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Sunday, December 11, 2016

San Francisco Turns against Its Own Startup Airbnb

San Francisco may have just forced residents out of the city.

San Francisco is the birthplace of Airbnb. Even so, politicians in this city have created some of the most restrictive home-sharing regulations in the country. And now they’ve outdone themselves by approving an unprecedented and arbitrary limit on the number of nights residents may welcome paying guests into their homes.

San Francisco’s existing regulations are already burdensome in several ways.

First, only individuals who live in San Francisco for more than 275 days a year are allowed to use their property for home-sharing. This means bi-coastal workers and other part-time residents must leave their dwellings empty and unused. Their capital, in the form of their home, lies dormant, unable to generate revenue.

The Board of Supervisors has abandoned any pretense that its regulations protect housing affordability, safety, or neighborhood integrity.Second, an entire home cannot be rented out on a short-term basis for more than 90 days in a year, even though a room in a host-occupied home can be rented for an unlimited number of nights – for now.

Third, anyone who wants to use Airbnb must pay to apply for a variety of licenses and permits. Predictably, not all Airbnb hosts have been enthusiastic about paying the city for permission to use their own homes, so only about one quarter of San Francisco’s home-sharing hosts are currently registered. This is where the new proposal comes in.

To retaliate against residents who did not register, the San Francisco Board of Supervisors has voted to limit all home-sharing to 60 days a year, except for residents who registered with the city before November 15, 2016. By approving this arbitrary limit on the number of nights a person is allowed to rent out one of their bedrooms, the Board of Supervisors has abandoned any pretense that its regulations protect housing affordability, safety, or neighborhood integrity.

Renting an unused room out to guests rather than the full house does not take a home off the market or out of the hands of long-term renters. So this new 60-day limit cannot possibly be about affordable housing concerns. In fact, many use the extra money earned from home-sharing to help pay for their own housing in one of the nation’s most expensive cities.

In fact, San Francisco’s affordable housing concerns go back decades. A recent rental survey shows that rents in the city have gone up a steady 6.6 percent annually since the 1950s. Banning Airbnb will not make housing more affordable, and likely will make the problem worse. Instead, affordable housing concerns have proven to be convenient pretexts for politicians who want to exercise power to haul in new taxes and permitting fees.

The only winner from these regulations is the hotel industry, which sees Airbnb as a source of unwelcome competition. This combination of affordable housing arguments and special interest gains is a classic example of a “Bootlegger and Baptist” alliance of the sort that props up so many costly and harmful regulatory restraints on trade.

People currently renting out rooms to afford living in San Francisco will be forced to move.Moreover, the argument that regulation will help ensure traveler safety is absurd. Airbnb has an excellent safety record, with problems reported in less than a fraction of a percent out of millions of stays around the globe. The platform’s rating system, in which hosts and guests review each other, has proven remarkably effective at building trust and rewarding good behavior.  

Airbnb has experienced rapid success because it is simple and creates wealth. In a country where heavy-handed regulatory burdens have made the prospect of starting a business daunting, people eagerly jump at innovative opportunities to earn extra income.

San Francisco is raising the hurdles even higher by forcing home-sharing hosts to undergo lengthy application processes that cannot be done online, pay steep fees, and comply with a thoroughly arbitrary limit on how many days a year residents may rent their property to profit from the Airbnb platform.

This new rule, if the mayor does not veto it, will severely limit the supply of short-term rentals and cause the cost of both housing and lodging to continue to climb. Low-income tourists will find it harder to visit the city, and people currently renting out guest rooms as a means to afford the high costs of living in San Francisco will be forced to sell up and move on. That’s no way to address the city’s shortage of affordable housing.

Note: Since this article was written, the Mayor did indeed veto the ruleHowever, he pledged to work with the rule’s authors to “improve” Airbnb regulations, which will probably result in similar (if possibly less restrictive) rules being adopted at some point. Watch this space!

  • Iain Murray is the Competitive Enterprise Institute's vice president of strategy. For the past decade with the Institute, he has concentrated on financial regulation, employment and immigration regulation and free market environmentalism.

    Murray has published several acclaimed books, including Stealing You Blind: How Government Fatcats Are Getting Rich Off of You and The Really Inconvenient Truths: Seven Environmental Catastrophes Liberals Won’t Tell You About – Because They Helped Cause Them. His op-eds have appeared in The National Review, The Providence Journal and Fox News. He has appeared on Fox News, CNN Headline News, the BBC and Al-Jazeera, among other broadcast networks.

    In addition to his work at CEI, Murray is the visiting fellow at the Adam Smith Institute and board members of the Cherish Freedom Trust and American Friends of the Taxpayers Alliance and advisory board members of Global Britain and Young Britons Foundation.

    Prior to coming to CEI in 2003, Murray was the Director of Research for the Statistical Assessment Service and an Executive Officer in HM Department of Transport. He received his MBA from the University of London and his MA from the University of Oxford.

  • Daniel Cody is a Research Associate at the Competitive Enterprise Institute and a student at Hillsdale College. He is a frequent user of Airbnb.