The golden window for San Francisco’s unique brand of creative entrepreneurship, the share economy, seems to be closing. And by window, I mean the exciting honeymoon period when the positives shine brightest, just before public debate, lawsuits, and local politicians start to enter the fray.
San Franciscans who once were charmed by the sight of the distinctive pink Lyft mustache are now finding that hailing a cab is becoming a political decision. Companies like Uber, another ride-share taxi competitor, have found themselves under scrutiny for their business practices as well as the perceived social implications of their unorthodox service model.
And so too has the time come for San Francisco’s own Airbnb, perhaps the most successful and popular innovators of the share economy. The company lists short-term rentals of all kinds ($58/night shared apt., $1,500/night mansion, $68/night closet, $176/night sailboat) by owner or renter (called hosts by the site). The company provides peer reviews, ID and address verification, and a 24-7 customer service center to help minimize fraud and general sketchiness that might otherwise turn people off from renting to – or renting from – relative strangers. Part of the site’s success could be attributed to the sheer array of listings, providing something for travelers of virtually any budget. For its troubles, the company takes 3% from each host and 6%-12% from each traveler, for every transaction.
Formed in 2008, the company – with revenue valued in the billions by Forbes – is posing challenges to cities all over the world. Housing experts and advocates concerned with safeguarding affordable housing stock are scrambling to determine the impacts of an incredible influx of short-term rentals, many of which may be illegal according to lease terms and city zoning districts. On top of that, few Airbnb rentals generate hotel and occupancy taxes, costing cities an important source of revenue and undercutting competitors in the hotel industry. And in a city like San Francisco, where soaring housing costs and rising eviction rates are already driving low-income residents to cheaper communities, the rental site adds yet one more dimension to an already delicate and tense situation.
And while the site’s popularity grows (the company claims to have 500,000 listings in 192 countries), San Franciscans who host on Airbnb are faced with interesting questions about what their participation means for their neighbors and the city as a whole.
Are San Franciscans who rent out their places (either for a quick buck while on vacation or as a long-term source of income) significantly diminishing San Francisco’s already limited stock of affordable housing? Or are tenants and owners who are themselves barely hanging on to their houses or apartments making the best of a system stacked against them, finding ways to stay afloat amidst one of the most expensive cities in the country?
There’s an old joke about how living in New York City will put your relationship on the fast track since it’s so cost effective to live together. That may well be true for San Franciscans these days as well, but perhaps with a unique caveat: Couples are moving in together, but occasionally keeping one of their prized apartments and renting it out through Airbnb.
Nicole (who asked that her last name not be published) is an example of one such tenant. A year ago she moved into her boyfriend’s apartment in the Mission but kept her rent-controlled Alamo Square place and became an Airbnb host, collecting hefty fees ($150–$175 a night) from visitors looking to stay in the city for a few nights at a time. “The job I was at, at the time was not paying me enough to exist in the city,” Nicole explains. “I hadn’t saved any money since I moved here in 2008; it was an opportunity to pay off my credit debt,” she says. So for several months she hosted her apartment – unbeknownst to her landlord – on Airbnb, pulling in three to four times the cost of her monthly rent.
Nicole enjoyed meeting the travelers who booked her place, even joining some for drinks. (Many users appreciate the more local experience that lodging through Airbnb facilitates.) Eventually she returned to her old apartment, finding it too stressful to sneak around but not wanting to concede her place in a time of such high rents. Although she did return, her apartment was off the rental market for the whole time she was hosting, denying a potential resident a place.
Alex, another Airbnb host who requested we not print his last name, was fired from his sales job shortly after moving to San Francisco last spring. Until he found a new job (perhaps fittingly, working for Lyft) he rented out his Tenderloin apartment, usually for week-and-a-half stints. When his own place was occupied with Airbnb guests, he would travel or crash on friends’ couches. “It wasn’t a long-term solution,” he describes. “It was an oh-shit-I-can’t-pay-my-rent solution.”
Though he only hosted his place a handful of times, he did so without his landlord’s knowledge and in violation of his lease.
Alex had a very positive experience using Airbnb, but he didn’t consider it his only option. He had successfully rented out his place on Craigslist while traveling before he knew of Airbnb, and he could’ve done so again. “I don’t know how you can stop something like this,” he says. “It’s not a service, but a platform for people who would do this anyway.”
USF and SF State lecturer and affordable housing advocate Calvin Welch has been critical of Airbnb for many reasons. The it’s-going-to-happen-one-way-or-another argument doesn’t work for him. “You can’t argue that this activity is inevitable because we have the technology and the practice to do it and we have a business model that is very successful,” says Welch. “Craigslist had to intervene on prostitution … they were forced to de-list certain kinds of listings. The social reality is that it is simply not acceptable to use technology in this way.”
Welch takes particular issues with the Airbnb practices – such as those described by Nicole and Alex – where the hosts or owners rent out an entire unit for a short-term stay, rather than renting a room in an owner- or tenant-occupied house or apartment. One easy fix, he suggests, would be for Airbnb to outlaw the kinds of rentals that encourage the kind of speculation that helped Alex and Nicole survive some short-term cash-flow problems. Airbnb currently does offer these types of rentals (many hosts remain in their places while they rent our a portion of that space). “People took in boarders to keep their houses in this town in the depression,” he explains. “The difference is that there wasn’t a middleman doing an international business out of it. It was an individual owner and an individual tenant that came to a mutual understanding.”
Airbnb has listings in more than 34,000 cities around the world, and each city seems to have a different take on the issues. Austin has embraced the service, allowing for short-term rentals in homes where owners are present and for a $285 fee (paid by the host to the city). New York has taken a harder line, enacting legislation against short-term rentals in multifamily apartment buildings and subpoenaing data on hosts believed to be operating illegally (Airbnb is currently fighting the order). San Francisco officials don’t seem sure yet what approach to take when it comes to regulating this homegrown company.
Last year Airbnb announced that it would start paying hotel taxes in New York and San Francisco, perhaps in an attempt to delay or block local legislation that would mandate some ground rules for the company. It’s not clear yet how these taxes will be collected. Nick Papas, a spokesperson for Airbnb, said the company is working with city officials to come up with a plan, but he did not say whether the company will ask users to bear some or all of the tax burden or whether the company would assume the costs.
Mayor Ed Lee has pledged his support to protect and create affordable housing in the city. But how short-term rentals and Airbnb fit into that plan is unclear. The San Francisco Planning Department is well aware of the potential effects these type of rentals may have on housing, but they have pointed out that Airbnb is just one of a host of such rental listing services (or “platforms,” as Alex prefers) that could potentially impact the city’s limited housing stock. The Planning Department has dealt with – and continues to deal with – numerous planning code violation complaints regarding short-term rentals, a spokesperson for the department asserted. However, sorting through the hundreds of sites with SF listings has made collecting any kind of significant data on the number of local units listed (or what percentage of those units might be rent-controlled), a very tall order, especially since Airbnb is currently unwilling to share this information.
While reform to the Airbnb hosting practices that many San Franciscans currently enjoy may be in store for 2014, the debate over what effect those short-term rentals have on the city’s housing stock isn’t likely to end soon. When asked about Airbnb’s role in diminishing housing, Nicole acknowledged that it might be significant. She went on to say something that perhaps the whole city can agree on: “The housing crisis impacts every single person.”