Short-term rentals disrupting SF housing market

Short-term rentals disrupting SF housing market(sfgate.com)

72 points by silentscope 14 years ago | 103 comments

tptacek 14 years ago |

Much of the criticism of Airbnb in this article seems to stem from renters "subletting" their apartments to vacationers. Why does Airbnb allow renters to list their apartments on Airbnb at all? In virtually no case does a renter have a lease that permits Airbnb-style listings; the boilerplate lease that virtually everyone works from requires landlord approval for each subletter.

It seems unconscionable to rent an apartment from a landlord and then use the space to run a hotel. Anybody who's ever rented more than one apartment knows that landlords are picky about tenants, often requiring credit checks as well as references from previous landlords. Renters sign a binding agreement with their landlord stipulating that they're using the space as their private residence. Breaking that agreement for profit is unethical.

vijayr 14 years ago | |

All of this is true, it is unethical and illegal. But it is also true, that in cities like San Francisco and NYC (especially SF-Co) rents are absurdly high, and landlords care nothing other than making the most of it. My previous two landlords forced me to pay only cash for rent, and I know many other landlords do the same, and cheat on taxes.

In one place I went, they wanted 450$ for "application fee and credit check", and it was not even a luxury apartment, wasn't in Manhattan or any high rent place.

I am not defending any party here - just pointing out, noone in this mess is totally ethical.

fennecfoxen 14 years ago | | |

Usually the places that want $450ish, it's a single check that they'll hold onto and, iff they decide to give you the apartment, they'll actually take it (otherwise they return the check). That way they're guaranteed that you're a serious applicant (or they get a consolation sum if you're not). It's sort of a like a security deposit on your application.

I don't care for it myself.

tptacek 14 years ago | | |

What about the legitimate tenants in the building?

tlrobinson 14 years ago | | |

California has limits on what landlords can charge for "application fees". I think it's around $40.

moreorless 14 years ago | | |

"All of this is true, it is unethical and illegal. But it is also true, that in cities like San Francisco and NYC (especially SF-Co) rents are absurdly high, and landlords care nothing other than making the most of it. My previous two landlords forced me to pay only cash for rent, and I know many other landlords do the same, and cheat on taxes."

Way to go on painting every single landlord as greedy bastards who care about nothing other than squeezing every single penny out of the tenant based on your own personal limited experience. Don't be so quick to generalize that all landlords are slumlords. For every story of landlord abuse, there is one for tenants who take advantage of the system as well.

lkrubner 14 years ago | |

I will offer a counter-example to tptacek's argument:

For 18 months (till April) I lived at 16 Waverly Avenue in Brooklyn, New York. I never signed a lease. The landlord did not care about a thing, so long as I paid the rent on the time. In that building, sub-letting apartments is common. The landlord is an older Hasidic Jewish gentleman, and his attitude toward renters is fairly common among the Jewish landlords who own a large chunk of the southern Williamsburg neighborhood. In all of these buildings, the tendency is toward laissez faire. This cuts both ways: the landlord lets you do anything, but the landlord rarely fixes anything that you need fixed. For a particular type of person (like me) this seems like a reasonable trade-off. And in such circumstances, it is perfectly reasonable for renters to find sub-letters.

tptacek 14 years ago | | |

And in cases like that, I don't see much of a problem with Airbnb. I'd just add that cases like that aren't the norm.

ChuckMcM 14 years ago | |

"Breaking that agreement for profit is unethical."

Of course it is. There was another story about a tenant in NY getting sued after his landlord started renting out apartments.

But it is also true that your lease could allow you to sublet with an AirBnB type arrangement, so for AirBnB they probably have you sign up saying "Yes, I am allowed to do this." and leave it up to the participants to be legal and if they aren't having the landlord deal with it.

A number of stories we have yet to hear are "AirBnB got me kicked out of my apartment." or "I was arrested sued by a hotel chain." kinds of stories. I think of them as the sounds of disruption. Basically they have created a market, very much like eBay created a market, or Craigslist, and suddenly there are commerce opportunities that didn't exist before, combined with a tight economy and poof, disruption.

airbnbtrouble 14 years ago | | |

Airbnb is getting me kicked out of my NYC apartment.

I just received a notice of termination from my landlord in the mail. It states that I am violating my lease by using my apartment as a hotel/bed and breakfast and that I have two weeks to move out. As evidence, they included my airbnb posting and the two reviews I received from the two people who stayed in my apartment (one for two nights and one for five nights). The apartment is not rent stabilized and I have lived here for two years, always paying my rent on time. I don't know if it is legal that they are trying to kick me out of my apartment with two weeks notice, and I don't know if they can use my airbnb posting as proof. I'm going to see a lawyer this week.

netcan 14 years ago | |

Question: Why does Airbnb need to deal with this at all?

I mean, if these apartments were being advertised on craigslist or local classifieds would you think they need to deal with it?

tptacek 14 years ago | | |

The classifieds don't provide comprehensive listings of short-term vacation rentals.

But I'm not saying Airbnb "needs" to deal with it. I'm saying they "should" decline listings from people who don't own their property absent some documentation of consent from the landlord of that property.

ditojim 14 years ago | |

and airbnb really doesnt care about this or they would take further steps to ensure that their rentors have the authority to rent the place. they say they do, but they don't. without renters i think airbnb would be in trouble..how many homeowners really want strangers coming in and out of their home regularly?

arethuza 14 years ago | | |

"how many homeowners really want strangers coming in and out of their home regularly?"

Everyone who runs a Bed and Breakfast business from their home? (In the UK this sector is huge).

pork 14 years ago | | |

There's a category of homeowners like that: vacation home owners who DO explocitly want people coming in and out and paying.

Zak 14 years ago | |

Why does Airbnb allow renters to list their apartments on Airbnb at all?

What is the incentive for Airbnb to check? Even assuming most listers do have the legal right to do so, checking in a way that isn't easily gamed would be time-consuming and expensive. It's pretty obvious why they don't do that; it would put them out of business.

Was this a rhetorical question meant to make the point "Airbnb is bad"?

tptacek 14 years ago | | |

I said I liked Airbnb, so you can safely assume that no point I raise is a cryptic barb at them.

I think Airbnb has no incentive right now to try to ensure that listings are legitimate or authorized, and that that's a problem.

dllthomas 14 years ago | |

Checking the credit of the tenant is about the landlord worrying they won't get paid. This is entirely unrelated to the tenant's relationship with a potential subletter.

The rest of your post stands, though - landlords have a valid concern for the condition of the apartment, disruption of other tenants, &c.

spinlock 14 years ago | | |

As a - former - landlord, I can tell you that I was interested in much more than just credit scores. I wanted to have stable, long term tenants in my units. I also wanted responsible people who would tell me if there was a drip so that I could fix it before it became and issue. I found that the more time I spent vetting tenants, the less time I had to spend worrying about disputes and other issues. Tenants live in a valuable asset and everything from their cleanliness to job stability really matters.

cluutran 14 years ago | |

Not all landlords have leases, credit checks, or references. What about those cases?

tptacek 14 years ago | | |

You just knew someone was going to come in here pointing out that they knew of a landlord that drafted their lease on the back of a used Kleenex. Well. I stand corrected, then.

primigenus 14 years ago |

Two of my coworkers are in SF right now for WWDC, having flown there from Europe, and their AirBnB host was just handed an eviction notice for subletting - they have to leave immediately. So this article feels extremely ... timely.

And I'll be in SF in 2 weeks for Google IO, also staying with an AirBnB host. Not the kind of article I want to read before flying out there :-)

rexreed 14 years ago | |

Having had this happen once, my only advice is to find hosts on AirBnB that own their properties. I know, not the majority for SF city, but there are quite a few home owners who are in control of their property and thus not under a tenant agreement. They might later have to pay the piper with regards to the city, but that's a much harder bone to pick.

If you want references for property owners in San Fran or near by who have their properties listed on AirBnB, drop me a line.

_delirium 14 years ago | | |

I wonder if people who own their own properties could gain a modest advantage by mentioning that in the AirBnB listing. Possibly not enough AirBnB users know about or are worried about the distinction, but I'd personally be more willing to rent from someone if the description assured me that it wasn't an unauthorized-sublet type situation.

mattw 14 years ago | | |

The owners might also have to pay the piper with regards to their mortgage holder unless they own the property outright - I'm pretty sure my mortgage prohibits commercial activity like this without prior approval, similar to what a lease agreement would say. (Of course, a bank is far less likely to find out than a landlord.)

ebiester 14 years ago | |

I had that happen to me, subletting an apartment for two months outside of AirBnB. (We were taking over an apartment of friends of friends while they were in France.) So, a few days after the house was broken into and our laptops were stolen, the landlord (from Germany) found out we were there and we had an hour to get out. Since then, I've been very wary about subletting unless everything is above board.

runako 14 years ago | |

Do you know how AirBnB is handling this for your coworkers? This kind of real-time fiasco is exactly the reason I've been hesitant to rent on AirBnB, so I'd be curious to see how they resolve the situation for the renters.

primigenus 14 years ago | | |

They headed out to see the keynote at 9am and I think they'll deal with the problem afterwards. Priorities, and all that ;-) If I find out what happened and it's relevant I'll report back.

josefresco 14 years ago |

For an industry so focused on disrupting ...everything. Things start to get real hard, boring and normal when met with success and exposure to the public. I admire the optimism that youth brings, allowing someone to look at a problem with a fresh perspective but all too often, the rules, laws and regulations in place that make the old way of doing business so boring and hard are actually in place for a very good reason.

Support line dealing with complaints from neighbors? How messy and resource intensive.

Meeting with local community leaders and the public to discuss the issues surrounding their service? That doesn't scale very well and is again ... messy, boring and hard.

kanamekun 14 years ago | |

"Meeting with local community leaders and the public to discuss the issues surrounding their service? That doesn't scale very well and is again ... messy, boring and hard."

In other words, a fantastic way to build barriers to entry and really lock up a new industry.

vecinu 14 years ago | | |

A lot of folks don't want to acknowledge this fact but many businesses operate this way.

Most internet startups have low or no barriers to entry, so they can get an idea off the ground really quickly.

tomjen3 14 years ago | |

Also, if they are not their customers why should ABNB care?

mindcrime 14 years ago |

all too often, the rules, laws and regulations in place that make the old way of doing business so boring and hard are actually in place for a very good reason.

I can just as easily say that "the rules, laws and regulations in place that make the old way of doing business so boring and hard are actually in place because of corruption, greed, nepotism, and/or incompetence and are universally immoral, unjust and should be ignored".

And on a semi-related note... did anybody else notice how the phrase "scarce rental housing" kept cropping up in that article? Hmmm... so if there is actually demand for more long-term rental housing, and that demand is not being met, I'd bet money that the primary reason is drumroll please government interference. And I'd be strongly tempted to suspect that said interference has it's root in more corrupted relationships involving the local government and powerful special interests.

jseliger 14 years ago | |

The article has one other howler: "But others, encouraged by lax oversight and lucrative payoffs, use the rental sites to run ad-hoc hotels, which besides annoying neighbors, takes long-term rentals off a market that desperately needs them. . ."

San Francisco has also made it virtually impossible to build new housing units (http://www.slate.com/articles/business/moneybox/2012/05/face...). If the city needs more housing stock, there's an advanced, information-age technology called the "elevator" that can allow it to build a very large number of housing units on a very small amount of land.

tomkarlo 14 years ago | | |

This... there was also a recent NYT article about how new workers moving to SF are displacing existing residents by competing for apartment rentals. Having thousands of new residents moving into a city should be viewed as an opportunity, not a problem, especially considering the budget issues out here. SF needs to stop obstructing new construction and allow for more vertical residential housing like New York and other space-constrained cities. Even if those apartments mostly go to yuppies, it will take pressure off the overall housing market.

peejaybee 14 years ago |

"We used Airbnb happily in Europe last summer," said Thieme. "I want to extend them the benefit of the doubt that they are still evolving their business model and have had explosive growth, but they need to evolve appropriate mechanisms of monitoring and control. They should deal with zoning laws and tax laws more aggressively and realistically, or they will antagonize people."

tl;dr: "We like Airbnb when others are potentially inconvenienced to our benefit, but not the other way around."

tptacek 14 years ago | |

The overwhelming majority of those inconvenienced by abusive Airbnb listings have never previously heard of the site. It's unhelpful to single out a single person who had used Airbnb as a way of warding off criticisms of Airbnb abuse.

peejaybee 14 years ago | | |

Well, I didn't exactly single the guy out -- he was presented to me by a major news outlet as poster boy for the problem.

merc1985 14 years ago |

I also just had an issue with AirBnb. I live in a NYC cooperative apartment. We do NOT allow short-term rentals (It's actually a NYS law, minimum of 30 days). The person renting out their apartment owns it. I had spoken to AirBnb about this issue, asking them to remove the listing. They feel that this is an issue between our building and the owner of the individual apartment. However I asked AirBnb why they allow apartment rentals in a state where the law does not allow it. AirBnb stated that the lessor signs an agreement and therefore the onus is on them. However, I feel the law is implicit and AirBnb is aware of this law, then entering a contract with prior knowledge of the contract already being invalid makes AirBnb culpable. You dont enter contracts knowing the contract is already void. It's amazing that AirBnb's entire business model pretty much hinges on this contract cop-out. It has yet to be seen if my building decides to include AirBnb as a defendant in a lawsuit against this owner as we work to evict them. The main reason why toursts need to stay in hotels is also as follows: 1) no background check - allows opportunity of crime. Example: pedophile renting a house or apartment near children. Or someone wanting to rob a specific apartment or group of apartments. How do you gain access to the building? $120 bucks, one night. 2) Fire Code: hotels have sprinklers and proper signage for fire in places where people are not as familiar with the surroundings. This puts the guests at risk. 3) Fire hazard: Guests are unfamiliar with the stove, or jet lagged or smoke a cigarette etc. Risk of fire is greater. 4) Noise: guests decide to have a party or blast music. Or they are just up late b/c they are on vacation. 5) Vermin: guests arent going to be as clean. B/c, hey that's what the cleaning deposit is for. This can attract vermin. Then there's the chance the guests bring bed bugs with them.

And yes, I agree it does take away units that would otherwise have been used for long-term renting, robbing the rental market of stock. NYC has about a 1% vacancy rate as it is.

AirBnb is going to see a huge litigation storm coming its way if it doesnt take more of a proactive approach where local law does not allow such rentals.

nodata 14 years ago |

"The big surprise for us was when we tried to contact Airbnb" to complain, said Thieme, a writer and editor...

Not mentioned is if they tried to talk to their neighbour.

tokenadult 14 years ago | |

Not mentioned is if they tried to talk to their neighbour.

Was the neighbor who had control of the unit as a tenant on the lease home when the room was rented out? I don't think so. The article opens with these paragraphs:

"First came the noisy upstairs neighbors who said they were just "renting the place for a couple of nights" but refused to tone it down. Then came the people who would try to open the front door of the Castro/Duboce Triangle apartment where Barnaby Thieme and Rebecca Reagan live, saying they thought it led to the lobby.

"The couple looked online and discovered what was behind the disruptions - a unit in their building was being rented out through Airbnb, the marketplace for short-term housing in private residences."

I read that as saying that the couple who were disturbed by Airbnb visitors DID talk to those visitors, only to find out that they weren't actual tenants of the building. The person putting the unit up for short-term stays on Airbnb doesn't seem to have been available.

AFTER EDIT: A top-level comment that came in since I posted this makes an interesting point:

I admire the optimism that youth brings, allowing someone to look at a problem with a fresh perspective but all too often, the rules, laws and regulations in place that make the old way of doing business so boring and hard are actually in place for a very good reason.

This is usually how the law (and business custom) develops, by encountering actual human behavior. As Oliver Wendell Holmes, Jr. wrote, "The life of the law has not been logic; it has been experience." The Common Law (1881), p. 1.

nodata 14 years ago | | |

..DID talk to those visitors..

They need to talk to the person the visitors are renting from. Is that doesn't work, they can go one level higher up.

neutronicus 14 years ago | |

The point is that they didn't have a neighbor. They had an absentee property owner and a string of short-term tenants.

ScottWhigham 14 years ago | |

Not mentioned is whether the person who owns the subletted apartment is, in fact, their actual neighbour (as opposed to someone who lives somewhere else yet still owns the property and rents it via Airbnb).

abcd_f 14 years ago | |

First came the noisy upstairs neighbors who said they were just "renting the place for a couple of nights" but refused to tone it down.

redwood 14 years ago |

Weird that AirBnB wasn't asked to comment on this piece; or if they were, that they didn't provide anything significant.

ThomPete 14 years ago |

I can say as someone who moved to New York two weeks ago and hoped that AirBnB would allow me to find a good temp place that i feel pretty critical towards the experience.

The prices are insane. I paid 3300USD for a shitty studio in China Town for a month.

I am ok with paying a lot of money for a place and I know NY well enough to know it's expensive.

But people who get only profit from subletting and pumping up the prices by a factor 2x-3x should not be allowed onto the platform.

Of course Airbnb don't really care because they get a percentage of the transaction.

So great idea but pretty shitty service at least in NY.

rexreed 14 years ago | |

Out of curiosity, would it not have been cheaper to stay in New Jersey and take the NJ Transit or Path? If you could, then your options for low-cost AirBnB or short-term sublet are much expanded.

I know, it's not the same as living in the city, and perhaps you wanted that experience as well. But not sure if the Chinatown Studio gave you the experience you were looking for.

ThomPete 14 years ago | | |

I am here on an O Visa so I am here to work. I wanted to stay close to the office in the beginning until I found a proper place.

Hopefully I found that yesterday :)

Will have to get approved (again an issue when you don't have credit history as the US works opposite of Denmark in that regard)

jaems33 14 years ago | |

Well there are places on Craigslist you probably could've found cheaper in Chinatown of all places. But studio apartments in general are expensive in a place like

Secondly, Airbnb does have plenty of shared places in Queens and Brooklyn that go for less than seventy bucks a day, and studios that would be closer to 2k.

ThomPete 14 years ago | | |

The thing is. right now I am looking at a 1BR appartment completely modern building, rooftop, open kitchen the works for 3600USD.

There are many places on AirBnB that have simply pumped up the prices to make a living and since there is not negative feedback mechanism everyone just charges more and more.

Craigslist yeah i tried that, i enden up with mostly scams and bait and switch guys.

jusben1369 14 years ago | |

That's probably just a supply and demand issue. Those sorts of profits will attract other folks to let out space and bring prices back into line (assuming of course they can sort out all of the issues above)

Adirael 14 years ago |

This kind of lettings are a PITA for the neighbours, with or without AirBnB. I used to live in a city with high level of tourism and the apartment next door was rented in a short term fashion. Sometimes the people was nice, others they were noisy, there's nothing AirBnB or the owner can really do apart from removing the people form the property if they are breaking the law or community rules.

Taxes and laws are a totally different beast here.

tomjen3 14 years ago | |

My neighbors are pretty noise and the appartment is leased on a normal contract.

jusben1369 14 years ago |

Weird no one mentions insurance. That's the biggest issue of all I would think. Landlords have insurance for legitimate tenants.

slug 14 years ago | |

They do? The last time I read a lease mentioning an insurance was only to pay a hotel in case of fire/flooding, anything else you are on your own.

tomkarlo 14 years ago | | |

It wouldn't be in the lease, it's not for the tenant. Landlords will carry liability insurance for their units in case a tenant or their guest is injured, etc and decides to sue the landlord. Those liability policies often have limitations on who they'll cover, how the unit can be used, etc.

I'm guessing the insurance companies find a way to avoid covering you if you let a tenant sublet their apartment hotel-style... if for no other reason than I'd bet policies for hotels are more expensive than residences. (And hotels have to have better fire protection, etc.)