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San Francisco’s Short-Term Rental Solution

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Editor’s note: David Chiu is president of the San Francisco Board of Supervisors and a candidate for California State Assembly.

After two-and-a-half years of intense policy discussion and countless hours of public testimony, this week Mayor Ed Lee signed into law legislation I authored that will for the first time regulate short-term rentals in San Francisco. This legislative process was a test of whether or not we could find a reasonable solution to a policy issue posed by the new tech economy — and I strongly believe we succeeded.

Unfortunately, critics of our approach — some of whom have genuine concerns, but many of whom are politically motivated given my campaign for California State Assembly — have continued to spread misinformation about the policy.

It is time to set the record straight and be clear about what the new law means and to dispel the most persistent fabrications about it.

These regulations are the direct result of discussions with a variety of people, including tenants, landlords, the hotel industry, the tourism community, neighborhood associations, home sharers, the city planners, the mayor’s office, my fellow supervisors, and many others.

Like all legislative processes, we all had different ideas for what the perfect solution should look like. But everyone agreed on one thing: the status quo is not working.

Every night hundreds of San Franciscans share their space with visitors from around the world. This activity is happening, and I am proud that rather than continue to ignore it, we chose to update outdated laws and put a balanced solution in place.

The heart of this legislation is about addressing housing affordability. How can we all afford to live in the San Francisco we love as it becomes increasingly expensive?

We know there are bad actors using illegal short-term rentals to push San Franciscans out of the city. Previous efforts to stop them had fallen short. There were no coherent enforcement structures in place. That’s why we consolidated enforcement in one city department and imposed tough fines and potential criminal penalties on anyone taking housing off the market and turning any unit into a year-round vacation rental. We placed a limit on the number of days residents can rent their space if they’re not present.

But we also knew that many San Francisco residents were sharing the homes they lived in and not taking much-needed housing off the market. Throughout this process, we have heard hours of testimony from seniors, students, families and artists who rely on this income to make ends meet and pay their rent or mortgage. These are our friends and neighbors. We have seen that home sharing, when regulated properly, could actually be a tool to make the city more affordable for more families.

The new law says that San Francisco residents who play by the rules, register their residence, pay their taxes, obtain liability insurance, abide by building safety and rent control rules, and do not profit wildly from sharing their space, can participate to a limited degree in short-term rentals.

This is the truth about the new short-term rental legislation. Ideally we could start to implement it and monitor our progress, and future supervisors could tweak it as necessary. Instead, opponents are saying that they will try to push a ballot measure on the issue in 2015. And you can be sure that whatever the they propose, it won’t be the result of a thoughtful, inclusive legislative process. It will be a profoundly political effort based on a fictitious narrative about back taxes.

Contrary to claims by David Campos — my opponent in the upcoming election — claims echoed repeatedly without any fact checking, the new law does not let Airbnb or any hosting platform off the hook for $25 million in back taxes. In fact, I was the first elected office to publicly support the city’s treasurer when he issued a ruling that the “transient occupancy tax” or TOT applies to short-term rentals.

My legislation affirms the treasurer’s existing powers to apply this tax and goes a giant step further by explicitly stating that hosts and hosting platforms must collect and deliver taxes to our city. I also pushed Airbnb to work with the treasurer to simplify TOT collection for short-term rentals.

Before the final board vote on my legislation, the treasurer issued a statement that said unequivocally that he has all the legal authority he needs to pursue back and future taxes. For two-plus years, I have stated publicly that the city should collect all taxes owed before any of the opponents focused on this issue. But the idea that we should not address the broken status quo until a full completion of a lengthy tax collection is a great political sound bite, not a real policy argument.

There’s one more falsehood to call out regarding taxes. The ubiquitous $25 million figure is not a real estimate; it’s a math error. We do not know the amount that past short-term renters and platforms owe. We do have a very rough estimate from San Francisco Chronicle reporter Carolyn Said that we could see $11 million or so annually in new taxes moving forward — funds we will be able to spend to build affordable housing, clean our streets and support the social safety net. But extrapolating back from the $11 million estimate and concluding that the back taxes owed are $25 million simply because the treasurer issued a ruling two-and-a-half years ago is absurd. It assumes the same level of activity over that time period, when in fact we know that short-term rentals have been growing exponentially.

Finally, I want to respond directly to one other aspect of the anti-Airbnb rhetoric that’s swirling around: the offensive suggestion that I would pursue legislation based on campaign spending by technology leaders on my behalf. Nothing could be farther from reality. I began to craft short-term rental regulations two years ago because I saw a housing policy challenge in San Francisco that needed to be solved — well before I even began to consider running for the State Assembly. I believe that new technology is creating the need for new policies, and I was elected to pass laws to solve problems.

The Board of Supervisors I’ve presided over has worked tirelessly to address San Francisco’s housing crisis by fighting evictions and approving the construction of new housing, with a focus on maximizing the number of affordable units. The work we’ve done to regulate short-term rentals is in that same spirit.

San Francisco has always prided itself on innovation and openness. With this step, we continue to show the world that we are a leader not just in technology, but in government’s response to technology. At our best, we do not run from tough challenges or grandstand from the sidelines; we work together to hammer out new and fair solutions.

Featured Image: Martin M303/Shutterstock