San Francisco is the nation’s top destination for travelers of all ages. Our city’s attributes, within tight geographical boundaries, make for hotel rates that exceed those of many other cities, thereby creating an incentive for visitors to seek alternatives to pricey hotels.

The short-term rental is a form of lodging that is very attractive to visitors, permanent renters (our tenants), and owners (us). Craigslist’s section on short term rentals includes listings for a variety of lodgings, many of which blatantly state that they are sublets.

Owners and renters alike list their short-term rentals with services such as airbnb and VRBO. A representative from one of these services recently opined that roughly 30% of their hosts are tenants.

Rentals of most dwellings for periods of under 30 days has long been illegal by San Francisco city ordinance and zoning regulations. However, recent legislation (Ordinance File No. 120299) creates a complaint and compliance process, and ominously, a process for “interested non-profits” (read Tenants Union and Tenderloin Housing Clinic) to bring a lawsuit against alleged violators. The legislation even allows for fines up to $1,000 per day, the proceeds of which go directly into the pockets of the complainant. However, there is no mention in the legislation of the converse: empowering owners to sue tenants who sublet their rentals. SPOSFI board members have suggested – not entirely tongue in cheek – that our (non-profit) organization should be similarly empowered to assist owners whose rentals are being sublet by tenants in violation of their rental agreements.

Short-Term Rentals Not Just a Local Issue

Regulation and/or prohibition of short-term rentals is not exclusively a San Francisco issue. Chicago has created a permitting process. Austin, Texas, has a permit procedure that includes limiting the number of short-term rentals in given neighborhoods. A 2011 New York state law strengthened laws against short-term rentals, including a prohibition on many bed-and-breakfast homes. In Paris, most short-term rentals are banned and permits issued only to property managers who convert the property from residential to commercial. The state of Florida, in contrast, has passed a law that prohibits municipalities from instituting new laws designed to prohibit short-term rentals!

However, the end result of all these regulatory efforts seems fairly universal: short-term rentals continue to flourish, but do so under the radar. We have been told that legislation to allow some short-term rentals is being prepared by Supervisor David Chiu, but to date have received no details from his office. It appears that the legislation would permit permanent residents of an apartment unit or home, be they the renter or the owner, to rent out their domicile for stays of under 30 days, and would require payment of the standard 14% hotel tax.

With no firm information yet on the proposed law, it would be premature for SPOSFI to declare our position. While we would probably not object to taxation, we most definitely would oppose any provision allowing renters to engage in short-term rentals if doing so would breach the subletting clause in their rental agreement. Small property owners bear substantial liability and pay dearly for insurance against our own negligence. If a short-term subtenant is injured or feeling litigious, we could become defendants long after the real or imagined incident occurred, and possibly after the tenant has left. Also at issue is the well-being of the other tenants in the building, who have a right to the safe and quiet enjoyment of their residence. Permitting tenants to conduct what is essentially a small hotel business and bring unknown short-term renters into the building would further erode the ability of small property owners to control their properties, and is something we would oppose. So it is a great relief to hear from a legislative aide in Supervisor Chiu’s office that however the legislation is ultimately crafted, it will not override any provision in a rental agreement that prohibits a tenant from subletting. Let’s hope that Supervisor Chiu keeps his promise.

Reprinted with permission of the Small Property Owners of San Francisco Institute (SPOSFI) News.  For more information on becoming a member of SPOSFI or to send a tax-deductible donation, please visit their website at www.smallprop.org or call (415) 647-2419.

 

 

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