Home Sharers of San Francisco
Supervisor David Chiu’s
Legislation to Legalize Short-Term
in San Francisco
A. Home Sharers of San Francisco
Home Shares of San Francisco (“Home Sharers”) began in October, 2012 as group of San Francisco residents engaged in short-term, vacation rental of spaces within their homes through Airbnb, a popular website company based in San Francisco and other platforms (“home sharers”). The purpose was to form a self-help group for home sharers dedicated to examining legal, taxation, insurance issues, as well as to provide mutual assistance as to best practices related to all aspects of home sharing.
Currently, Home Sharers has over 900 members and has incorporated as a mutual benefit association under California law. Since inception, members have met and continue to meet at least once a month to discuss and educate each other on topics of mutual concern related to home sharing.
B. Proposed Legislative Changes
On April 15, 2014, President of the Board of Supervisors David Chiu introduced legislation to legalize home sharing under a set of conditions and restrictions (“Chiu’s Bill”).
The full text of Chiu’s Bill and its Digest can also be found at:
The following is a summary of the main provisions of Chiu’s Bill:
1. Home Sharing will be legally permitted under San Francisco law for the Primary Residence of a Permanent Resident.
2. The Permanent Resident may only rent out the entire Primary Residence a maximum of 90 days per year.
3. The Permanent Resident must be registered on a newly created Department of Building Inspection Registry (“Registry”).
4. The Permanent Resident must pay all taxes, including the Transient Occupancy Tax (“Hotel Tax”).
5. The Permanent Resident must maintain property insurance of not less than $150,000 per incident or transact though a platform that provides a property damage guarantee program in the same amount.
As a consequence of the introduction of Chiu’s Bill, Home Sharers undertook a review of its provisions with a view to examine how its provisions impact Home Sharer members and home sharing.
We commend Supervisor Chiu for taking this initiative and introducing this legislation. His bill has many features that represent an attempt to improve vastly the status quo; for example, the provision giving home sharing tenants a thirty-day right to cure in order to avoid eviction.
However, there are many provisions that raise concerns. This Position Paper aims to point out those concerns and to recommend ways Chiu’s Bill can be improved to address them.
C. Home Sharers Review Process
Home Sharers formed three Committees of members who volunteered to undertake the examination of Chiu’s Bill as they pertain to the interests of the following groups of home sharers:
(a) single family home owners,
(b) tenants, and
(c) landlords/condo owners.
These Committees met at least twice, exchanged ideas online and submitted a Report on their findings. Finally, a draft Position Paper was made available online to the general Home Sharers membership during a comment period before the publication of the final Position Paper.
This Position Paper represents the collective work of the Committees and the result of the above process.
D. Executive Summary
The following are the Position Paper’s main recommendations for amendments to Chiu’s Bill:
1. That the inclusion of specified non-profits be deleted from the definition of “Interested Party.”
2. That the requirement of consecutive days of occupancy be deleted from the definition of “Permanent Resident.”
3. That the term “two or more units” be replaced with “three or fewer units” in the definition of “Residential Unit.”
4. That the proposed Registry be replaced with a permitting process where the information regarding permits are kept by the Department and only made publicly available to the extent required by and allowed under law.
5. That there is a clear statement as to the kinds of records and documentary evidence sufficient to prove Primary Residence.
6. That the maximum annual number of days permitted for short-term rental of ones Primary Residence be increased from 90 to 180 days.
7. That there is an exception to the ban on sharing secondary units for those secondary units that have customarily and occasionally been used by the owner in his building to accommodate family members.
8. That the provisions requiring the payment of the Transient Occupancy Tax clearly refer only to the tax liability that accrues from the effective date of Chiu’s Bill.
9. That the provisions allowing for an upward adjustment to the registration fee be capped at $100.
II. REVIEW OF SPECIFIC PROVISIONS OF CHIU’S BILL
A. Section 41A.4 Definitions
“Interested Party. A permanent resident of the building in which
the tourist or transient use is alleged to occur, the City and County of San
Francisco, or any non-profit organization exempt from taxation pursuant to
Title 26, Section 501 of the United States Code, which has the preservation or
improvement of housing as a stated purpose in its articles of incorporation or
Sharers is concerned that an undefined “interested party” is unacceptably
broad, and requests that it be replaced with “Interested Party.”
2. Concern: The proposed definition of “Interested Party” includes “any non-profit organization exempt from taxation pursuant to Title 26, Section 501 of the United States Code, which has the preservation or improvement of housing as a stated purpose in its articles of incorporation or bylaws.”
Home Sharers objects to special standing being given to a particular non-profit organization fitting this precise description. No non-profit group should be singled out for special treatment by the City. All non-profit groups wishing to assist residents in filing a Complaint should have equal status and should do so in the normal course of representation; that is, properly on behalf of, through and with the express consent of that resident.
Recommendation: Home Sharers requests that “any non-profit organization exempt from taxation pursuant to Title 26, Section 501 of the United States Code, which has the preservation or improvement of housing as a stated purpose in its articles of incorporation or bylaws” be deleted.
3. Concern: The proposed definition of “Interested Party” includes a “permanent resident of the building in which the tourist or transient use is alleged to occur …” “Permanent Resident” is a defined term under these Definitions.
Recommendation: For consistency and precision, that defined term should replace “permanent resident.”
4. Concern: The proposed definition of “Interested Party” does not include landlords who are not Permanent Residents of the building. Many landlords do not live in the buildings for which they are lessors and therefore have a legal right and interest in controlling short-term rentals in their buildings.
Recommendation: Home Sharers requests that “landlords” be included in this definition.
“Permanent Resident. A person who occupies a residential unit for at least 60 consecutive days with intent to establish that unit as his or her principal place of primary residence. A permanent resident may be an owner or a lease.”
1. Concern: The proposed definition of “Permanent
Resident” includes the term “residential unit.”
“Residential Unit” is a defined term under these Definitions.
3. Concern: It is unclear what kind of evidence will suffice to demonstrate occupancy “for at least 60 consecutive days.” The definition of “Primary Residence” includes examples of sufficient documentation: “motor vehicle registration, driver’s license, voter registration, home owner’s tax exemption, or other such evidence.”
Recommendation: Home Sharers requests that similar examples of sufficient documentation proving occupancy be provided.
“Residential Unit. Room or rooms, including a condominium or a room or dwelling unit that forms part of a tenancy-in-common arrangement, in any building of two or more units, or portion thereof, which is designed, built, rented, leased, let or hired out to be occupied for residential use, as defined in the San Francisco Housing Code.”
1. Concern: This definition does not include single family homes. Residents in these homes are therefore excluded from the legalization provisions of Chiu’s Bill. Single family home sharing residents bring as much economic benefits to their neighborhoods and the City as other kinds of residents. There is no valid reason they should be excluded from legalization.
1. Concern: The proposed definition of “Residential Use”
includes the term “permanent resident.”
“Permanent Resident” is a defined term under these Definitions.
Residential Rental. A tourist or
transient use where all the following conditions are met:
(b) the permanent resident is a natural person;
(c) the permanent resident has registered the unit and maintains good standing on the Department’s short-term residential rental registry.”
1. Concern: The proposed definition of “Short-Term
Residential Use” includes the terms “residential unit” and “permanent
resident.” “Residential Unit” and
“Permanent Resident” are defined terms under these Definitions.
“Short-Term Residential Rental Registry: A database of information maintained by the Department that includes information regarding permanent residents who are permitted to offer residential units for short-term residential rental. The registry shall be available for public review to the extent required by law, except that, to the extent permitted by law, the Department shall redact any permanent resident names form the records available for public review.”
(ii) The Constitutionally protected privacy rights of San
Francisco citizens outweigh any remote public purpose in making the registry
data publicly available, especially online.
(iii) More seriously, the registry is described as a
“database of information … regarding permanent residents.” The definition of “Short-Term Residential Rental” includes the
condition that the “permanent resident is a natural person”
and the legalization conditions described in Section 41A.5(g) are all
requirements of personal conduct by the Permanent Resident. It is therefore an inescapable conclusion
that the registry so conceived is one of a registry of persons rather than of properties.
Moreover, Home Sharers is extremely concerned that such a registry, in combination with the enforcement provisions, will enable, facilitate and financially incentivize “bounty hunters” to target home sharers.
Recommendation: Home Sharers therefore requests the replacement of the provisions regarding the Registry with a permitting process where the information regarding permits are kept by the Department are only made publicly available to the extent required by and allowed under law.
Home Sharers also requests the deletion of the following
words from Section 41A.5(d) (indicated in
“the City and County of San Francisco
B. Section 41A.5 Unlawful Conversion; Remedies.
“(b) Records Required. The Owner and Business Entity if any, shall retain and make available to the Department records to demonstrate compliance with this Chapter 41A upon request as provided herein. Any Permanent Resident offering his or her Primary Residence as a Short-Term Residential Rental shall retain and make available to the Department records to demonstrate compliance with this Chapter 41A, including but not limited to records demonstrating Primary Residency and the number of days per calendar year he or she has occupied the Residential Unit.”
1. Concern: It is unclear what are adequate and sufficient “records demonstrating Primary Residency and the number of days per calendar year he or she has occupied the Residential Unit.” The definition of “Primary Residence” includes examples of sufficient documentation: “motor vehicle registration, deriver’s license voter registration home owner’s tax exemption, or other such evidence.”
Recommendation: Home Sharers requests amendments such that proof of Primary Residency should be prima facie proof that the requisite number of days has been satisfied. Further, if the Department has a valid reason to request proof that the requisite number of days has been satisfied, there should be specific provisions setting out examples of sufficient documentation sufficient to prove the number of days occupied.
“(g) Exception for
Short-Term Residential Rental.
(B) maintains records for two years demonstrating compliance with this Chapter, including but not limited to information demonstrating Primary Residency, the number of days per calendar year he or she has occupied the Residential Unit, and compliance with the insurance requirement in Subsection (D). These records shall be made available to the Department upon request.”
1. Concern. The
effect of this provision is to limit home sharing of an entire (as distinct
from part of a) Residential Unit to a maximum of 90 days per calendar year. Home Sharing is an important source of
revenue that allows ordinary San Franciscans the ability to stay in a city
where the cost of housing is rising at an alarming rate. A recent study shows that 80% of hosts say
Airbnb has helped them stay in their homes.
Home Sharers is concerned that the proposed 90 days cap is and will increasingly become inadequate in helping San Franciscans stay in their homes.
Recommendation: Home Sharers requests that this cap be increased to 180 days.
Home Sharers recognize that small-scale buildings of three units or less, including single family homes, are very common building types in San Francisco. It is also common for these buildings to be owned by families, especially first generation immigrant families, for a substantial length of time, and handed down sometimes for generations. Many of these owners and their immediate families have occupied the entire building as their primary residence, for their sole use and that of their extended family without ever having leased one or more of the units to long-term tenants. These same families will occupy units on a non-continuous basis, as members leave and return home for reasons related to education or providing care for elderly members. Income from short-term rentals help substantially to defray property expenses during periods when family members are not occupying those units, but provide the flexibility of allowing those family members to be housed and cared for upon their return or according to their needs.
Home Sharers requests an express exception from the ban on short-term rentals
of secondary units, and an exemption from any limitation on the number of days per year that such units may be offered for short-term rental, provided that the secondary units:
(b) are intended to be occupied by the Permanent Resident’s extended family;
(c) have not been leased on a long-term basis during the Permanent Resident’s ownership of the building, or the long-term tenant vacated on his or her own volition; and
(d) have been owned by the Permanent Resident for at least 36 continuous months.
“(C) (if the Permanent Resident) complies with any and all applicable provisions of state law and the San Francisco Municipal Code, including but not limited to the requirements of the Business and Tax Regulations Code by, among any other applicable requirements, collecting and remitting all required transient occupancy taxes;”
The phrase “all applicable provisions of state law and the San
Francisco Municipal Code” is both vague and over-broad. For example, it is not clear whether the term
“applicable” implies all laws that apply to the Permanent Resident generally,
or only as they may apply to his or her actions as a home sharer.
Home Sharers strongly argues that it would be unfair for the
starting date to be interpreted as any time before the effective date of Chiu’s
Bill. The legal liability of home
sharers to pay the TOT has been far from clear, certainly before the Tax
Collector Regulation. Even after its promulgation, there was confusion as
to whether it placed the liability to collect and remit on the home sharer or
the website company (as “operator”) or both.
Additionally, the bureaucratic process and requirements of actually
collecting, calculating, reporting and remitting the TOT has been and continues to be unclear,
confusing and unreasonably burdensome on home sharers. Some home sharers have been actively turned away from City
Hall by clerks when they tried to remit the TOT.
2. Concern: This subsection imposes a legal
precondition to legalization that the Permanent Resident “complies with … the requirements
of the Business and Tax Regulations Code by … collecting and remitting all
required transient occupancy taxes.”
“(2)(B) Fee. …Not
later than May 15, the Controller shall determine whether the current fees have
produced or are projected to produce revenues sufficient to support the costs
of establishing and maintaining the registry and any other services set forth in this Chapter and that the fees
will not produce revenue that is significantly more than the costs of providing
such services. The Controller shall, if
necessary, adjust the fees upward or downward for the upcoming fiscal year as
appropriate to ensure that the program recovers the costs of operation without
producing revenue that is significantly more than such costs. The adjusted
rates shall become operative on July 1.” (Emphasis added).
1. Concern: The words in bold above are extremely
broad. They cover not only the cost of
maintaining and operating the Registry, but also all enforcement costs relating
to complaints, inspections, issuing of “Cease and Desist” letters, Department
of Building Inspection prosecutions of alleged violations, administration costs
related to collection and processing of penalties, recovery costs associated
with unpaid penalties, etc. Potentially,
the upward adjustment of registration fees can be so high as to make home
sharing in San Francisco cost prohibitive at best and punitive at worst. There are approximately 6,500 hosts on Airbnb
in San Francisco. Together with other
platforms, the number may be approximately 10,000 at most. With an application fee set at $50 for two years, the annual revenue from these fees would be
approximately $250,000. It is unfair and unreasonable for
home sharers to shoulder any annual administrative cost above $500,000. In other words, it would be unfair and unreasonable for home
sharers to have to pay a registration fee that exceeds $100.
Recommendation: The Subsection should be amended by providing that the upward adjustment of the registration fee shall not exceed $100 (adjusted each year for inflation), which is roughly double the initial fee set by the provision.
 Section 37.9(a)(4). References to sections contained in this Position Paper are references to sections contained in Chiu’s Bill (i.e. as it would amend existing law) unless otherwise indicated.
 Section 41A.4, definition of “Short-Term Residential Rental” sub-section (b).
 See Section 41A.4(g).
 Section 41A.4, definition of “Short-Term Residential Rental Registry.”
 Section 41A.5(d)
 For the purposes of this exemption, “extended family” shall have the same meaning as the list of family members under Section 37.9(a)(8)(ii) of the San Francisco Administrative Code, regulating the circumstances under which a landlord may seek to regain possession of a rental unit.
 We note that there are typographical errors on Pages 17, 18 and 19 of Chiu’s Bill. Subsection (3) is missing from Page 17. Thus, Subsection (4) on Page 17 should be renumbered (3), Subsection (5) on Page 18 should be renumbered (4) and Subsection (7) on Page 19 should be renumbered (6). For the purposes of this Position Paper, we will use the original numbering to avoid confusion.