Most San Francisco Airbnb Hosts Operate Illegally, Says New City Report

Even though San Francisco, the hometown of Airbnb, has gone much further than most cities to regulate short-term rental platforms, a new report issued by the city shows most short-term home rentals and hosts operating in the city are not abiding by local laws.

The policy analysis report, issued on April 7, found the following:

• Most short-term rental hosts are out of compliance and have not registered with the city’s Office of Short-Term Rentals (OSTR). As of November, the OSTR received 1,082 registration applications, but that suggests 4,296, or 79.9 percent of the 5,378 unique hosts listed on Airbnb for that month did not register.
• Since February 2015, when the city enacted new laws regulating short-term rentals, approximately 26.1 percent of entire home listings where the host is not present appear to have been rented for more than 90 nights a year between February and November 2015, a violation of the city’s 90-night cap.

To compile this report, the city analyzed data supplied by Airbnb as of March 15, 2016, and Flipkey (whose parent company is TripAdvisor), as well as webscrapes from December 2014 and November 2015, both conducted by Murray Cox, one of the founders of Inside Airbnb.

In November, Inside Airbnb discovered that Airbnb had removed some 1,500 listings from New York City prior to releasing its data on the city, and thereby skewing the numbers of operators with multiple listings, or those in violation of New York City’s multiple dwelling law. The webscrapes Cox conducted apply software algorithms to publicly available data on Airbnb’s listings in a particular city.

Cox’s New York findings were initially rejected, then accepted by Airbnb as an accurate reflection of its November actions.

The data presented in the city’s report, not surprisingly, does not seem to align with data presented by Airbnb for the period from March 15, 2015 to March 15, 2016, for the most part. On April 2, Airbnb released this data and said it would begin investigating San Francisco hosts with more than one listing, pledging to remove “unwelcome commercial operators” or those running illegal hotels in private homes.

According to Airbnb, only about a fifth of the city’s full-home rentals, or 1,149 listings, are run by hosts who rent more than one entire home on the platform. Of those 1,149 listings, 478 are legally listed by licensed hotels or comprise legal rentals of 30 or more days. The other 671 listings, however, are run by 288 hosts who may soon be removed from the Airbnb platform. Although these 288 hosts’ listings only make up about 7 percent of all listings in the city, they generated 17 percent of all host revenue in San Francisco from March 15, 2015 to March 15, 2016.

One important piece of data not included in Airbnb’s numbers, however, relates to the number of entire home listings that are rented for more than 90 days a year. The Airbnb data also did not look at the number of hosts registered with the OSTR.

Airbnb issued the following statement in response to the city’s report:

“Airbnb is already working to help meet The City’s goal of fighting illegal hotels and we are taking action by removing unwelcome listings from our platform, releasing data and cracking down on commercial operators. Unfortunately, the registration process remains a challenge — San Francisco is asking hosts to apply for multiple permits, fill out dozens of pages of paperwork and tell The City how many spoons they have in their home.”

It’s worth noting that Airbnb’s CEO violated the city’s short-term rental laws for at least eleven months following the passage of the city’s Airbnb-friendly law.

Airbnb’s statement continued: “The typical middle class host in San Francisco shares their space 48 nights a year to generate supplemental income and we are proud that our community is paying their fair share of taxes. We will keep working with City on policies that help keep unwanted commercial activity off the platform and let middle class families share their home so they can afford to stay in San Francisco.”

Does Regulation of Short-Term Rentals Actually Work?

Beyond suggesting that the majority of Airbnb hosts and listings in San Francisco may be operating illegally, the report also examines whether the city’s short-term rental regulations are actually achieving their desired goals.

Here’s how those regulations work in San Francisco:

In February 2015, short-term residential rentals in San Francisco were legalized for permanent residents in their permanent residence (occupying a residential unit for at least 60 consecutive days). These residents can rent out their residences on a short-term basis, un-hosted (host is not present), for a maximum of 90 nights per year. There is no limit to the number of nights a resident can rent out a room or portion of their home for hosted stays (when the host is present). All short-term rental hosts, however, must obtain a business registration certificate prior to registering with the city’s OSTR, and they also have to maintain liability insurance and provide a quarterly report to the OSTR on the number of nights their unit is rented, among other obligations.

Last November, a proposition that would have enforced tighter restrictions on short-term rentals to 75 nights per year, as well as other enforcement tools, was on the ballot, but it was defeated and not implemented.

Recently, San Francisco’s Office of the Assessor-Recorder and the Treasurer & Tax Collector launched an initiative requiring short-term rental hosts to pay business personal property taxes on all “furniture, appliances, supplies, equipment, and fixtures” used in their short-term rental units, which would amount to an approximate 1 percent value of these resources.

It’s meant to match the taxes paid by business owners on their office equipment. Notices were sent to registered Airbnb hosts and they are required to file forms by May 7 without penalty. After May 7, the penalty amounts to 10 percent of the total assessed value of the business/personal property. If a host ignores the notice, the assessor’s office will estimate the value of the property and leverage a 10 percent fine.

Among the city report’s other findings are:

• Because there are an unknown number of duplicate listings on multiple hosting platforms, it’s not possible to estimate the total number of unique listings in the city across all platforms.
• Since February 2015, the OSTR pursued 322 enforcement cases, 79 of which resulted in violations and collected $680,000 in assessed penalties.
• Approximately 92.2 percent of those enforcement cases were the result of resident complaints.
• Hosting platforms don’t have to report required registration numbers for San Francisco hosts and they don’t provide information about the number of hosts renting out units while they are not present in the unit for more than 90 nights per year.
• The city’s Treasurer & Tax Collector’s Office has issued more than 1,500 business registration certificates to short-term residential rental hosts. Since November 2015, however, the city estimates there are 5,378 unique Airbnb hosts operating in San Francisco.
• Airbnb’s estimated tax contribution from its hosts for the period of March 15, 2015 to March 15, 2016 was $14.5 million, which “reasonably” matches the estimate proposed by the city’s report ($15.13 million).

Airbnb, for its part, alleges that the city of San Francisco doesn’t have a system that would allow Airbnb to verify registration information for its hosts, and that it can take as much as 10 or more weeks for an application to be approved by the city. It also says its hosts can place their permit numbers on their listings.

On the other hand, Airbnb refuses to allow the city access to its data, forcing taxpayers to foot the bill to create an enforcement agency and mechanisms that have to rely on third-party data scrapes to gather insights about bad actors and non-compliance.

The city report’s authors suggest the city require online platforms like Airbnb and Flipkey to prohibit hosts from advertising on their sites if they have not yet registered with the city’s OSTR. They also recommended that the OSTR and the city’s Treasurer and Tax Collector collaborate more with one another to share data, and that the city should come up with a better way to simplify the short-term registration process.

If anything, this latest report from the city depicts San Francisco as a case study in progress for regulating short-term rentals.