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Tenant Lawsuits Target Airbnb and HomeAway Hosts in San Francisco

Jul 30, 2014 11:40 am

Skift Take

San Francisco has massive housing problems that are no fault of short-term rental companies, but these companies do make matters worse by providing financial incentives to kick out tenants in favor of more profitable nightly bookings.

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D. Ross Cameron  / Contra Costa Times/MCT

Pedestrians cross Castro Street in the Castro district of San Francisco. D. Ross Cameron / Contra Costa Times/MCT


Outside a three-unit apartment building in North Beach at noon on Tuesday, Benito Santiago banged a drum while Erin McElroy danced and led a dozen housing activists in chants such as “Vacation rentals; you can’t evict me.”

“Tourists are taking our homes,” said Ted Gullicksen, executive director of the San Francisco Tenants Union. “Thousands of units are being illegally converted to hotels. There needs to be enforcement.”

Vacation stays at private homes arranged through new online marketplaces, are a target for housing activists, who say that lucrative short-term rentals remove housing needed for long-term residents.

The run-away success of San Francisco startup Airbnb, which lets people rent rooms and homes to travelers, has given the issue extra impetus in the city. A Chronicle investigation showed it has almost 5,000 listings in San Francisco, about two-thirds of them entire apartments. A competitor, HomeAway and its subsidiary VRBO, have under 3,000 listings, according to the San Francisco city attorney.

Tuesday’s protest focused heavily on VRBO rentals. The small group marched to several buildings and plastered them with lime-green signs proclaiming, “Warning! The apartments in this building have been illegally converted to hotel rentals.”

Carl Shepherd, co-founder and chief strategic officer for Austin, Texas’ HomeAway, disputed the activists’ premise.

“The typical owner on HomeAway and VRBO uses the property as a second home; it’s a pied-a-terre that they use often, not a primary home,” he said. “It is naive to believe those homes would come back into the marketplace” if they were not vacation rentals.

However, the building targeted by the protest is clearly not a pied-a-terre. Rent Board records show that tenants in all three units were evicted in 2001 under the Ellis Act, a state law that lets landlords get out of the business of renting. The act is often used to change rentals into ownership units, and after an eviction, units cannot return to the rental market for five years.

Online reviews show that the North Beach units have been offered on VRBO since 2008. Public records show that a single entity owns the entire building.

In such a case, Shepherd said, property rights come into play.

“It is within the right of the owner of that property to choose how to use it,” he said.

That’s not strictly true in San Francisco. The city bans residential rentals of less than 30 days without a special license that is expensive and cumbersome to procure.

San Francisco regulations allow housing nonprofits to file private lawsuits over illegal hotel conversions. The Tenants Union soon will target 25 landlords with suits seeking city-mandated penalties of $1,000 per day every time the units are rented to tourists, said Joe Tobener, a tenants-rights attorney representing it.

“We intend to file lawsuits against as many landlords as necessary to put all of these units back into the permanent rental housing market,” he said.

In April, City Attorney Dennis Herrera sued two landlords for illegal hotelization; those cases are pending.

Legislation proposed by Board of Supervisors President David Chiu would legalize short-term rentals while placing numerous conditions, such as limiting tourist stays to 90 days a year and requiring owners to be full-time city residents, thus making it impossible for units to operate year-round as tourist rentals.

Airbnb spokesman Nick Papas said the 6-year-old company helps locals make ends meet. “Today, Airbnb helps make San Francisco more affordable for more families,” he said in a statement, citing data that the majority of hosts in the city use the extra income to help pay their rent or mortgage.

Airbnb supports legislation “that would remove any incentive for a speculator to abuse the Ellis Act to convert housing intended for permanent residents into short-term rentals in San Francisco,” Papas said.

Several protesters said they had received Ellis Act eviction notices, although none said they were related to short-term rentals.

“Speculators bought my building to flip it,” said Richard Silver of North Beach, describing himself as a “local curmudgeon.” “After 50 years in the city, I’m facing being thrown out willy-nilly. I’m part of what adds flavor to the cassoulet that makes San Francisco so wonderful.”

Theresa Flandrich said vacation rentals are proliferating in her North Beach neighborhood.

“There needs to be enforcement because they’re taking units away from those of us being Ellis Acted who are seeking to stay in our community,” she said.

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