Airbnb's tax and tenant law violations headed for hearings

|
(80)
Airbnb and other "shared housing" websites allow landlords to circumvent local tenant protections.

As Airbnb continues to avoid making any public comment on the $1.8 million annual Transient Occupancy Tax obligation to the city that it appears to be dodging, with the complicity of the Mayor's Office, Board of Supervisors President David Chiu is getting closer to introducing legislation to regulate so-called “shared housing” and holding public hearings on the issues it raises.

In addition to the tax issue, there are concerns that Airbnb, VRBO.com, and other Internet-based sites that facilitate short-term rentals of San Francisco apartments are increasingly being used to circumvent local tenant protections, often after evicting tenants from the apartments using the Ellis Act. That state law allows owners to leave the rental business and convert to other uses, and landlords can argue that Airbnb is a commercial use and not a residential use.

“I've been deep into a lot of these issues in my conversations with a lot of community stakeholders around Airbnb and the area of shareable housing and I'm hoping very soon to have a package of proposals in this area. And at that point, we'll have public hearings on the topics that you describe,” Chiu told us when we asked about the tax and tenants issues.

Among those involved in Chiu's negotiations with Airbnb is Ted Gullicksen, executive director of the San Francisco Tenants Union, who says the negotiations have been slow-going but he's generally happy with how they're proceeding and hopeful that the resulting legislation will rein in rampant current abuses of zoning, tax, and other regulations that city officials have been ignoring.

“All you have to do is sit in front of the computer for a few hours and you can identify a lot of the lawbreakers. But there's no enforcement by the city,” he said, noting that the Tax Collector's Office is the notable exception among city departments, such as the Planning and Building departments. “The taxes shouldn't even be an issue because they're illegal uses.”

For example, while landlords may be able to get around rental restrictions triggered by an Ellis Act eviction by calling the use for shared housing websites “commercial,” that's usually a violation of local planning codes prohibiting commercial use of residential property. Chiu's legislation approved late last year banning “hotelization,” in which entire apartment buildings are cleared of tenants and rented out on a short-term basis, allows nonprofit groups like the Tenants Union to help enforce the ban.

“We've been researching the buildings we want to go after with complaints and lawsuits,” Gullicksen said. “It's a pretty widespread problem.”

He said the VRBO.com appears to be a bigger culprit in terms of being used by landlords to avoid tenant protections than Airbnb, whose hosts are evenly split between tenants and landlords. But as the biggest shared housing service in San Francisco, the tax issues are bigger for Airbnb and the city.

“We don't mind the limited use of someone's principal residence for short-term rental, where we're concerned is about the whole buildings,” Gullicksen said.

Whether the issue is avoiding taxes or circumventing tenant protections, the complicated issues surrounding shared housing are long overdue for some public discussions and scrutiny, and it sounds like that's what we're see later this spring or summer.

Comments

There is a world of difference between Ellis'ing a building and then using it do short-term rentals, versus someone occasionally doing short-term sublets of their own home.

The problem I had with Steven's original message on this was that he failed to make that crucial distinction.

That said, I seriously doubt that many Ellis'ed buildings are run this way. For a start it would require them to be in good condition, and fully furnished and equipped, which Ellis'ed buildings typically are not.

Second, having invested the money to Ellis a building, the ROI is far higher to just sell/TIC it than mess around with an endless array of short-term tenants - running a BandB is hard work and most owners just want to Ellis/TIC/sell - that's where the money is.

And of course, even is something comes of this, not a single extra unit of affordable housing will be created. It might create more affordable ownership opportunities, however.

Posted by Guest on Mar. 28, 2013 @ 4:40 pm

He's been clamoring for decades to overturn Ellis. What he's trying to do here is allow the SFTU a place to "monitor" those who Ellis-evict tenants, for who knows how long, and then sue them so the Tenant's Union can add to its revenue stream.

As always - it's about the dollars.

Posted by Lucretia Snapples on Mar. 28, 2013 @ 5:02 pm

It doesn't matter how strict rent control becomes. The stricter it becomes, the more owners simply Ellis, to which there is no defense.

The irony is that we only have Ellis because people like Gullicksen took rent control too far. If they'd been content with a more moderate and reasonable rent control, there would now be no Costa-Hawkins and no Ellis - the two weapons that kill rent-controlled tenants.

So yeah, he can nibble around the edges and be content with crumbs, but he knows he has lost the war. And he only has himself to blame.

Posted by Guest on Mar. 28, 2013 @ 5:28 pm

The strategy will backfire. Many small property owners will not subject their property to the current long term rental regulations. Most will just TIC/Condo or Ellis/TIC.

On the bright side, this could be the catalyst for raising the SF home ownership percentage. Most of the short term units will become owner - not tenant - occupied.

Posted by Guest on Mar. 28, 2013 @ 10:17 pm

Raising the homeownership rate is likely to increase the unemployment rate. Look at the latest research on this. Homeownership is not the civic virtue that realtors, like many of the commenters here, want everyone to believe. It's time for us all to let go of this mindless dogma.

Posted by Guest on May. 22, 2013 @ 9:49 am

Places with lots of homeowners tend to be more successful and prosperous.

Posted by Guest on May. 22, 2013 @ 10:04 am

My understanding is that an Ellis Act eviction is allowed only when an owner PERMANENTLY removes the building from the rental market. The re-rental prohibition also applies to subsequent owners and applies to both short-term and longer-term rentals.

What appears to be happening in some cases is that owners either lied about agreeing to prohibit future rentals, or subsequent owners are not following the permanent Ellis Act deed restrictions prohibiting future rentals. In either case, the short-term rentals violate the Ellis Act. We have to wonder where the local DA and state AG are in all this since it appears land owners (former landlords) are intentionally thumbing their noses at the state law, even though they used the state law to evict tenants in the first place.

The BOS hearings are a good start, but since it appears blatent violations of state law are occuring both Kamala Harris and the local DA should be pursuing these cases with their fullest efforts. Let's remember there were hundreds, if not thousands, of tenants evicted from San Francisco under the Ellis Act. If there was deception and fraud in some of these eviction cases, then there should be applicable fines and penalties, and tenants should be contacted to see if they want to re-rent the units at the former rent price.

Posted by Guest on Mar. 29, 2013 @ 10:11 am

First off, the restrictions are temporary, expiring partly after 5 years and entiurely after 10 years. So if the Ellis was more than 5 years old, re-rental at a market rent is possible.

So Ellis really just removes a unit off the market for 5 to 10 years. What an owner does after that is unrestricted, except for a bar on condo conversion.

Also, you should be aware that criminal counts are rarely pursued for landlord-tenant infractions. Rather, that is left to the civil courts, where an evicted tenant may have standing to sue his former LL is and only if the unit is re-rented before the 5/10 year sunset.

All that is moot if short-term lets are deemed to be in violation of Ellis. Rentals of under 30 days are not covered by rent control anyway, and are deemed instead to be transient stays. The city appears to be arguing both that that is both a hotel (we want our hotel tax) AND as a rental (violation of Ellis?)

I suspect they cannot have it both ways.

Finally, if an owner Ellis'es a unit and then takes it over as his eprsonal home, then he can rent out rooms in that unit without violating Ellis.

Posted by Guest on Mar. 29, 2013 @ 10:36 am

The headline of this piece is:

"Airbnb's tax and tenant law violations headed for hearings"

AirBNB's tenant law violation? Can anyone name ONE time that AirBNB violated a tenant law? That's a serious charge, can anyone name one instance?

My guess is that Steven is referring to landlords/hosts who may have used AirBNB to operate in a gray area, but that is a completely different situation. If I rob a jewelry store and drive away in a Toyota you can't talk about Toyota breaking the law.

So can anyone name ONE tenant law violation committed by AirBNB or is this headline just another example of Steven Jones nonsense?

Anybody? One? He does claim to be a journalist, you know.

Posted by Troll on Mar. 28, 2013 @ 5:24 pm

AirBnB sublets are not violating rent control.

Some are trying to argue that it is a "change of use" but that is a stretch. It's still residential.

Others claim that if you OMI or Ellis, then you should not re-rent but, again, does an out-of-town guest staying for a night constitute a rental?

I think Steven was on safer ground with his tax idea than seeking to stretch city laws to somehow suggest that I cannot have overnight guests in my own home.

Posted by Guest on Mar. 28, 2013 @ 5:39 pm

You need a conditional use authorization with a hearing before the Planning Commission to convert residential uses in residential neighborhoods to hotels with 5 or fewer rooms.

See Section 209 of the SF Planning Code.

Posted by marcos on Mar. 28, 2013 @ 9:10 pm

The fact that I sometimes have short-term paying guests in my home does not imply a long-term structural change of use from home to hotel.

You're making the same mistake as others here, i.e. failing to draw a distinction between a 1,000 room Hilton hotel and a private home that sometimes has overnight guests.

Posted by Guest on Mar. 29, 2013 @ 6:49 am

The planning code specifies that a hotel use differs from a residential use because the hotel use is a transient residence.

The planning code distinguishes between small and large hotels and allows small hotels in most residential districts, provided the owner seeks a conditional use authorization for a change of use.

Posted by marcos on Mar. 29, 2013 @ 8:03 am

Most AirBnB is occasional. So maybe sometimes I let out my spare bedroom. Or, twice a year when I go on vacation, I have a guest stay. Or when I go away for a week-end, I do a short let.

So there is no permanent, structural change of use, requiring any kind of permit. Rather, the place remains a home of mine, which is occasionally loaned out to someone else.

You might have a point if I wanted to create a full-time, permanent hotel operation, but that is far from the case here.

Posted by Guest on Mar. 29, 2013 @ 8:35 am

The planning code is clear on this.

Posted by marcos on Mar. 29, 2013 @ 9:21 am

between a hotel and someone sub-letting part of their home. That's a loophole I could drive a muni bus thru, and explains why it is not enforced.

Posted by Guest on Mar. 29, 2013 @ 10:37 am

So if you pay someone for house-sitting while you're in Hawaii for three weeks, you have to register your home as a hotel? I really don't think so.

Posted by Guest on Apr. 01, 2013 @ 11:59 pm

When I read the title I figured that Steven meant a)the AirBnB tax issue, and b) tenant law violations (generally speaking, not necessarily ABnB)

Posted by Guest on Mar. 29, 2013 @ 5:28 am

laws. We see this in many forms and it is the inevitable result of those restrictions being too burdensome and confiscatory.

At least with short-term rentals, the property is still being used to provide rental housing. Wheras with Ellis, TIC, condo conversions and change-of-use tactics, the homes cease to be rentals altogether.

What we really need hearings about is not to create even more rules and restrictions, but rather to determine how our existing rules drive out rental housing.

Posted by Guest on Mar. 29, 2013 @ 6:53 am

"In addition to the tax issue, there are concerns that Airbnb, VRBO.com, and other Internet-based sites that facilitate short-term rentals of San Francisco apartments are increasingly being used to circumvent local tenant protections, often after evicting tenants from the apartments using the Ellis Act."

Is there any evidence of this? Or is it just Gullicksen's concerns?

Posted by The Commish on Mar. 29, 2013 @ 7:51 am

have to be a plaintiff with standing to file a lawsuit and then engage in discovery. That takes money, given that a lawyer would only take a case on contingency if it is open and shut, which this clearly is not, since people are still arguing over what law applies here i.e. is it a hotel or a rental?

In any event, I suspect that very few Ellis'ed buildings are used exclusively for AirBnB type sublets, since that requires the units to be fully fitted out, furnished, equipped etc just like you were running a real B and B. It makes far more sense just to TIC/sell rather than all that hassle.

The vast majority of AirBnB hosting is small owners and renters making a little money on the side, like Steven.

Posted by Guest on Mar. 29, 2013 @ 10:40 am

If there is no evidence, then the statement in the article is misstating the state of events.

Posted by The Commish on Mar. 29, 2013 @ 11:57 am
Posted by Guest on Mar. 29, 2013 @ 12:02 pm

The same article talks about the 'complicity' of the Mayor in nefarious events, which sounds quite damaging. And for proof...they link to the last time they made the same claim. Evidence? We're Progressives....we don't need no...'evidence'.

Posted by Troll on Mar. 29, 2013 @ 12:32 pm

It seems that Steven cannot decide whether he is attacking the Mayor, AirBnB or the people acting as hosts and not paying the taxes, which of course many people who do that outside of AirBnB.

Focus here might help.

Posted by Guest on Mar. 30, 2013 @ 7:52 am

By comparing the address of units rented through Airbnb, VRBO.com, and other Internet-based sites that facilitate short-term rentals to the list of addresses where Ellis Act evictions occurred will turn up situations where Ellis Act has been used to fraudulently evict tenants.

I suspect the hearings may include making sure that any units being rented through Airbnb, VRBO.com, and other Internet-based sites are inspected first for health and safety considerations. I hope the hearings also address the need for citywide registration of all rental units so that the city has better information about how its valuable rental stock - especially its priceless rent-controlled housing stock - is being used, and that any transient occupancy tax is being collected and remitted to the city.

Posted by Guest on Mar. 29, 2013 @ 12:07 pm

records of a private corporation, that presupposes that there is already a plaintiff with a cause of action. That would, in most cases, be a tenant who somehow discovers that a unit that he was Ellis'ed from is now being used as a vacation home. Hard to discover in the normal course of events.

The SFTU publishes lists of addresses that have been Ellis'ed or OMI'ed and tenants evicted from those places are encouraged to keep tabs on them. But the vast majority of such evictions are genuine, and tenants who discover otherwise already have a remedy - they can sue for wrongful eviction.

Your other ideas are so seriously whacked out and improbably that they look like nothing more than a fishing expedition. Such an approach to hearings would take away any cfedibility they might otherwise have.

The vast majority of Ellis evictions lead to the creation of a TIC, and there is nothing the city can do to prevent that. So no wonder you are grasping ats traws.

Posted by Guest on Mar. 29, 2013 @ 12:18 pm

Since the SF Tax Collector is charged with collecting tax it must have a list of every unit that has been rented through a short-term rental service like Airbnb. It would be impossible for the Tax Collector to audit any tax due the city without looking at such a comprehensive rental list. It's easy enough to compare this list to the separate list of Eliis Act and OMI evictions. If there appear to be any matches, those cases can be forwarded to the DA's office for possible fraud prosecution. Prettty simple, really.

Posted by Guest on Mar. 29, 2013 @ 12:35 pm

If I advertize my flat for $100 a night on CraigsList, and you accept that deal, how does the City know anything about that?

The IRS might, assuming of course that I declare that income. Maybe the CA FTB. But there is no way the city will know unless I volunteer that information.

And again, I am not aware of any legal obligation AirBnB would have to hand over their records, absent a court-approved subpoena, and for that there would need to be a filing and/or probably cause.

Posted by Guest on Mar. 29, 2013 @ 12:50 pm

Lose/Lose. David Chiu will anger both tenants and property owners - both benefit from short term rentals.

Posted by Guest on Mar. 29, 2013 @ 10:53 am

Because somewhere in SF there MAY be the odd Ellis'ed building operating as a de facto B&B, many tenants and lower-income homeowners who rely on a little extra occasional cash from this to help keep SF affordable, will be punished.

No good deed ever goes unpunished and, once again, the zeal of a few rent control bigots and land use ideologs ends up hurting ordinary San Francisans.

Posted by Guest on Mar. 29, 2013 @ 10:56 am

Housing economics is a "zero-sum" game. When a landlord gets higher rent from a tenant, the tenant family will have less to spend on other goods and services, which means less ,income to local shop owners. When a developer makes a few extra millions from their development project, this means families will be paying a higher purchase price, leaving less money in their pockets too. These same principles apply to Ellis units that are being re-rented: families lost their housing that are being used for lucrative income from short-term rentals.

The issue being discussed here concern housing units where familes were evicted based on the (apparent) lie that the building would no longer be used for rental housing. But now we're finding out the land owner is getting income from the unit, and yes a short-term tourist is getting a rental unit during their stay in SF, BUT tenant famlies were evicted (perhaps illegally) so that the landlord and the short-term visitor could benefit.

I'm glad Supervisor Chiu is standing up to the building owners who evicted families from San Francisco and then turned around and rented the same units as short-term visitor housing. And apparently many of these same bad actors aren't even paying the transient occupancy tax on the short-term rentals.

The Chronicle wrote a story about these tax evaders last April. Almost one year later we're finally getting some hearings to understand the extent of the issue and what the various city agencies are doing to counteract the Ellis Act fraud and transient occupancy tax evasion. The hearings may be about 12 months late, but at least it looks like they are finally taking place.

Posted by Guest on Mar. 29, 2013 @ 11:43 am

Your idea appears to be that the pizza is always a fixed size, so that if I have a bigger splice, you must have a smaller slice.

That ignores the fact that a bigger pizza can be baked. And that is exactly what happens when the SF economy grows.

And a growth in the SF economy occurs when a low-wage worker leaves (perhaps because he was evicted; perhaps for another reason) and a higher-wage worker takes his place. That leads to more productivity, more tax revenues, more growth and more prosperity.

Since your entire comment is built on the premise that pizza pies only come in one size, and that premise is false, the conclusions can be dismissed.

The vast majority of vacant units in SF happen not because of evictions (only about 1,000 per annum, and mostly for cause) but by natural turnover. If a property owner then decides to not seek a replacement long-term teants, but rather extract value from the property in some other way, you should not blame that property owner, but rather the punitive rules that make such behavior inevitable.

Posted by Guest on Mar. 29, 2013 @ 11:55 am

The economics related to the production of goods and services is very different from land economics. To see this most simply, consider a 20% tax on the receipts from pizza sales (or any good or service) and a 20% tax on rent income. In the first case, assuming perfect competition where the price of goods and services are fairly priced, the 20% tax will be added to the selling price. But in the case of rents, the rent price is already as high as someone is willing to pay, so the tax doesn't affect the rental price whatsoever. In the first case the consumer is burdened with the new tax; in the land rent case the landlord is burdened with the new tax.

The distinction between land economics and the more general economic issues involving the production of goods and services is not always well understood. Both sides of the aisle often confuse the two. The landlords like to confuse the issue since it's in their self interest to be looked at as "capitalists," when if fact they are not not "capitalists" at all since they don't produce any goods and services but merely collect rent income from the ownership of property. The "progressives" confuse the issues because most of them have an economic IQ of about 17 and an arrogance IQ of about 180.

Posted by Guest on Mar. 29, 2013 @ 12:26 pm

less people will buy pizza. If rentals cost 20% more, then less people will rent. They will either buy a home or move somewhere else. you imply costs make no difference - not true.

There's another problem too. If pizza suddenly costs 20% more, whether for a tax or anything else, then less people buy pizza, and then pizza bakeries close.

If taxes on rent make renting uneconomical for a landlord, he will simply close down, just like the pizza bakery. This raises the cost of rent (pizza) for everyone else.

Capitalism is the employment of risk capital for profit. The same definition applies whether a material product is produced or not. Financial invesment is simply another form of service. Since tenants canot afford to buy a home, they have to rely on someone else who can, and pay a rent for that privilege. Nothing immoral about that, unless of course you think you should free accomodation.

Posted by Guest on Mar. 29, 2013 @ 12:47 pm

You mention "supply" without considering what's happening on the demand side. With an increased pizza price, I may buy the same amount of pizza, but buy less of something else, or spend the same amount on pizza but get less of it. In both cases the pizza owner continues to supply pizza and may even sell more pizza if higher prices elsewhere make consumers buy lower quality food such as pizza.

If a landlord "shuts down" the building and land still reamin for someone to use, unlike when the pizza maker shuts down and the supply of pizza is reduced altogether. Again, there's a world of diference between land compared to the production fo goods and services.

If all of the pizza makers closed up shop and left town, the production of pizza in the city would collapse. But if all of the landlords left town, the land and buildings would still remain for city residents to use. Big difference.

And "investment" is not a "service" - it's ownership. Services involve labor, whereas a land owner collects rents regardless of any labor services provided. Almost every commercial lease is "triple-net," meaning the landlord only supplies the air and walls, with the tenant responsible for the insurance, taxes and whatever is put within the walls.

Posted by Guest on Mar. 29, 2013 @ 1:43 pm

(except for the continual erosion into the sea, and the odd earthquake) what matters much more is the utilization of that land.

So, in your ridiculous example, if a new 20% tax was levied on rents, then there are only two realistic outcomes:

1) The extra cost is passed on, in which case it is the tenant's problem.

2) The extra cost cannot be passed on, in which case the LL's ROI becomes sub-optimal, and he quits the business. In practice, in SF, this means Ellis/TIC or TIC/Condo.

Result? Less rentals and more owner-occupied units. Great for tenants who want to buy their first home and seek an affordable option. Bad for lifer tenants who see supply gradually dry up and rents increase ever upwards.

It's insanity to think that taxing rentals will somehow create more affordable housing. It's the exact opposite. You are motivated by nothing more than envy for and hatred towards those who make more than you.

Provide housing is a service. Even the Rent Board descibe landlording as the provision of "housing services".

Posted by Guest on Mar. 29, 2013 @ 2:00 pm

There shouldn't be any reason why a new tax on rental income couldn't be appplied only after a vacancy occurs. That way, whatever tax applied would be included in the total rent price offered by the landlord. A 5 year phase-in works too, using the current Rent Board process available to landlords for claiming increased costs.

ROI never becomes "sub-optimal," even when an investor can make a higher return elsewhere. Every asset is worth something based on its cash flow. A 10% or 20% tax on rent income will not sway an owner to Ellis a building or not. A speculator can make millions Ellising a building, which is far greater than the effect a rents tax would have on landlord net income. Besdies, all local taxes are deductible by landlords and businesses at the state and federal level, so the net cost of any tax is only about 50 cents on the dollar.

Taxing rents instead of labor is far better for the economy and for working families since there is more money circulating for productive, job-producing goods and services. For-profit landlords serve little purpose to society other than make housing costs increase, suck more of the GNP into their bulging pockets, and evict tenants when the building is more valuable as a different use. Fortunately for landlords, federal and state politicians are on their side, and "progressives" are so busy focused on corporations that they're mostly oblivious to the vast amount of wealth extracted from society by landlords and property speculators.

Posted by Guest on Mar. 29, 2013 @ 4:21 pm

have no interest in pursuing, perhaps understanding better than you that anything that increases the costs of providing rental housing harms tenants. Tenants have to rent but nobody is forced to be in the landlord business.

And that is where "optimal ROI" comes in, a concept that you clearly do not understand. Let me explain.

If I have, say, a million to invest, then I clearly can elect to invest that in various ways. For instance, in the long-term equities return about 10% per annum, require no effort, and are taxed at only 15%. Given that, why would I invest in SF RE unless the return was more than that? Why would I retain SF RE unless it continues to return more than 10%?

Now, as it happens, that has been the case. The rental building I bought for 500k in 1998 is now worth 1.5 million 15 years later. That's about 7.5% pa compounded. Throw in a rental yield of, say, 5% pa, and we have 12.5% pa.

That's 20% above the return I could have gotten on equities, but of course I took more risk and expended more effort, so that "bonus" is necessary.

Take away that 20% and there is zero reason to choose SF RE. Which means Ellis. Which means less rental housing.

This stuff really isn't that complicated.

Posted by Guest on Mar. 29, 2013 @ 4:53 pm

If you're going to use numbers, at least make sure you don't look like a fool since numbers don't lie except when being used by liars.

Guest (anon) wrote:
"Now, as it happens, that has been the case. The rental building I bought for 500k in 1998 is now worth 1.5 million 15 years later. That's about 7.5% pa compounded."

I seriously doubt the investor paid cash. Everyone knows that ROI is based on "cash invested compared to cash harvested." 3rd party loans are not part of the ROI equation.

I'll be generous and say that 40% of the $500,000 purchase price was a downpayment, so $200,000 cash down and a $300K loan. If 15 years later the building is sold for $1.5 million, that's a $1 million profit (ignoring any loan principal paid over the period - it doesn't change the ROI calculation very much anyway.) That's a gross ROI of 500% ($200K becomes $1M), divided by 15 years is roughly > 33% ROI, not the 7.5% Guest (anon) stated (ignoring annual compounding which doesn't change the calculation much.) Assuming a more typical 20% downpayment, the ROI is based on $1M profit on a $100K downpayment, or a 66% ROI ($1M / 15 yrs), again ignoring compounding.

Anon is always posting here using math incorrectly to prove a point. It looks like the SFBG now has another math liar on the board now too.

Now as to the point about a $10K or $20,000 annual tax on rents somehow making landlording unprofitable or forcing TIC sales. Even over the 15 year period, if Guest (anon) paid $20K of a annual rents tax, that's $300,000 total over the 15 year period. But Guest (anon) would have given up $1M of capital gain appreciation if they sold rather than pay the rent tax. Landlords and developers aren't stupid. If there is a potential $1 million capital gain over 15 years available, even if they have to pay a $300,000 rent tax (fully deductible at the state and federal level so the net tax is only 50% of the total paid), there will be hundreds of other land speculators who would buy the building, being very happy with a $700,000 gain.

Very few families see their net worth increase by $700,000 over a 15 year period. Even with a 10-20% rent tax, the landlord/speculator makes a huge profit, but the city would have a much fairer tax system that used the community land value (rent) to pay part of the city's pressing budget needs. Since it's the overall community that creates the land value in the first place, it's an equitable tax since it recyclyes some of the land wealth back to the community.

All of this ignores the point of the SFBG article. Does the Mayor Lee administration support tax cheats like Airbnb, and is this how he plans to govern over the next 6 years by coddling the very wealthy and tax cheats?

Posted by Guest on Mar. 30, 2013 @ 10:15 am

The ROI of a business doesn't change much whether you use cash, debt or equity - that is more a funding question. Cash has an opportunity cost and debt interest has an interest cost. I tend to use the same numbers for both, so ROI isn't affected.

You changed your argument half way thru there, from quibbling about what my ROI is to discussing whether my ROI is fair. Well, "fair" is a subjective notion and so has no place here. I think my return is "fair" given the risk, hassle and effort involved. Someone else might think I could have gotten the same ROI elsewhere, and with less risk or effort, and they may be correct.

And that is the real point. It doesn't matter whether my profits are "fair" or "unfair", but it is does matter whether I choose to buy a SF property and use it as a rental or not. And anything that impacts my ROI makes it less likely I will run a rental. You may think a 300K tax on that will make no difference but that is naive.

I have a required after-tax ROI and I will find it, either in SF or elsewhere. Your mythical tax on rents is not on the table and is a joke, but if it were to ever happen, you'd need to repeal Ellis first, otherwise a significant percentage of SF's rentals would vanish in about 120 days - the notice period for an Ellis eviction.

If you tax applied, either it would be passed onto tenants or it would lead to less rentals, meaning higher rents. So, either way, a tax on rents will drive up rents, as everyone understands except for you.

To the last, AirBnB isn't cheating on tax as they are not required to pay a hotel tax, because they are not a hotel. Assuming the city thinks that occasional sublets are a hotel, and I do not, they should chase after the people who do it, most of whom I suspect are tenants.

Posted by Guest on Mar. 30, 2013 @ 10:48 am

Look at your property tax statement and you will see two figures - one for the assessed value of the building and one for the assessed value of the land.

Do you really think the city could ever resist taxing anything? Especially something like land that cannot be easily moved to a lower tax jurisdiction?

Even if I demolish my building, I still pay tax on the value of the land. Maybe a landslide is the only way to avoid that.

Posted by anon on Mar. 30, 2013 @ 10:51 am

Follow the money, ladies and gentlemen. Airbnb is the plaything of Ron Conway--huge contributor to Run Ed Run, huge contributor to anti-Olague campaign, and personally slightly to the right of Genghis Khan politically. He's buying the city's politics and masquerading as The Holy Tech Guru for Lee's fantasy city of never-ending tech enlightenment and unlimited tech goodness. When you want to secretly exercise political power (outside the view of the electorate) you set up nonprofit corps-in Conway's case corps that issue study after study "showing" the supreme advantages of tech investment and how one job in the tech sector creates 4.6 jobs elsewhere-Look to Steve Cohen in New York and what his hedge fund managers concocted. Conway's on that same path-why else is he allied with Thomas Coates, a real estate mogul so stupidly vicious that even a pragmaitist like Gavin Newsom had to disavow him.

Posted by Apthorp on Mar. 29, 2013 @ 2:03 pm

but tragically lacking in substance or relevance.

What you think of Lee's pro-jobs policies is irrelevant, for one very good and clear reason. Lee stood for mayor on exactly that platform and won handsomely. He therefore has a clear mandate to pursue policies that generate prosperity and no reasonable person can argue against that.

As for AirBnB, it's physical presence in SF is irrelevant since, as an internet business, it really doesn't need to be anywhere. If SF punishes it, then it will simply rematerialize elsewhere. Or lose business to it;s rivals domiciled in other locations.

The massively profitable online gambling business is located 100% outside the US, because the US imposes punitive laws, restrictions and taxes on it. Result? We lose all that business to offshore.

You guys are lost back in time somewhere, and just do not get it.

Posted by Guest on Mar. 29, 2013 @ 2:11 pm

Very few federal laws protect a company from escaping applicable local taxes wherever they might do business. If a company is profiting from renting out SF real estate, whatever they call themselves ("agent," "service provider," "facilitator", etc.), the company is going to be liable for any tax that applies. Collecting tax can be a problem sometimes, but I trust the City Attorney and DA will be able to haul the executives into a CA court and make them face justice, or the courts will close down their business activity in CA. Tax evasion is not looked at too kindly by the courts, even those populated with conservative jurists.

Posted by Guest on Mar. 29, 2013 @ 4:33 pm

profits on internet gambling, which are all based offshore?

Answer, not at all.

And if the IRS cannot do that, why would some shmuck in the SF tax office be able to, with a fraction of their powers and resources?

That's the problem, you see. AirBnB does not need to have a physical presence anywhere, not in SF, not in CA, and not even in the US.

Punish AirBnB for committing to SF and you send the world the message that businesses should go elsewhere. And they will.

You're applying 19th century theories to a 21st century economy. Won't work.

Posted by Guest on Mar. 29, 2013 @ 5:04 pm

>"If a company is profiting from renting out SF real estate, whatever they call themselves ("agent," "service provider," "facilitator", etc.), the company is going to be liable for any tax that applies."

Really? So I pay you a $100 fee to set up a meeting between me and Warren Buffet, and at that meeting he agrees to buy my business for a billion dollars. He even sends you the billion dollars first so that you can deduct your $100 and send me the rest.

So you are the "agent," "service provider," "facilitator", etc.

And you are now responsible for paying all the taxes on a billion dollars.

Really?

Posted by Troll on Mar. 29, 2013 @ 5:20 pm

If this tax nonsense proceeds, then the booking should be outsourced to a call center some place far away, and the high value part - hooking up the host and the guest, would be discretionary only.

It's easy to figure a business mdoel thatc an circumvent a hotel tax because, in essence, the idea is flawed and inappropriate.

Posted by Guest on Mar. 29, 2013 @ 5:39 pm

Are you really arguing that Airbnb should simply become a criminal enterprise, hiding from regulation and tax debts like an online gambling company? Is this where the high tech economy is headed? Where's your sense of civic responsibility?

Posted by steven on Apr. 01, 2013 @ 9:33 am

rather you think they should collect the taxes on behalf of those who (allegedly) do owe them.

I can see why that would be an administrative convenience for the city. But I do not see why AirBnB should be put at a comparitive disadvantage relative to other intermediaries who are not located in the city and therefore could not be compelled to make such collections.

I'd also like to see a court case tod etermine whether casual use of one's home in this way constitutes a hotel in any normal, reasonable sense of the word.

Posted by Guest on Apr. 01, 2013 @ 10:51 am

Also from this author