The Takeoff Episode 02: How Startups Can Adapt and Pivot Sponsored This content is created collaboratively with one of our sponsors.
The Mayor’s Office, Airbnb, and SFO all talk about an ongoing “dialogue” and “conversation,” but any timelines are vague and the city’s own neighborhood associations, let alone its residents, aren’t yet part of the discussion. The sharing economy will one day be regulated in San Francisco, but there’s still much work to be done.
San Francisco Mayor Edwin Lee has long been outspoken in his support for new laws that would foster a thriving environment for the emerging sharing economy. How does he describe the laws that restrict the growth and legality of travel startups in the the Valley?
It turns out that other state stakeholders are open to the idea as well.
Earlier this month the Mayor’s Office of Civic Innovation teamed up with Airbnb and GIS software creator Esri to host a hackathon that sought technical innovations that “re-imagine how tourists and residents experience and explore the City of San Francisco.”
When asked about the legal barriers that startups already targeting tourists in the Bay area contend with, Jay Nath, the Mayor’s Chief Innovation Officer said, “It goes back to a larger discussion that we’re having about the sharing economy. We’re applying 20th century rules to a 21st century model.”
“It’s a big organization and it takes time for the regulatory environment to change,” says Nath. “It’s about having the conversation with different regulators.”
In mid-February, airport car rental startup FlightCar received a cease and desist letter from SFO, hours after its official launch.
“…even when we launched we knew it wouldn’t last very long. It was little surprise that they issued a cease and desist, but it was surprising how quickly they reacted,” explains Kevin Petrovic, co-founder of FlightCar.
Flightcar wasn’t able to pay the fees that were required for it to continue operating at the airport so the startup decided to stop operations and contracted a third-party limousine company in order to access customers at the airport.
“I think the airport is understandably out to protect its own interests given how much it makes from taxis, car rentals, and long-term parking,” says Petrovic. “At the same time, we would have been very interested in working with someone where we would be happy with the outcome … they weren’t really willing to give any leeway.”
SFO spokesman Doug Yakel; however, says the airport is “open to new business ideas.” The challenge, according to Yakel, is figuring out where new business models like FlightCar, Lyft, and Sidecar fit into the current permitting process.
“From an airport perspective, we want to provide transport options that our customers want,” says Yakel, citing the expansion of the BART system to SFO as an example of the airport listening to flyers’ requests.
There are currently no ride-share startups that have a permit to operate at SFO, but the airport has met with several companies to discuss the different avenues that would help them get certified to operate at the airport.
The future of ride-sharing startups and e-ride concepts is currently hinged on a proceeding underway within the California Public Utilities Commission. The proceeding looks at the state’s regulations for providing transportation services and if or how they need to be changed.
Andrew Koch, Information Officer at CPUC, says “if all proceeds as anticipated, a final decision should occur sometime in August.”
Startup Airbnb and short-term rental veterans like Homeaway and VRBO deal with an entirely separate set of issues that, at times, pits homeowners, renters, tourists, and politicians against one another.
President of the San Francisco Board of Supervisors David Chiu is leading the discussion that’s aimed at formulating a policy to regulate the short-term rental economy in San Francisco.
“Most of the activity is currently illegal under San Francisco local law,” says Amy Chan, a legislative aide in the Office of Supervisor David Chiu. “Right now the law says you can not rent for less than 30 days if you’re in a building with four or more units.”
Legalizing the activity involves figuring out how to protect the city’s housing stock, how not to turn apartment complexes into hotels, a tracking system for such activity, and a time limit for how often residents are permitted to rent their home for fewer than 30 days; not to mention issues of security, liability and insurance.
“We don’t want to take housing units off the market [for renters], but want to create flexibility for residents,” says Chan.
Chiu’s office has been working on these issues with a small number of stakeholders for over a year and is looking to release a draft of the legislation in the next couple of weeks. That vague timeline has been quoted before, and Chan says deliberations have taken much longer than expected.
The overall concept of the discussed legislation is to legally permit San Francisco residents, living in buildings with four or more units, to rent out their primary residences for fewer than 30 days at a time. Apartment owners would be able to override the legislation and restrict their tenants from renting or subleasing a space for that amount of time.
In order to pass the legislation, the board of supervisors, planning commission, and mayor would have to sign off on the new law.
Airbnb has been an active participant in the discussions with Supervisor Chiu.
Molly Turner, who manages public policy at Airbnb, hints a day when the startup and its peers can celebrate a political victory.
“We’ve been making a lot of process with the policymakers, but it takes a long time and it’s hard stuff. We’re very happy with how the conversation has gone. The policymakers have been receptive and curious,” says Turner. “We’re reaching a point when something will be introduced soon…we’re hopeful.”
Working with locals to create regulations
Although it seems that everyone in the city is looking forward to a day when the sharing economy is indeed legitimized, some stakeholders may not be. Neighborhood associations and individuals could be opposed to sharing their buildings and sidewalks with transient visitors.
Homeaway co-founder and Chief Strategy Officer, Carl Shepherd, told Skift that he recommends making short-term rental regulations “very easy to understand, very easy to comply with, and make sure all of the delineations are clear.”
Shepherd also recommends local governments work with stakeholders including neighborhood associations, property managers, and residents to create the regulations. This is a step that San Francisco has not yet reached.
Skift reached out to a number of neighborhood associations in the San Francisco area and all responded that it was the first time they had heard of the proposed legislation. Each was interested in discussing the issue internally before issuing a statement, but JJ Stahle, President of the North of Panhandle Neighborhood Association, told Skift:
“We are happy that the City is taking up the issue of short-term rental units. Much like that of the unregulated ride services, there is obviously a need for such services and it is incumbent upon the City to legislate rules and regulations in order to ensure the safety of residents and guests, eliminate the possibility for eviction of tenants in favor of short-term rentals and to collect appropriate taxes to administer such regulation.”