San Francisco Law: Airbnb Wins, Vacation Rentals Lose

Airbnb has finally gotten a break. After years of increasing scrutiny by cities like New York -- which has contended that the sharing economy business has, in some cases, been operating illegally within the metropolitan area -- Airbnb can finally chalk one up on its side.

The coup may not help its legal woes in New York, but it’s bound to make San Francisco home-sharing advocates a bit happier. On Oct. 7, the San Francisco Board of Supervisors voted to legalize home rentals of 30 days or less for the city’s permanent residents.

Residents were previously restricted from renting out their homes for periods of less than 30 days, according to a law that the city said protected housing rates and helped to regulate property rentals. The new law allows residents who live in the city for a minimum of nine months of the year to rent out rooms or residences for short stays for up to 90 days of business per year.

Sharing economy advocates fought hard for the change, arguing that the rentals helped cash-strapped homeowners make their mortgages. As of next February, residents who register with the city, agree to pay hotel tax on their rentals and carry a minimum of $500,000 liability insurance can now legally rent out their digs.

It’s yet to be seen how much profit the landlords will have left over to apply to their costs once they're done paying the extra taxes and insurance. Or what those codicils will do to the rental rates that everyone has been eager not to upset in the country’s most expensive city. Will increased short-term rentals, with new earnings for the city as well as insurance companies, raise or lower the rates? And by the same token, what will they do to hotel rates? Can business travelers and short-stay vacationers expect a better option on Expedia or Hotels.com?

One sector of the tourism industry that is liable to lose out on this new vote is the vacation home business, which has a modest footing in the San Francisco area. The online service Home Away, owned by VRBO, isn’t happy with the new ruling because it does not take into account homeowners who don’t live in the city.

On Friday, Home Away’s co-founder Carl Shepherd deflected the impact of the law, which forces non-residents to adhere to the older mandate of renting out residences for 30 days or more.

“Home Away will weather the challenge of the new law,” said Shepherd, who also serves as the development officer for the Austin, Texas-based company.  But he acknowledged in an interview with SFGate that the law didn't exactly reinforce the rights of the vacation home sector.

"This is very much a law written for Airbnb," Shepherd said, acknowledging that the two tourism services are completely different in their advantages and needs. Airbnb serves as an intermediary service, promoting the listings of small, short-term rental options. The vacation rental company charges flat fees for well-appointed, complete residences and often cater to the needs of transitioning business travelers.

The new regulations give more breathing space for resident homeowners to make just a bit more money from rentals, but it means more restrictive rental options for those who aren't full-time residents and have for years rented out their homes during peak summer months. That may mean more hassle, not less, for renters who already find it hard to obtain temporary housing for relocations, conferences, medical trips and such.

Shepherd also questioned whether the new law will actually do what city supes are hoping to accomplish.

The legislation, he said, was “easily subvertible” and encourages homeowners to try to find a way around the restrictions. “A person has to declare that it’s their permanent residence, and anyone can say that about any place [and] this invites people to do all sort of things and then say 'come catch me,’” he told SFGate.

The Board of Supervisors maintains it will enforce the ruling and fine those who violate the restrictions. Penalties can start at $1,000 a day, and don't include court costs if they are sued by the city. And the city has apparently gone after vacation rental businesses in the past, demonstrating that it does follow through with enforcement.

Still, Shepherd’s point does have some historical ring to it. In New York, where apartment rentals are strictly regulated, thousands of residents signed up for Airbnb services -- defying the city’s rental laws and causing legal headaches for the city, the state attorney office and, of course, Airbnb. While the city went after Airbnb, the message that seems to have been overlooked is that people will look for ways around regulations when they feel laws are either exclusionary or don’t make sense to their current economic situation.

And while Home Away/VRBO vows that it will work with the current restrictions, the law leaves plenty to ponder when it comes to its impact on San Francisco’s tourism sector where a business’ bottom line often depends on its ability to be sensitive to the needs, whims and time constraints of the seasonal travel industry.

Image credit: David Ohmer