Tuesday was a big election day for many communities. Incumbents were ousted. Houston had a controversial ballot item about transgender use of bathrooms. But despite the excitement surrounding these other elections, all eyes were on San Francisco.
Why San Francisco? Because of Proposition F.
Prop F, otherwise known as the “Airbnb Initiative” was a measure put before voters in an effort to restrict private, short-term housing rentals. The details included:
- Private, short-term rentals to be capped at 75 nights per year;
- Provisions that would require such private rentals from paying hotel taxes and abiding by more burdensome city codes;
- Rental hosts and “housing platforms” required to provide quarterly guest and revenue reports;
- Prohibits the use of “in-law” units for short-term rentals; and
- New regulations around privacy, peace and quiet.
Prop F regulations would allow for both city government and private citizens to initiate lawsuits against property owners found in violation of these regulations. Steep fines would be imposed on anyone who did not abide by the new city law, upwards of $1,000 per day for each non-compliant rental listing. Websites like Airbnb, HomeAway and VBRO, companies with rental listings nationally and internationally, stood the most to lose and faced millions of dollars in fines under the proposed regulations.
While data pertaining to short-term rentals is not widely available, an analysis of the Airbnb platform finds that there are 4,798 properties listed in the city using that platform alone. Nearly two-thirds of those were entire houses or apartments—meaning that they were being used for more than just “couch surfing.” How often are these properties being used for short-term rentals? Again, thorough data is not readily available but a review of the site finds that two-thirds of Airbnb listings in San Francisco have fewer than 10 reviews, meaning that they are likely rented infrequently. Only 6.4% of listings (307) had more than 50 reviews, indicating more frequent traffic. Only 160 units are rented full time.
Interestingly, the 7th and 8th largest Airbnb users in San Francisco are actual hotels (The Regency Inn and Stay in SF Residence)—indicating that at least some of the largest users are not skirting local taxes and regulations.
It’s perhaps no surprise, though, that there have been a number of tech start-ups that have launched to tap into the power of Airbnb. For instance, Come2SF is a property management company that uses the online platform to manage its 51 houses and apartments.
Advocates of Prop F urged that with housing as expensive as it already is in San Francisco, more regulations were needed to keep long-term rental units intact for the welfare of residents. A Telegraph Hill resident told the L.A. Times that she voted “yes” on Prop F because she fears short-term rentals are wreaking havoc on the community: “I’ve seen it in my neighborhood – people have been evicted from [their units], and they’re no longer long-term rentals,” she said. “Now they’re hotels, and we hear people go up and down and up and down with their roller bags all the time.”
There is also concern that converting apartment rentals in to short-term rentals will only restrict the local housing stock even further, thereby driving up costs that are already exorbitantly high (the median rent for a one-bedroom apartment now hovers around $4,000/month).
Property owners were less decisive. Wealthier residents in owner-occupied units seemed in favor of passing Prop F, whereas landlords expressed concern over their ability to own, operate and manage their properties as intended in a capitalist society.
Somewhere in between fall the lower- and middle-income property owners of owner-occupied units who say platforms like Airbnb allow them to rent their units out on a short-term basis (perhaps, for instance, when they are traveling) and generate additional income that then makes it more affordable for them to stay in the city.
On Tuesday, it was up to the voters to decide once and for all.
In an election that saw more than $8 million in campaign dollars spent on behalf of Airbnb alone, Prop F was defeated 55% to 45%.
Here’s what it means for landlords and property managers:
- Increased freedom to rent properties as they choose, for either short- or long-term stays, without being subject to hotel taxes and additional government regulation.
- Landlords and property managers retain the ability to use Airbnb to manage their listings, if they so choose (though, we wouldn’t necessarily recommend that strategy!).
- With fewer restrictions, it may lead to fewer units available for long-term rentals, thereby potentially driving up the market rate for those long-term rentals.
- Less recourse against tenants who are listing units as short-term rentals, often in violation of leases that prohibit subletting.
- Increased vigilance needed by landlords and property managers who may have more transient people coming in or on to their properties.
The defeat of Prop F also sent a signal to the local community that whether or not platforms like Airbnb are regulated by the government, there is still real need for the municipality to address the issue of a housing shortage. Limiting Airbnb isn’t going to have a dramatic impact on San Francisco’s housing affordability; the city was already the most expensive in the nation long before Airbnb was founded. More comprehensive policies are needed at the city-level to increase the overall housing supply for renters and buyers alike.
Read more on Real Estate Markets