The Airbnb struggle: Stumbling through innovation in San Diego

A fairly typical Airbnb short term room rental - recently made illegal by the City of San Diego

A fairly typical Airbnb short term room rental – recently made illegal by the City of San Diego

Airbnb hosts and the company they use to make their homes available have been struggling because of the city of San Diego’s current treatment of the issue. With a hearing set for November 1, 2016, there are a few updates to the original post that are worth making to help people understand the new issue. First, know that this isn’t just applicable to Airbnb. It applies to Craiglist and renting to military or foreign exchange students on short stays or any other type of rental/home swap for less than 30 days in a residential part of San Diego.

The photo above is of a room in Austin from this blog. The story stretches back to at least mid-2015 in San Diego when, for the first time publicly, the City of San Diego announced its position regarding the funky upstart that brings people together by allowing them to share rooms in their homes. What did City officials say: renting a room for less than 30 days within the City of San Diego in almost all residential zones is illegal unless you first obtain a $5,000 – $10,000 Permit.  Despite this, with one notable exception the City has basically ignored this position. Until now.  The proposed changes to be considered on November 1, 2016 will, if enacted, make the City of San Diego among the first major US cities – and only major tourist destination that I’m aware of outside New York – to tell its citizens that renting rooms or homes using Airbnb in residential neighborhoods is illegal. Belong Anywhere…except San Diego it seems.  Well, let me explain…

CURRENT ISSUE

City of SD Posted Announcement

City of SD Posted Announcement

The photo above is a notice the city published “explaining” a proposed change to the municipal code.  It describes a “minor” revision by removing the word primarily from the definition of a visitor accommodation.  Let’s recap briefly what’s going on. If you are renting out a room in your home OR your whole primary residence (as in when you go on vacation) the City of San Diego says this is a commercial bed and breakfast. What does that mean?

Commercial bed and breakfasts, according to the city of San Diego’s current printed law (see page 5, 141.0603, here) are “…visitor accommodations within a residential structure where breakfast is typically provided for guests.”  Umm, okay.  Anything else?  Well, a visitor accommodation (see page 9, 131.0112(L), here) is a place for lodging or entertainment, food and lodging that is primarily for visitors and tourists.  Not to put too fine a point on this, but this is how Merriam Webster defines “typically” and “primarily” (Hint: “Never” or “occasional” are not in the definition.).  Why oh why is my city trying so hard to make its outdated definitions fit this new technology?

The notice the city posted describes removing the word “primarily” from the above definition as minor. Think about what happens when you change “primarily for visitors and tourists” to simply a place for lodging for visitors and tourists. It now means that the code would no longer distinguish between a one-time use and something that you do as a business. All such uses in residential areas would become illegal without first obtaining the $5-$10,000 permit mentioned above. This is effectively a ban.  In that light, it seems a bit less minor, right? And under this new definition of visitor accommodations it likely would now apply

The change to align “visitors and tourists” with the definition in SDMC 35.0102 is pretty straight forward. Except not at all.  It makes clear that people who stay in a visitor accommodation will be subject to transient occupancy tax for stays less than 30 days. Unless you’ve been paying really close attention, you may not have noticed that the current City Attorney opinion allows whole home, non-owner occupied rental for less than 30 days because, says the memo, the terms visitor and tourists aren’t defined in the Municipal Code. If this change goes through there will be a definition, that definition will be transient, and taken together with the change to visitor accommodations will enable the City to ban Airbnb and all things like it and claim it is doing so under the existing code, not creating a new ban. Still seem like a “minor change?”

BOTTOM LINE: This most recent effort by the City of San Diego would alter the term ‘visitor accommodations’ such that any short term rental – whole home, granny flat, primary home, room in home – would no longer be allowed in residential zones without the $5-10,000 minimum permit mentioned above.

GOVERNMENT TRANSPARENCY: Let’s set aside for a moment whether we think Airbnb in our neighborhoods is a good thing.  I think the benefits outweigh the negatives and most of the bad parts could be handled with better, 24-hour enforcement. But reasonable people can disagree on this point.  What I think we should all agree to demand is much greater transparency from our local government.  Read that notice and ask yourself if you have any idea what the real impact is going to be?  Our government should not make such massive changes thinly disguised as minor cosmetic revisions.  We’ve all seen the local news rush to cover some run-of-the-mill press conference for a groundbreaking or some new initiative, so it’s not like the politicians don’t know how to get in front of a microphone when they want people to know what’s going on.  This will impact thousands of San Diegans. I saw one report that Airbnb guests spent $71 Million last year in small San Diego businesses. If you have a newborn and you want your parents to come to town and help out, unless you live really close to downtown or Mission Valley you have very limited options.  Maybe the will of the people in San Diego will be to ban short term rental. I hope not. But either way, we really ought to demand more transparency from our elected officials. Does anyone really think they weren’t given legal guidance about the impact of the changes? Given that the official who called the hearing is an opponent of short term rentals, is there any doubt that she knows what impact the proposed changes would actually have?

Whether one agrees or doesn’t, the City has the land use authority to ban this type of use. But if they are going to do it, they ought to do so in the light of day and accept the political, economic and social ramifications of those choices.

THE MATERIAL BELOW (old material)

The rest of this material is from my original post on this issue in April of 2015.  I left it here for those who might be curious about how some of this could play out – as it did for a client of mine.

I found myself involved in this ordeal because someone with a land use background and a law license had to stand up for a woman whose sole crime (if you can call it that) was renting out 2 rooms in her cozy historic home for $80/night.  You can watch clips about that particular story below.

San Diego AirBnB in Cross Hairs of Enforcers (2/10/15)

Politically Speaking: AirBnB Confusion, Controversy (3/7/15)

We are still fighting, but that case is now in the hands of an Administrative Law Judge so it is not the focus of this post.  However, since this site is about travel, I’d like to warn my fellow San Diegans what the impact of the City’s current position will be.

Basics about the issue

Before I present a clip of the city’s view, let’s review the current law.  There’s this handy legal memo from the City Attorney back in 2007.  It is a legal memorandum that concludes “there are currently neither regulations nor prohibitions on short-term vacation rentals in single family residential zones in the City of San Diego.”  As it turns out, according to the current City Attorney, the old City Attorney actually was only talking about renting out your entire home, only if it was not your primary home, and then only in single family zones.

First Key Point: In the City of San Diego, when local government people say “short term vacation rental” they are NOT talking about renting a room nor renting your whole primary residence.  A short term vacation rental, says the City, is only a rental of a whole unit that is not your primary residence.

The effect of this first key point is that if you are renting a room out or renting out your primary residence when on vacation, this is NOT short term vacation rental and you are considered a commercial bed and breakfast.

Well, what does the law for commercial bed and breakfast establishments in San Diego actually say?  I’m glad you asked.  Here goes.

Commercial bed and breakfasts, according to the city of San Diego’s current printed law (see page 5, 141.0603, here) are “…visitor accommodations within a residential structure where breakfast is typically provided for guests.”  Umm, okay.  Anything else?  Well, a visitor accommodation (see page 9, 131.0112(L), here) is a place for lodging or entertainment, food and lodging that is primarily for visitors and tourists.  Not to put too fine a point on this, but this is how Merriam Webster defines “typically” and “primarily” (Hint: “Never” or “occasional” are not in the definition.).  Why oh why is my city trying so hard to make its outdated definitions fit this new technology?

Let’s turn now from the actual official definition written in the law books to the version the City of San Diego is using. Here is a Development Services Employee explaining the City’s rules (note: I’ve included the entire portion of her presentation, but you can scroll to 2:33 to start the most important 30 seconds – just click the link below)

Video Clip of City Staff

I have nothing against the public servant in the clip above personally, nor any other personal issues with City employees.  We all get attached to positions and it’s human nature to feel strongly about our work.  That said, when any of us gets too attached to our own views or feels too personally attached to our positions, problems can arise.  And this interpretation has some problems.

You only get to interpret the municipal code if it is not clear from the actual words used.  Breakfast is generally food consumed before noon.  At a minimum it’s a meal involving food.  If you never provide any food to a guest as part of their stay, is there any way to meet this definition? It doesn’t matter if the definition is a bad one, that’s the policymakers’ fault, not yours, dear Airbnb host.  According to the City of San Diego, food is not necessary to make you a commercial bed and breakfast.

Also, and perhaps more important, the City’s interpretation of the required phrase “primarily for visitors and tourists” really turns the basic definition of primary on its head.

Renting your primary home or a room in your home may not be right for every situation.  In an ideal world, reasonable people would always reach an understanding at the neighborhood level before looking for government intervention.  We don’t always live in that world.  But even in the one we do occupy, the idiosyncratic sensitivities of one or two neighbors should not eliminate the whole opportunity for every property owner across the city. And if a couple complaints IS enough to blow it, that should be made clear by passing laws that explicitly say so, not by enforcement officials who aren’t elected to make policy.

Second Key Point: According to City Staff, it does not matter if you only rent one room one night to someone who stayed over for a Super Bowl party and then gave you money instead of driving home.  Once is enough.  

Here’s an excerpt of a City employee in the Code Enforcement Department testifying under oath.

Taken verbatim from official transcript of the City's enforcement action against a retired school teacher

Taken verbatim from official transcript of the City’s enforcement action against a retired school teacher

The City of San Diego – by fiat not by elected officials voting on laws – has told approximately a few thousand property owners that they cannot rent rooms in their homes or their primary residence on Airbnb or other short term rental sites for less than 30 days without first obtaining a $5,000 to $10,000 permit.  This includes such popular sites as Home Exchange, Flipkey, and Couchsurfing.  It also includes short stays by foreign exchange or language school students, friends of family who offer you money, or any other permutation that involves exchanging something of value. It is surprising that no elected officials appear to have sent press releases or email blasts to their constituents being sure they know these practices are against the law based on current City interpretation.  Well, it ought to make for an interesting summer with Comic-Con in town this week and Pride weekend not far off.

What is the other side of the policy debate?

There are San Diegans who argue that renting out a room or your home for less than 30 days just shouldn’t be allowed in a single family residential zone. Their perspective tends to focus on whole home short term rentals – which as a reminder the City has said is perfectly okay at the moment in single family zones without any permit at all.  But either way they make some variant of the point that it destroys community character.  I can see the argument here and actually think the jarring effect of temporarily living next to large groups of thrill-seekers while you try to enjoy the home you saved up to buy is not good for anyone.  And I’d be in favor of significant punishments for these situations. But I just don’t think neighbor-to-neighbor disputes should be handled with citywide policy – and certainly not with the heavy hand of the government as the first option.

That said, we have lawmakers and hopefully at some point they’ll make laws on the issue.  For now, we have an interpretation of terms that have everyday meanings and we ought to be using those everyday meanings.

The Tax Issue

On July 1st, Airbnb announced to its hosts via email (see below) that it would start withholding the transient occupancy taxes from rentals of less than 30 days.  This is surely a boon for the City, which will be able to accurately account for revenue that should be part of the tax picture.  What this announcement conveniently does not do is require the City to tell people when and where they can actually host using Airbnb.  This might seem difficult given the City’s current interpretation.  Here’s how it might look:

Dear San Diegan,

We love that you want to show off our fine city, but we have some rules for Airbnb and sites like it that you might not know.  We don’t blame you, we haven’t made it particularly clear.  Our bad.  Here are some easy guideposts:

  1. If you live in a single family zone, it is illegal to rent out a room in your home or your whole primary residence for less than 30 days without first getting a certain permit. That permit costs between $5,000 and $10,000, minimum.
  2. If you live in most multi-family residential zones, it is also illegal to rent out a room in your house for less than 30 days without first getting the permits mentioned above. This one is tricky, so come down to Development Services and we’ll have someone explain it.
  3. If you have a whole second house that you kept after you got married or something, a duplex that you’re only using one part of, or a second apartment on your property, then it’s likely okay to rent out for less than 30 days without getting any of the permits.  Yes, you read that right.  If you are not on site, not able to directly control what is going on, and don’t regularly live there at least half the year, then you can rent to your heart’s content. There are a few small exceptions, but just come down to Development Services and we’ll get this sorted out for you.

Airbnb Tax

What next?

Time will tell how this all plays out.  For now, if you are choosing to rent out a room on a short term basis – to foreign exchange students, empty-nesters visiting their adult children, vacationers, or anyone else and you haven’t paid the $5,000 – $10,000 for a conditional use permit or a neighborhood use permit, the City of San Diego says you are breaking the law and could be subject to a maximum of $250,000 in fines even if you are paying taxes.  Not a great step for an economy so driven by tourism.  If you’d like to share your views, the Council offices who need to hear from you (with communities in parentheses) are listed below.  One question I hope everyone who lives in San Diego asks their elected officials is why the City hasn’t released its official position in some public way so everyone actually knows how it is enforcing the laws. *since I’m a lawyer I think the State Bar would appreciate me clarifying that nothing in this post constitutes legal advice. Truthfully, the laws should be clear enough that you don’t need to pay a lawyer, anyway.* Also, in case it isn’t clear, this is a personal blog and a hobby, not an expression of views endorsed by anyone other than myself.

San Diego Elected Officials as of 7/8/2015

(neighborhood lists not exhaustive)

City of San Diego Seal

Mayor Kevin Faulconer – entire city

Email: kevinfaulconer@sandiego.gov

Photo of District 1 Council President Sherri Lightner
District 1
Council President Sherri Lightner – (La Jolla, Carmel Valley, Del Mar Mesa, University City)
Email: sherrilightner@sandiego.gov
Photo of District 2 Councilmember Lorie Zapf
District 2
Councilmember Lorie Zapf – (OB, Mission Beach, Pt. Loma, part of Clairemont/Bay Park, Pacific Beach)
Email: loriezapf@sandiego.gov
Photo of District 3 Councilmember Todd Gloria
District 3
Councilmember Todd Gloria – (North Park, downtown, Little Italy, East Village, Hillcrest, South Park, Mission Hills)
Email: toddgloria@sandiego.gov
Photo of Myrtle Cole
District 4
Councilmember Myrtle Cole –  (Emerald Hills, Skyline, Encanto, Paradise Hills)
Email: myrtlecole@sandiego.gov
Graphic of District 5
District 5
Councilmember Mark Kersey – (Rancho Bernardo, Black Mountain, Rancho Penasquitos, Carmel Mountain, Scripps Ranch)
Email: markkersey@sandiego.gov
Photo of Councilmember Chris Cate
District 6
Councilmember Chris Cate – (parts of Mira Mesa, parts of Rancho Penasquitos, parts of Clairemont, Kearny Mesa)
Email: chriscate@sandiego.gov
Photo of District 7 Councilmember Scott Sherman
District 7
Councilmember Scott Sherman – (Mission Valley, Del Cerro, San Carlos, Allied Gardens, Linda Vista)
Email: scottsherman@sandiego.gov
Photo of District 6 Councilmember David Alvarez
District 8
Councilmember David Alvarez – (Barrio Logan, San Ysidro, Nestor, Grant Hill, Otay Mesa, Sherman Heights)
Email: davidalvarez@sandiego.gov
Photo of District 9 Councilmember Marti Emerald
District 9
Council President Pro Tem Marti Emerald – (Rolando, Kensington, Talmadge, City Heights, College Area, Mt. Hope)
Email: martiemerald@sandiego.gov

 

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