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City for Let: The Sharing Economy Proves It Can Do Whatever It Wants 

Wednesday, May 14 2014

In a recent radio interview, Ed Lee, San Francisco's incredibly lifelike mayor, extolled the virtues of the so-called sharing economy. "This is happening in, literally, every industry," he said. "Having access should trump ownership because of the expensiveness to own things."


And yet, Lee is the exception to his own rule. The well-heeled tech barons who bankrolled and shepherded his political ascent were hardly content with merely "having access" to a mayor. They wanted to own one.

The lords of the sharing economy have, literally, redefined the term "sharing." Raising your prices to squire a passenger around in the rain or subletting your rent-controlled apartment for St. Regis rates doesn't jibe with giving half your tuna sandwich to the kid who forgot his.

Modern-day sharing, it seems, requires an algorithm and a profit motive.

For better or worse, the San Francisco of yore was built by the robber barons who extracted minerals from the earth and built the railroads connecting our city to the rest of the nation. And now, their tech-savvy successors are — again for better or worse — unbuilding it.

We have been disrupted by forces offering a lucrative new digital spin on established — and regulated — entities; the West is wild once again. Corporate shuttles glide through town, squatting with impunity at Muni stops while actual Muni patrons run like hell to catch their displaced buses. Burgeoning fleets of app-based car-hire services have given the Darwin treatment to traditional cabs, an industry run with the efficiency of a Soviet department store and bound by that irritating nuisance we call "the law."

Closer to home (notably, yours), cavalcades of tourists shlepping rolly bags have descended upon San Francisco's ostensibly residential neighborhoods; your temporary neighbors may be patrons of Airbnb and similar travel websites. A recent lawsuit by City Attorney Dennis Herrera accuses several landlords of jettisoning tenants via the dreaded Ellis Act in order to begin printing money with Airbnb hotels. Within the suit, the city claims 9,500 units were listed on Airbnb and smaller vacation rental websites on the sample date of April 10. The San Francisco Apartment Association claims 2,728 "whole apartment units" were offered on Airbnb alone in the first week of this month.

In February, the most recent month on record, 20 apartment units were vacated via the Ellis Act.

Well, what are you gonna do? This is happening in, literally, every industry. The pattern thus far is for the politically connected disruptors to ask for forgiveness rather than permission — and get it. Entire business models based upon violating local or state laws have been retroactively approved, validating the outfits who rolled into town and did as they pleased. Purveyors of tech shuttles have been offered the "I'd buy that for a dollar!" buck-a-stop deal by the city. Uber, Lyft, and their ilk have been legitimized by the state's Public Utilities Commission. And, last month, Supervisor David Chiu introduced a measure aiming to regulate Airbnb and similar sites, a move gestating for more than a year.

Chiu, to his credit, stepped into a void. Under city codes, renting out a residential unit for less than 30 days is illegal — period. Every last Airbnb rental is in violation of the San Francisco Administrative Code — period. City workers could, theoretically, scour the Internet and wear out keyboards by typing up notices of violation.

They don't.

The Planning Department and Building Inspection Department have been remarkably lax in their enforcement. Chiu's response — for better or worse — is to give the latter more responsibility. Under his proposed legislation, would-be Airbnb hosts will have to sign up for a registry, which will be overseen by the Department of Building Inspection; rogue Airbnb hoteliers who fail to register are subject to the wrath of the DBI.

This is the crux of Chiu's legislation. "It does hinge on enforcement," admits Judson True, Chiu's chief of staff. And yet, True continues, the DBI officials mandated to make this legislation work "are a little bit hesitant." They still require a bit of cajoling to "get them as enthusiastic as they need to be to actually enforce it."

Good luck with that.

A longtime DBI manager bluntly tells your humble narrator, "I don't know how we're going to enforce it."

The registry, he continues, "will be easy to cheat." And "it's going to be very hard to verify what's an Airbnb and what's not." The city has trouble enough busting far more corporeal illegal in-law units; landlords have a tendency to reinstall the kitchens and bathrooms they earlier removed at a building inspector's behest. Recidivist Airbnb pirates will have it even easier; they can simply lie low for a couple of weeks and then begin hawking their rooms on the Internet once more. Kitchens and toilets need not be pried out. Sure, the DBI could monitor the thousands of ersatz hotels like hawks, "but we're not FBI agents," grumbles the manager. "We're building inspectors."

Illegal in-law units, for what it's worth, add affordable housing stock to our city. Airbnb takes it away. Keeping tabs on the website and its users "is going to be much harder."

But, first, Building and Planning have to want to keep tabs on Airbnb. And that's no given.

Multiple well-placed city sources tell your humble narrator that both Planning and Building have been pressured to not issue notices of violation following Airbnb-related complaints. There's a pattern here: We are also told that the Mayor's Office directly inveighed against confronting the politically connected scofflaw land barons of Academy of Art University. And, in 2012, Lee urged Treasurer Jose Cisneros — in writing — to back off collecting the Transit Occupancy Tax on Airbnb until a newly formed "Sharing Economy Working Group" could opine on the matter.

It's a hell of a thing for the mayor to instruct the independently elected treasurer to shirk his legal obligations. Cisneros refused.

(This is the point where we note that, in an amazing coincidence, Ron Conway, Lee's preferred financier, is a major Airbnb investor.)

Fittingly, Lee's Sharing Economy Working Group never met. To date, Airbnb hasn't tendered the city a penny; it claims, in a high-tech nod to Waiting for Godot, that it'll begin paying its taxes sometime soon.

Payment won't come this evening. It'll come tomorrow. Without fail. And, in the meantime, the rolly bag brigade continues to inundate our city.

What to do about Airbnb's mushrooming tab is the multimillion dollar question — and one unaddressed by Chiu's proposed legislation. Cisneros' office declines to name a figure — but a source claims city bean-counters estimate Airbnb owes between $50 million and $100 million, with $60 million being the most commonly cited number.

If Airbnb sees fit to even up with the city, other cities could come and ask for their ducats, too. This would put a crimp in Airbnb's genius business model of not paying money to people whom it ought to pay money to. So, again, good luck with that.

Paying your fair share isn't exactly a tenet of the sharing economy.

About The Author

Joe Eskenazi

Joe Eskenazi

Joe Eskenazi was born in San Francisco, raised in the Bay Area, and attended U.C. Berkeley. He never left. "Your humble narrator" was a staff writer and columnist for SF Weekly from 2007 to 2015. He resides in the Excelsior with his wife, 4.3 miles from his birthplace and 5,474 from hers.


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