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San Francisco Cements Homesharing with 'Airbnb Law'

City officials have formally passed a measure that legitimizes Airbnb in the city while placing limits on high users.

Airbnb lodging is now legal in San Francisco.

On Oct. 7, the San Francisco Board of Supervisors formally legalized short-term rentals in a 7-4 vote that, starting in February, will allow homeowners to rent rooms and housing similar to hotels. The measure’s passage chalks a major win for the sharing platform Airbnb, an app that facilitates the majority of the rental activity, and that has gradually gained momentum nationally and internationally.

The law, unofficially called “the Airbnb Law,” represents the city’s effort to broker a regulatory compromise between multiple city interests. City affordable housing advocates were concerned higher Airbnb rental rates were displacing low-income earners. Traditional hotel chains worried a double standard in taxation and regulation was creating unfair competition. And throughout the legislative process, struggling homeowners argued income from Airbnb was desperately needed to prevent forced relocations.

Previously, San Francisco prohibited Airbnb rentals but withheld policy enforcement to allow for discussion.

Only time will tell whether the new policy will satisfy the many demands -- but in this attempt at regulation, the policy’s framework is clear. Setting the ground rules, the law limits the practice to permanent San Francisco residents only, requires each listing to hold at least $500,000 in liability insurance and dictates city hotel taxes must be paid for all transactions. Other major regulations include compliance with city housing codes, annual self-reporting of rented days and participation in a citywide host registry for Airbnb users renting properties.

According to estimates, Airbnb tax revenues, currently at 14 percent, will generate $11 million per year.

District 3 Supervisor David Chiu, who spent two years crafting the legislation, said Oct. 8 he hoped it can simultaneously pave a path for innovation while aiding the city in its housing crisis.

“Our policy, our new legislation, will ensure that hundreds of San Franciscans will no longer be displaced by bad actors who are evicting tenants or otherwise turning good rental stock into hotels and bed and breakfasts.” Chiu said. “While on the other hand, it allows other San Franciscans who are trying to make the rent and pay their mortgage to have the chance to continue to live in San Francisco [with Airbnb profits] who are seniors on fixed incomes, working families, students, artists and others trying to make ends meet.”

A blog statement from the company Tuesday hailed the development a success for residents, and described the action as one that secures guest rental privileges for San Franciscans -- often only afforded to lodging businesses.

“The legislation that moved forward [on Oct. 7] will give regular people the right to share the home in which they live and make it fair to share in San Francisco,” said Airbnb spokesman Nick Papas.

However, the celebratory words were not had by all. Many city stakeholders, businesses, landlords and others in opposition of Airbnb, had desired a stricter framework. In an article from SFGate, vacation rental site HomeAway denounced the law as overly one-sided for Airbnb and “wildly unenforceable.” Additionally, District 9 Supervisor David Campos, in competition with Chiu for a California Assembly seat in November, asked for the law to be delayed and amended so Airbnb had to pay $25 million in back taxes before the law took effect.

The proposed amendment failed, but Chiu said there was nothing in the legislation that would preclude a demand of payment from city officials.

“I have been clear that anyone who has engaged in this activity up until now, who owes city taxes must pay those taxes.” Chiu said. “And it is in the purview of SF city treasure and city attorney to collect those taxes.”

Jason Shueh is a former staff writer for Government Technology magazine.