Into thin air

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

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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.