In an op-ed in SFGate published on Tuesday, Sen. Diane Feinstein (D-Calif.) begs her city officials to not “hand San Francisco over to Airbnb.” She claims that strong zoning laws protect residents from unwanted commercial activity, that Airbnb leads to increased rental costs and that Airbnb’s “unpaid tax bill” currently tops $25 million.
On the topic of zoning laws, Airbnb does lead to commercial activity being conducted in residentially zoned areas. It also allows homeowners living in those areas the ability to make extra money off of their unused space. It’s a trade-off. It’s especially fallacious to say that strong zoning laws help residents “support families,” when extra rental income would also help residents support their families. It’s quite possible that some residents could reasonably want to keep their neighborhoods clear of short-term renters, but if that’s the case, let them vote that way. It’s more likely that they want to make some money.
{mosads}Feinstein next asserts that allowing Airbnb to operate in San Francisco “will further increase already sky-high rental costs.” This is a strange claim, and she does not back it up with evidence of any kind. Her logic, if one had to guess, would be that some people would rent out their homes and then go on the open rental market, which will increase demand for rentals. The truth is that the number of short-term renters and long-term renters is not affected by Airbnb, unless you believe its existence leads to more tourism for San Francisco (in which case, it would be another benefit). Airbnb actually unlocks unused housing stock and puts it onto the market.
Alternatively, the senator’s logic may be that the units that are now being used for short-term rentals are being taken from the long-term market, decreasing supply. In San Francisco, that is definitely not the case. First, many of the units on Airbnb wouldn’t have been on the long-term market anyway. Second, because of extreme tenant-friendly laws, homeowners are very cautious about taking on tenants, especially when they are sharing the property (and in a city of big Victorians, that’s often the case).
It’s nearly impossible to get rid of tenants as a homeowner in San Francisco, and you can’t even sell your house unless the buyer agrees to continue the lease terms or takes the rental unit off the market completely. In the latter case, you can expect protesters and smear campaigns. If it were a healthy market, you’d prefer long-term renters to short term stays as a general rule. The income is more predictable.
All of these arguments and refutations are beside the point. There is capital housing stock in San Francisco going unused and Airbnb matches the capital with consumers and facilitates dealmaking. This is the definition of wealth creation. By her logic, people should be barred from selling their knickknacks on eBay because similar knickknacks at flea markets are getting too expensive, and we don’t want our neighborhoods overrun with sleazy eBay sellers.
Finally, she gets to the point: We’re not getting any taxes from these deals. Most likely the city of San Francisco would love to tax Airbnb. Eventually they will try doing so, if they think they can do it and keep their jobs. Why haven’t they done it so far? It turns out that residents don’t like to be taxed for the free use of their own property.
As an aside, Republicans must love when Democrats make arguments like this, because it silently chips away at support for the latter among the tech community. Regulating the Internet, stifling free markets and taxing the new economy is no way to encourage innovation. I bet at least a couple of Airbnb employees just became Republicans.
Colangelo is executive director of Consumers’ Research.