commenter boogyman groups, the Telegraph Hill Dwellers, got Proposition B on the June ballot (to provide increased protection for Coit Tower’s Depression-era murals) without much visible effort.
These increased sanctions on short term rentals will be unlikely to have the desired effect of increasing the rental stock. However why not penalize renters who maintain other primary residences? Of course it is anecdotal, but I know of a number of people who have kept their rent controlled apartments while residing elsewhere. How about a $1k per day penalty on them? Or does this conflict with the landlord=bad, renter=good narrative of SF politics?
There’s two main policy issues here as I see it:
(1) Someone renting a house or condo for transient (ie tourist) use, both in defiance of zoning (ie they didn’t get approval to operate a hotel) as well as the hotel tax. As a home-owning taxpayer, the latter really gets my goat because my taxes have to support services for these tourists. That’s what the hotel tax is for. If they pay it, the only issue is whether individual homes and condos should be used for these purposes. That’s a case by case thing. I really wouldn’t care if a house down my block was being rented out like that. I would care if it was my upstairs neighbor’s unit, but that’s why these things require approval from the Planning Commission to vet. There’s a legal avenue to do this stuff. Get approval. Pay taxes. No issue.
(2) Then there’s the real housing policy concern of landlords of larger apartment buildings turning large blocks of units or even entire buildings into de-facto hotels. This is beyond a tax issue. Witholding these units from the actual rental (or for sale market) for actual residents does have the effect of helping to reduce the housing supply and drive up housing prices. That’s a matter of economic fact. It’s not really an issue if the individual small home or condo owner does this here and there. It is a legitimate concern for large property owners to essentially remove hundreds or thousands of units from the market and illegally operate hotels/corporate short stay. Again, there are procedures for legalizing this stuff, and that’s where these policy considerations are weighed. I just don’t understand commenters who think we should throw out all our laws and turn into the wild west. There’s nothing really novel about Air BNB that warrants waiving the basic procedures and requirements. It’s just more tempting for people to do it.
A ballot measure that is guaranteed to harm renters and union hotel workers in a town full of renters and union supporters?
Good frickin’luck with that.
eddy, no FUD here. Both the renter and airbnb are on the hook for the tax. It only needs to be remitted once, of course, but the city can go after either, or both, for non-payment.
And VRBO as well? Ar they ponying up the 14%? In my neighborhood, more and more of the rental housing stock is dedicated to furnished short term stays, to avoid rent control issues. The rest jsut sits fallow.
@anon, you statement seems to contradict directly the statement made by the Editor who is the authoritative source on the subject:
“…to collect and remit a 14 percent occupancy tax to the City, a responsibility that would fall on any website…that acted as the merchant or broker.”
No where does Adam mention that the burden falls on the owner? So where are you getting these “facts”?
[Editor’s Note: The responsibility for a brokering website to collect the tax does not obviate an owner’s need to actually pay said tax should the website fail to fulfill their responsibilities.]
eddy, I read the linked document! Always go to the source.
The ed. is not wrong, he just did not mention that liability is on the head of both the guy who rents out the place AND airbnb.
Thanks for the clarification. I guess they are all going to jail and all these businesses will cheese to operate in San Francisco in the near term. Sad.
Why on earth is this sad? Anyone who wants to can rent a hotel room at any price range any day of the week. There are plenty of them. Anyone who wants to start a hotel can do so as well, they just need to go through the regulatory procedures.
I can’t drive around the streets in my car and pick up passengers for hire, even though my car is my property.
I really don’t think it’s as sad as it is cheesy. OK, I don’t think it’s cheesy either, but I thought I’d take a poke at the typo.
I wonder who would be liable to pay the tax if a tenant rents out his or her unit without the landlords consent? I use the SFAA lease that expressly prohibits subletting, but people do it anyways. Would some non profit, lets say the Tenderloin Housing Clinic or the San Francisco Hotel Lobby sue the owner or the tenant? Tenants can be hard to collect from, if they do not have many assets. Owners have the building, so it is easier to attach a tax lien. I would hate to be responsible for a tax on a service I did not provide nor authorize.
And in response to the Guest666 about penalizing renters who do not use their rent controlled apartment as their primary resident, a landlords recourse is to hire a PI, build a case against the tenant that they in fact live somewhere else, and then petition the rent board to raise the rent to market prices. It is a pain in the ass, I have done it.
Helmut,
It would appear that “owner” for purposes of this statute would include the “lessee” of the property. So I would assume that the actual owner would not be responsible for his/her tenant’s actions unless he/she was aware of transaction.
In the case of the non-primary resident, it seems that merely raising the rent if caught is not a sufficient penalty to dissuade tenants from attempting to maintain a rent controlled secondary residence.
I agree, raising the rent is not much of a penalty, especially when it costs many thousands of dollars to hire the private investigator and build a case to the rent board – but that is the law and we have to live by it.
I agree that it appears at this point that owner includes lessee, but the devil is in the details of the legislation, and it could be changed to make the actual property owner liable, and that would not be very nice.
Don’t be ridiculous. No one is going to make a person who is not a party to the transaction, liable for the taxes on that transaction, unless that person is there as a sham to thwart the collection.
However, if you put someone in between you and the transaction purely to avoid the taxes, remember to say “cheese” when they take your mug shot.
Other cities have figured out how to regulate these short term rentals. Paris has a large number of short term rental apartments, and recently started trying to crack down on individuals who are doing this, though as I understand, many apts will still be available through commercial agencies, which have to jump through hoops, but are allowed legally. Barcelona also has many, and they have recently decided to make everyone register (and pay) and limit supply in some parts of the city, instead of making it illegal.
I think it would be good if SF regulated it, but allowed it, maybe with some limits on numbers or other restrictions (and of course, individual HOA can restrict also). Staying in these places is often nicer than being in a hotel.
Tipster, I do not think that being ridiculous has ever prevented laws from being passed.
I know. I just wanted to work the word “cheese” into the thread one more time.
And this makes two times. 🙂
Eddy Munster 😉
Can we cheese and desist now. It’s getting a little too gouda.
@Dubocian – well stated.
The faux-gressive leadership of this town literally disgusts me. And judging by November, they disgust a lot of other people in the city too. What’s startling is how they seem bent of self immolation at the polls next time around by pressing for utterly insane hairsplitting crap like this.
When I travel, I stay in rentals. I have for 30 years.
Its not a crime. Its life for adults.
I saw all the cheese and crime references and thought I was watching an episode of The Wire for a second.
Sounds more like a Hotel industry give-a-way.
Allow short term/B&B style lettings and make people apply for a license to do so. The city would inspect your property to make sure it’s nothing dodgy etc.. plus they make money on the license fee.
When my partner and I travel abroad we almost always stay in a B&B or a short term apartment rental. Much more economical then hotels.
Some joker in Brooklyn using Airbnb and subleasing rooms in his apartment, grossing $20,000, got his lease canceled after the owner of the property found out about it. From fastcompany.com today (link via SFGate.com), My Airbnb Biz Got Me Evicted, Here’s What I Learned:
Even though it isn’t a very well written piece (the author comes off like a latter day Jeff Spicoli), read the whole thing.
Like I said before, not every dot com startup has a legitimate business model, even if they attract lots of “users” and make money. Someone leasing a unit that they don’t have the right to, whether by violating the terms of a lease they never read or operating a vacation rental in an area not zoned for it and forgetting to pay the requisite taxes, are just people choosing to cheat, there’s nothing revolutionary about that.
Now that this law is in place, anyone know if sftu is aggressively pursuing it’s new bounty hunter status, or is it constrained by the inconvenient fact of so many airbnb etc listings being made by sftu’s base.
Is the law in place? Anyone know the status?