Airbnb's tax and tenant law violations headed for hearings

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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

Isn't SF supervisor David Chiu financially vested in Airbnb? And if so, could this be a reason SFBOS—he's the Board President—has been so dilatory placing this on its agenda.

Posted by Awayneramsey on Apr. 03, 2013 @ 12:07 pm

Isn't SF supervisor David Chiu financially vested in Airbnb? And if so, could this be a reason SFBOS—he's the Board President—has been so dilatory placing this on its agenda.

Posted by Awayneramsey on Apr. 03, 2013 @ 12:16 pm

it's not clear to me that airBnB is operating a hotel business.

And their rpesence in SF is surely coincidental. What would they do if they were located elsewhere? Care about SF's weird tax and rental rules?

Steven loves to recommend civil disobedience and breaking the law when it comes to tree-hugging or Occupy. But as soon as it is a corporate interest that is threatened, he insists that the law is fully complied with.

Posted by Guest on Apr. 03, 2013 @ 12:19 pm

And should we assume a list of tenants subletting their apartments, and breaking their leases doing so, is also be investigated and tracked and measures against them are being planned?

Posted by Guest on Apr. 08, 2013 @ 2:39 pm

corporation and it's supporters, and not tenants like stevn who break the law and their lease by subletting their rental unit.

Ironic that a shot at corporate America might end up hurting tenants more than anyone else.

Posted by Guest on Apr. 08, 2013 @ 2:59 pm

The renter getting a few extra bucks for renting a bedroom is just collateral damage. Wrong time, wrong place for them, sorry.

Rest assured that Steven will try to minimize civilian casualties, but he needs to nuke AirBNB because he thinks that it is Ron Conway's company.

It isn't, of course, Conway is just one of many investors. Including Jeff Bezos who knows a thing or two about taxing internet transactions.

Posted by Troll on Apr. 08, 2013 @ 3:20 pm

The sales tax laws have a long and firmly established history, including many decisions by the US Supreme Court. Anyone selling tangible personal property (eg, books, clothes, equipment, etc) into a state DOES NOT have to collect sales tax from the resident IF the company does not have a "presence" in the state. Mail order houses and internet sales are typical transactions where sales taxes are not required to be collected, assuming the seller is not located in the state (eg, warehouse, internet servers, sales office, etc.).

Collecting fees from renting or using property in a state (or city) is a very different business activity than collecting fees from the sale of tangible personal property , as I'm sure Jeff Bezos and the executives of AirBnB know very well. The generous sales tax rules will not protect anyone from the requirement to pay taxes due on using property in a state. Many real estate investors may not live in a particular state, but you can be sure they are liable for any taxes for rents or fees collected related to their ownership of property within a state.

One can assume AirBnB is getting much better advice from its advisors that the nonsense being spouted here by Troll, anon, Guest and others.

Posted by guest on Apr. 08, 2013 @ 4:35 pm

room stays. It was designed for hotel rooms but has been stretched to cover the private renting of rooms on a night-by-night basis. It is debateable whether such a tax would be upheld by the courts but, so far, it has not been tested.

The real problem here, of course, is that it is evry difficult for SF to know about these stays, and they want AirBnB to do their tax collection for them. But I see little reason why they should, and AirBnB should relocate if they are unduly pressured to do so - we have seen how the city caves to that threat with the Twitter concessions.

Individuals who hosts places thru AirBnB should be including an extra 14% in their fee, and then declaring that to the city. Whether they do or not is another matter, of course, and I cannot say I really care either way, given that I think this is a bad tax and a bad policy.

But let's not forget the real purpose of Steven's "War on AirBnB" is simply the Lee connection. The fact that some tenants may lose their homes as a result is just collateral damage to an ideolog like Steven.

Posted by Guest on Apr. 08, 2013 @ 4:52 pm

I applaud the SFBG for asking the pertinent question: Do Mayor Lee and Treasurer Cisneros agree that Airbnb is above the local laws requiring the collection of a transient occupancy tax? Believe me, the voters want to know the answer to this question. The follow up question is, what other city tax and licensing laws do the Mayor and Treasurer think are okay for local businesses to violate?

And Guest (anon), you keep calling it a sales tax. Are you always so dense? It's a transient occupancy tax on REAL property, which is very different from a sales tax on tangible PERSONAL property. Do your heroes Mayor Lee and Treasurer Cisnerso also think it's a "sales tax? If so, the voters would like to know that too since it would be obvious the elected political leaders are getting very bad advice from the City Attorney's office.

Posted by guest on Apr. 08, 2013 @ 6:23 pm

Hi, thanks for sharing.

Posted by dog trainer on Apr. 10, 2013 @ 2:55 pm

I moved in to a 2 bedroom place in the city with an ex gf. We broke up, she moved out, but I can't get a roommate. The room is too small to rent out. Because of other laws, a 6x6 room with a closet is techically 'an extra bedroom', but it's not livable by anyone and is only useful as an office. I can rent out my laptop for $10 / day if I wanted to. I can rent my lawnmower out too. I am paying for 2 bedrooms, I should be able to rent one out if I wish.

Offering an affordable place will attract more people to the city -- instead of $1400 for a week of hotels, they need only put up $400 - $700. The city will get the tax dollars it otherwise would not if those people didn't come here because board was cost prohibitive.

Posted by Guest on May. 02, 2013 @ 10:48 pm

Since Gullickson is so concerned with what's fair, why does he fight even mentioning "means testing"? This is where tenants would be simply asked annually to provide documentation that they meet the guidelines for having a rent controlled apt, that rent control was set up for: low to mod-low income salaries, and being employed in SF (since it was to help locals, not commuters).
Exactly why should some landlords have to subsidize tenants working at Google, or otherwise making in the six figures? ... or tenants who once were low income and now are upper level managers?
As long as the tenants unions, and looking out for their own protections - over new tenants who would meet set guidelines for rent controlled apts, and landlords. Landlords will sell, and there will be fewer and fewer rent controlled apts. But then, as long as those who have rent controlled apts, get to keep them, Gullickson is fine, short of other lip-service.

Posted by Guest on May. 11, 2013 @ 3:30 pm

Obviously wealthy tenants should not benefit from rent control. But it's just a numbers game - if less than 50% of SF'ers benefit from rent control, then it will probably be repealed, and then where will Ted go then? He moved here from boston when they rejected rent control. Where will he go when SF abandons it? Cuba? North Korea?

Posted by Guest on May. 11, 2013 @ 3:43 pm

decades before Massachusetts forced Boston to end rent control. You know that from other threads, but choose to lie.

Posted by Guest on May. 11, 2013 @ 3:57 pm

And he probably sees it now. But then what else could he possibly do?

Posted by Guest on May. 11, 2013 @ 6:29 pm

regardless of when he moved here, the laws he has pushed through helps the minority of current tenants. they greatly hurt new tenants looking, especially the most needy - protected. law or not, what landlord is not going to discriminate a tenant who not only has the existing tenant protections, but even a much higher threshold - possible "protected" status? of course, it protects better him and his friends who already have apts, but for any families, sick people etc, expect getting an apt in SF 1000 times harder in SF. And thanks Ted for that!

Posted by Ray on May. 17, 2013 @ 11:38 am

smart, middle-class, educated whites, who know the system and the rules, and play them to their advantage.

Despite the fact that tenant activists always play the race card and say how RC helps non-whites, families, the poor etc., that is usually not the case. They often don't know about rent control at all, and pay all increases of rent regardless of whether they are legal or not. Quite a few will simply leave if you ask them.

No, it's the annoying SFBG-type white guy (Lilli, Greg, Marcos etc.) who always trumpet their "rights" who game the system. And not surprisingly, they're usually the ones who get Ellis'ed - no landlord wants a smartass for a tenant.

Posted by Guest on May. 17, 2013 @ 11:55 am

who rents a pre-1979 apartment and knows that their rent won't be capriciously boosted after they move in for whatever reason; it has nothing to do with race, class, education or family status.

Posted by lillipublicans on May. 17, 2013 @ 12:05 pm

rent control:

1) Anyone in a post-79 building
2) Anyone in a condo or SFH
3) Anyone who is Ellis'ed or evicted for some other non-fault reason
4) Anyone who owns a home and might one day want to rent it out
5) Landlords, obviously
6) Anyone newly arriving in Sf, hoping to rent, and finding a near-zero vacancy rate, and so sky-high rents
7) Anyone who wants to move

That's the vast majority of the population.

Posted by Guest on May. 17, 2013 @ 12:31 pm

of the predatory nature of even the small time landlord:

"Despite the fact that tenant activists always play the race card and say how RC helps non-whites, families, the poor etc., that is usually not the case. They often don't know about rent control at all, and pay all increases of rent regardless of whether they are legal or not. Quite a few will simply leave if you ask them."

Thank you for your candor in admitting your blatant disregard of landlord responsibilities in following the law, your racism and classism, and your greed.

Posted by Guest on May. 17, 2013 @ 12:06 pm

amount. It's simply that if the tenant doesn't pay the increase, you cannot evict him for non-payment of rent. So giving the increase is actually fine.

Some people pay it and if they are happy to, no harm is done. They also insure they will never be Ellis'ed.

Some people point out the increase is illegal. Then you just issue a new notice for the "correct" amount.

It may shock you, but not all tenants see their LL as evil, but rather want to pay a fair rent. and that has the effect of them getting a much better level of service, as with any business, you look after your best customers and try and get rid of the bad ones.

I never had a problem with a non-white tenant.

Posted by Guest on May. 17, 2013 @ 12:34 pm

"It's not a crime to give a rent increase above the allowable amount." and
"Some people point out the increase is illegal."

You are an unethical and odious human being, or at least play one on the internet.

Posted by Guest on May. 17, 2013 @ 12:45 pm

Not everything that is "illegal" is a crime. It may merely be ineffective if challenged.

The law ultimately cannot interfere with two consenting adults who want to make their own personal arrangement.

Posted by Guest on May. 17, 2013 @ 1:04 pm

regardless of your perverted interpretation of San Francisco landlord-tenant law, you are a detestable person.

The fact that you like to boast about it on this website reflects badly on you and contributes greatly to the (to use someone else's term) cesspool quality of these comment pages.

Posted by Guest on May. 17, 2013 @ 3:53 pm

No reason for you to respond if you cannot find fault with my logic.

Posted by Guest on May. 17, 2013 @ 4:29 pm

Yes, and landlords are in turn taking Ted's advice and compiling a list of all the tenants illegally subletting on Airbnb. I realize he cares about one thing: making sure everyone who feels entitled, keeps what they have, regardless of if their income is in the six figures, or they commute to work outside the city (not who rent control was designed for). And, he wants to make decent landlords adversaries, who can't be reasonable and make concessions for temporary situations for tenants -- since with his encouragement the landlords risk the tenant using the landlord's concessions to grandfather the temp concession, for life, for the tenant. Then, the tenants union can further use this against landlords to make their distorted case that all landlords are unreasonable. News flash: landlords are selling, not renting and generally, long term, these ridiculous policies are working against protecting existing tenants.

Posted by Ray on May. 17, 2013 @ 11:35 am

Is "evicted" being used here for dramatic effect or does the Ellis Act really allow landlords to break leases with tenants and kick them out? If that's true how has this not made it's way to higher courts yet?

In the rest of the world "eviction" means a court order to quit the premises because you're on the wrong side of the law.

Or are we just talking about people who had a one year lease at some point but they've stayed on month-to-month, the landlord asked them to leave and they cry "i'm being evicted!"

Posted by ETI on May. 31, 2013 @ 7:44 pm

Since the tenants union is secretly tracking landlords doing vacation rentals, property owners need to ban together to secretly the man tenants with no subletting in their leases, from doing vacation lease. The city appears to support gestapo tactics, as long as the gestapo are tenants rights advocates.
that recent law of allowing non profit organizations to police corporate owners of apt bldgs. or such, to find and bust them is unprecedented.

Since when does a municipality privatize policing of local laws. Were it any other law being broken and the city let citizens ban together to spy and investigate and press charges, the public would be outraged. not with rent control issues though.

Posted by Ray on Jul. 25, 2013 @ 9:15 pm

I like your article. It is great.

Posted by How to Evict on Sep. 06, 2013 @ 2:47 am

Very nice and useful article. Thanks for sharing it.

Posted by How to Evict on Sep. 06, 2013 @ 2:49 am