Time to enforce the law


EDITORIAL The new tech companies that are making waves in San Francisco — Airbnb in the short-term rental business and Lyft and Uber in the taxi industry — may describe themselves as innovative and disruptive, and they may be appealing to investors.

But there’s a more accurate word that describes their relationship to the city:


The way these companies are luring customers isn’t really about high-tech applications or brilliant business models. They’ve just found a way to get around the rules that everyone else has to obey.

Some city officials are talking about hearings and new legislation, all of which is fine. But in the rest of the business community, when someone flagrantly, openly violates the regulations, the City Attorney’s Office cracks down. That’s what needs to happen here, and soon.

Airbnb has a slick and appealing promise: You can rent out your house or apartment on the Internet to someone who wants to stay in the city for a few days, but is looking for an alternative to a traditional hotel. The homeowner or tenant gets some extra bucks; the visitor gets to stay in a cool neighborhood at a bargain price. What’s not to like?

Well, for one thing, most leases in San Francisco bar unauthorized sublets, so renters who offer their places on Airbnb face problems with their landlords, including possibly eviction. City laws also bar the use of residential property for commercial purposes. And, as we’ve pointed out repeatedly, Airbnb isn’t collecting the transient occupancy tax that every other hotel operator in the city has to pay. The total tab: At least $1.8 million a year.

Lyft and Uber say they’re using creative apps to offer an alternative to the screwed-up taxi system. Drivers offer rides to people who can “volunteer” to pay at the end — but if nobody pays, the whole business model fails and the venture capitalists who put up the money lose. So everyone knows that these are pay-for-hire taxis.

Except that San Francisco requires every taxi driver to have a permit, called a medallion — and drivers have to go through training, background checks, and carry extensive insurance. If a driver overcharges or refuses a fare, a customer can complain to the city, and get recourse. The startups don’t follow the same rules.

There are reasons the city regulates cabs and charges hotel taxes. Cab drivers are ferrying people, some of them vulnerable; it’s only a matter of time before a rogue driver who sneaks into the new unregulated startups winds up in a horrible crash or criminally preying on riders.

Driving a cab without a medallion is illegal. Failing to pay city taxes is, too. City Hall can debate and dither and try to avoid offending the mayor (who, unfortunately, is trying to help Airbnb slide). But this is a clear-cut case of businesses flouting city law. Herrera needs to put an end to it.


Airbnb’s tax and tenant law violations headed for hearings


As Airbnb continues to avoid making any public comment on the $1.8 million annual Transient Occupancy Tax obligation to the city that it appears to be dodging, with the complicity of the Mayor’s Office, Board of Supervisors President David Chiu is getting closer to introducing legislation to regulate so-called “shared housing” and holding public hearings on the issues it raises.

In addition to the tax issue, there are concerns that Airbnb,, and other Internet-based sites that facilitate short-term rentals of San Francisco apartments are increasingly being used to circumvent local tenant protections, often after evicting tenants from the apartments using the Ellis Act. That state law allows owners to leave the rental business and convert to other uses, and landlords can argue that Airbnb is a commercial use and not a residential use.

“I’ve been deep into a lot of these issues in my conversations with a lot of community stakeholders around Airbnb and the area of shareable housing and I’m hoping very soon to have a package of proposals in this area. And at that point, we’ll have public hearings on the topics that you describe,” Chiu told us when we asked about the tax and tenants issues.

Among those involved in Chiu’s negotiations with Airbnb is Ted Gullicksen, executive director of the San Francisco Tenants Union, who says the negotiations have been slow-going but he’s generally happy with how they’re proceeding and hopeful that the resulting legislation will rein in rampant current abuses of zoning, tax, and other regulations that city officials have been ignoring.

“All you have to do is sit in front of the computer for a few hours and you can identify a lot of the lawbreakers. But there’s no enforcement by the city,” he said, noting that the Tax Collector’s Office is the notable exception among city departments, such as the Planning and Building departments. “The taxes shouldn’t even be an issue because they’re illegal uses.”

For example, while landlords may be able to get around rental restrictions triggered by an Ellis Act eviction by calling the use for shared housing websites “commercial,” that’s usually a violation of local planning codes prohibiting commercial use of residential property. Chiu’s legislation approved late last year banning “hotelization,” in which entire apartment buildings are cleared of tenants and rented out on a short-term basis, allows nonprofit groups like the Tenants Union to help enforce the ban.

“We’ve been researching the buildings we want to go after with complaints and lawsuits,” Gullicksen said. “It’s a pretty widespread problem.”

He said the appears to be a bigger culprit in terms of being used by landlords to avoid tenant protections than Airbnb, whose hosts are evenly split between tenants and landlords. But as the biggest shared housing service in San Francisco, the tax issues are bigger for Airbnb and the city.

“We don’t mind the limited use of someone’s principal residence for short-term rental, where we’re concerned is about the whole buildings,” Gullicksen said.

Whether the issue is avoiding taxes or circumventing tenant protections, the complicated issues surrounding shared housing are long overdue for some public discussions and scrutiny, and it sounds like that’s what we’re see later this spring or summer.

Does Mayor Lee support Airbnb dodging its $1.8 million tax debt to SF?


My story in this week’s Guardian about how Airbnb appears to be refusing to pay the hotel taxes it owes to the city has gotten a lot of attention. But I’m still getting stonewalled by representatives from the company and Mayor Ed Lee, who apparently refuses to take a public stand against corporate tax evasion, even when it means thousands of San Franciscans could get stuck with an unexpected tax bill.

How much money are we talking about? According to a study that Airbnb commissioned and publicized late last year, its hosts in San Francisco collect $12.7 million from their guests every year. That means that if the company was charging the 14 percent Transient Occupancy Tax – as the Tax Collector’s Office last year ruled that it must – it would be paying the city nearly $1.8 million annually.

But that doesn’t seem to be happening, although only Airbnb can say for sure, which is why its spokespeople have been dodging my questions for more than a week. As I reported, taxpayer privacy laws prevent city officials from disclosing how much individual businesses pay in local taxes, but we do know Airbnb doesn’t add the TOT to the online transactions it facilitates or specifically encourage its San Francisco hosts to collect the taxes (even though the tax codes make the hosts and Airbnb jointly responsible for this growing debt to city coffers). And with the company charging 6-12 percent per transaction, it’s a safe bet that it isn’t simply paying the taxes itself.

What makes this particular case of corporate tax dodging even more interesting is the fact that Mayor Lee has a close connection to this particular San Francisco-based corporation. Venture capitalist Ron Conway is a top investor in both Airbnb and Mayor Lee’s political campaigns, creating a potential conflict-of-interest in Room 200. Last year, Mayor Lee personally lobbied against the interpretation by the Tax Collector’s Office, and now he appears to be silently backing Airbnb’s resistance to paying its taxes.

Last week, when I was trying to get a comment for Lee spokesperson Francis Tsang on Airbnb’s apparent tax dodge, he replied, “It’s an incorrect assumption that Airbnb and hosts haven’t been paying any transient occupancy tax..” Of course, because of the taxpayer privacy laws, Tsang can’t actually support that statement and I responded by laying out the evidence that the city is getting stiffed by Airbnb.

Then, he and Airbnb simply stopped responding to my questions, even though I’ve made repeated inquiries and asked only whether Mayor Lee was willing to make a public statement calling for a major San Francisco corporation to meet its local tax obligations. And in the interests of fully transparency, I’ll close with the email that I sent to spokespersons for Airbnb and the Mayor’s Office on Wednesday as my story came out, along with their emails in case you want to push for answers yourself.,,

Dear Airbnb and mayoral spokespeople,

Since I couldn’t get responsive answers from any of you about why Airbnb isn’t collecting the Transient Occupancy Tax from its guests, I wanted to forward the link to my story on the topic in our latest issue ( and to let you know that I will continue covering this issue in the Guardian and our sister newspapers until you address it publicly.

Because of privacy laws that limit the Tax Collector’s Office from addressing this directly, only Airbnb can say whether they’re paying any of the hotel taxes that the city last year conclusively ruled that they owe. As I reported in my story, that tax obligation is shared jointly by Airbnb and its hosts, who don’t appear to have been warned of this by the company, making this an issue of consumer protection as well as corporate greed.

Will the Mayor’s Office make a public statement opposing tax evasion? Will it stand up for San Franciscans who may be unwittingly stuck with the tax bill by Airbnb? Or will Mayor Lee stick up for a tax-dodging corporation funded by the same billionaire that funds his political campaigns? And how will people feel about San Franciscans and the city treasury paying for his political ambitions?

These are all questions that I plan to air and explore in the Guardian, and I think that our readers and the general public deserve answers to those questions. If there are reasons why Airbnb guests aren’t being charged the TOT, some other arrangement that has been made, or some other complex reasons why Airbnb feels it can’t comply with last year’s ruling by the Tax Collector’s Office, I’ll be happy to hear it and let you make your case to our readers. But I don’t think that continuing to stonewall me is going to be a viable strategy for any of you. I hope to hear from you soon.

Compromised position


When Mayor Ed Lee came to the Board of Supervisors for his monthly “question time” appearance Feb. 12, Sup. David Chiu tried to get some sense of where the mayor stood on a controversial piece of legislation that would allow more condominium conversions.

Chiu explained the complexities and implications of an issue where the two sides have dug in and appear to have little common ground, and he asked the mayor for some guidance.

“What is your position on this pending legislation?” he asked. “What protections would you support to prevent the loss of rent-controlled housing in our increasingly unaffordable city? How would you address the concern that if we allow the current generation of tenancy in common owners to convert, we will replace then with a new generation of TIC owners and additional real estate investments that will lead us right back to an identical debate within a short time?”

But if Chiu and other board members were looking for leadership, direction or a clue of where the mayor might stand, they didn’t get it. Lee said he understood both sides of the issue and hoped they could reach a consensus solution — without offering any hints what they might look like or how to achieve it. “I can’t say that I have a magic solution to this issue that will make everyone happy,” the city’s chief executive explained.

Asked by the Guardian afterward why he didn’t take a position and whether he might be more specific about how he’d like to see this conflict resolved, he replied, “I actually did take a position, even though it didn’t sound like it, because I actually believe they have good points on both sides.”

That’s a typical answer for a mayor who rose to power preaching the virtues of civility and compromise and striving to replace political conflict with consensus. But now several major, seemingly intractable issues are facing the city — and insiders say Lee’s refusal to take a strong stand is undermining any chance for successful.

The lack of mayoral leadership has been maddening to both sides involved in the negotiations over the condo-conversion legislation. Tenant advocates say the mayor’s waffling hardened the positions on both sides and emboldened the group Plan C and its allies in the real estate industry to reject the compromises offered by supervisors and tenant advocates.

“It’s very unhelpful,” San Francisco Tenants Union head Ted Gullicksen said of Lee’s refusal to take a stand. “Someone needs to kick the realtors in the butt, and that’s not happening. They have no impetus at all to compromise.”

Then there’s the case of California Pacific Medical Center’s proposed new hospital, a billion-dollar project that would transform the Cathedral Hill neighborhood and have lasting impacts on health care in San Francisco.

The mayor’s eagerness to get the deal done — even if it wasn’t the best deal for the city — led to a proposal that fell apart last year under scrutiny by the Board of Supervisors. That project has now been in mediation for months — and sources tell us they’re getting close to a deal that has little resemblance to the anything offered by the Mayor’s Office.

California Nurses Association Director of Public Policy Michael Lighty, who has been involved with the CPMC negotiations, said Lee’s unwillingness to take a strong and clear stand, or to help mediate the dispute once the deal blew up, is why this negotiation has been so difficult and protracted.

“If he had engaged stakeholders and the supervisors, we wouldn’t have had to go to the brink last summer,” he said. “You’ve got to have clear objectives and be willing to fight for those, and that means saying no…If you’re willing to accept any deal and just put political spin on it, this is what you get.”




Neither Lighty nor others involved in the CPMC negotiations would discuss details of the pending deal, as per the instructions of mediator Lou Giraudo. But they did talk to the Guardian about the political shortcomings that led to such a protracted mediation process on a project that has been in the works for many years and involving a looming state deadline to replace the seismically unsafe St. Luke’s Hospital.

Lighty called Lee’s conciliatory approach to CPMC “an administrative orientation and not a political one,” noting that what worked during Lee’s long career as a city administrator may not be working well now that he’s in the Mayor’s Office dealing with issues where consensus isn’t always possible.

“I don’t think it’s a very sophisticated view and I don’t think it’s one that produces the best results,” Lighty said.

Lighty did say the negotiations were getting close to resolution. “What comes before the board is going to be vastly superior to what the mayor and CPMC proposed,” he said. “I think what you’ll find whenever this comes out is it will repudiate the mayor’s approach.”

He contrasted Lee’s style to that of his predecessor, Gavin Newsom, who took positions on most controversial issues and would often get involved with forcing his allies to cut deals. For example, shortly after taking office on 2004, Newsom demanded that his allies in the hospitality industry end their lockout of hotel workers, and when they refused he turned on them and even famously joined workers on the picket line, pressuring the hotels to soon end the lockout.

“Why did you need to bring in an outside mediator for CPMC? Why didn’t the mayor do that?” Lighty asked, noting that Lee has stayed away from the current negotiations.

Ken Rich from the Mayor’s Office of Economic and Workforce Development has been in those meetings but didn’t return our call. Mayoral Press Secretary Christine Falvey has also ignored repeated messages seeking comment on the issues raised in this story.

Rudy Nothenberg, who negotiated big deals on behalf of five successive mayors before Lee and who has been critical of the Warriors Arena deal that the Mayor’s Office has negotiated, said Lee’s unwillingness to take strong stands with developers is hurting the city.

“I was able to say I’m going to get the best deal I can for the city,” Nothenberg told us, saying he approached all negotiations, including the construction of AT&T Park, with the understanding from the mayors he worked for that he could simply say no to bad deals. “You need to bargain for the city as if these guys walked away, well, then that’s okay too.”

Sup. David Campos, who has been trying to get CPMC to strengthen its commitment to keeping St. Luke’s open as a full-service hospital, agreed that, “There have to be times when you’re willing to say no.” And on the CPMC project, Campos said that fell to the supervisors when the Mayor’s Office wasn’t willing to. “It was clear that the board was not going to approve it,” Campos said, “and sometimes you have to do that to get to a result you can live with,”

UCSF Political Science Professor Corey Cook said the problem is less with Lee’s overall philosophy than with what is strategically smart on individual issues.

“The mayor’s strength is in trying to come up with consensus measures,” Cook told us, calling the approach “generally a good one” and saying “the decider isn’t always who you want, then you get George W. [Bush].” Yet Cook also said intractable problems like the condo conversion debate may require a different approach. “Sometimes you do need to stake out clear ground to limit the terms of the debate.”




Chiu has at least been willing to put his energies behind his belief in compromise, taking an active role in the CPMC and condo negotiations, as well as complicated current negotiations involving how to legalize but limit Airbnb’s shared housing business in San Francisco, which involves landlord-tenant-neighbor dynamics, regulation of private leases, and complex land use and taxation issues.

“It’s been a very long month. I’ve been going around the clock on several challenging negotiations,” Chiu told the Guardian. “The most important things to work on are often the ones that are the most difficult to get done.”

Chiu was reluctant to discuss the negotiations, calling it a sensitive moment for each of them. But he did admit that he was disappointed in Lee’s non-answer to his publicly posed question. “I had hoped for a little more direction,” Chiu said. And while these negotiations haven’t shaken his faith in compromise, he did say, “It depends on the substance of the issue whether there are common ground solutions that are superior to two warring sides.”

But all involved in the condo debate say it appears we’ll be stuck with the latter. “The two sides are so far apart that I don’t know what a compromise that both sides would live with would even look like,” Campos said. “There are certain issues where I don’t think compromise or consensus is possible.”

On this one, tenant advocates are trying to protect a finite supply of rent-controlled housing and real estate interests want to convert that same housing into condos. “If the issue was just existing TIC owners, we would come to an agreement,” Gullicksen said. “But clearly the agenda of Plan C and the realtors is they just want more condos.”

Plan C board member Kat Anderson told us, “I have a simple approach to this: Home ownership is important to me.”

She was undeterred by arguments that thousands of new condos are now being built in San Francisco, but there’s a steadily dwindling number of rent-controlled apartments in a city where two-thirds of San Franciscans are renters.

Anderson made it clear that she wants to not only allow the backlog of condo applicants to be approved, but she doesn’t want to slow the flow of condo conversions for a few years thereafter or place TICs themselves under the cap, compromises offered by Gullicksen. “The worry is that if you change the system, it will never come back and we’ll lose our tiny toehold of 200 units [that the lottery allows to be converted to condos annually],” Anderson said. And so we end up with the very thing Lee sought to avoid: a big, nasty, divisive public fight that will probably end up being decided by big money and deceptive campaign mailers rather than a civil, deliberative political process. And the mayor has nobody to blame but himself.

Waiting for the end of the world (1)


TULUM, MEXICO — The Yucatan is filled with Americans and Europeans who have come for the Dec. 21 end of the Mayan Long Count calendar and/or the end of 2012 next week, and those looking to spend time in paradise before the end have come to Tulum.

Boca Paila Road runs along about 10 miles of pristine Carribean beaches, lined with lodging ranging from camping  and small affordable cabañas (our thatched roof spot at Pico Beach, booked through Airbnb, is amazing) to expensive luxury hotels, all nestled into verdant tropical foliage.

On south end is the biosphere and biggest cenotes (little lagoons with underwater caves), and on the north is the main Mayan temple and archaeological site in the area, a well-preserved coastal fortress crawling with visitors.

Bay Area residents are well-represented on the beaches of Tulum, and most that we’ve talked to a headed to the Synthesis 2012 Festival in Chichen Itza today or tomorrow. I’m still not sure what to expect from the scene there, but I’m excited to find out to report back tomorrow when the festival begins.

We and Mr. Jones


THE GREEN ISSUE No one can accuse Van Jones of being a one trick pony. In the early days of his activist career he monitored police violence in the Bay Area, and from there gradually widened the frame of his activist efforts. Jones formed the Ella Baker Center for Human Rights in Oakland in 1996, then became a green jobs pioneer, promoting environmentally-friendly work in low income communities — a revolutionary tactic that eventually landed him a short-lived adviser position within President Obama’s Council on Environmental Quality.

In his new book Rebuild the Dream (Nation Books, 278pp, $25.99) Jones has expanded his talking points to include the ways in which the financial sector has let us down, how Obama only did what we forced him to do (we gotta yell louder, Jones says), and how we can help fix the economy by focusing on “collaborative consumption.” Call it holistic activism. He’s launched a national junket to talk Rebuild that will bring him to the Commonwealth Club on April 16.

It is perhaps this kind of nuanced approach that scared the bejeezus out of the conservative demagogues whose smear campaign convinced Jones to resign from his White House post in 2009. Leave it to Glenn Beck to shame someone for saying he wanted “a whole new system” (as Jones proclaimed in a speech at a youth climate change conference.) The conservative media accused Jones of a communist past — which was accurate enough — and of signing a 9/11 truther petition that said that George Bush had prior knowledge of the World Trade Center attacks. He was innocent of this last point, the organization in question admitted months later, to a deafening media silence.

But Jones hasn’t retracted his call for a new system. In fact, in the pages of Rebuild the Dream he seems to step into a post-resignation hybrid role, in which he is no longer an outsider activist, but still has no formal role in Washington, D.C. Accordingly, he seems less fired up by the actions of national politicians as the agenda-pushing energy of the Tea Party and Occupy movements, which his new book spends entire chapters analyzing and critiquing. Even certain innovative businesses get a shout-out.

“You have Kiva, Kickstarter, Airbnb, and Zip Car already beginning to point to a future economy where more people are sharing fewer things,” Jones told the Guardian in a phone interview last week. “That’s good for people and the planet. You are also are saving money and you’re relying on people and relationships rather than dollars, you’re refinancing your social capital.”

He calls this economic ethos “collaborative consumption,” and it’s a heady idea for proponents of self-sustaining communities. Building a new economy on this business model, however, will take some tweaking that’s not covered in Rebuild — the city-level debate on whether SF Airbnb users should be subject to the city’s 14 percent hotel tax is one current-day example of how things can get complicated.

Rebuild offers a fairly honest critique of Obama’s successes and failures during the president’s first year in office. Nonetheless, the timing of the book, with it’s underlying message that we need to stay engaged in the political system to achieve real change, seems somewhat cagily timed. Is Rebuild the Dream part of Obama’s re-election campaign?

“The answer is no,” Jones is quick to reply. “We’re a non-partisan organization, we don’t endorse political candidates.”

But the election year publication is no coincidence: he wants all candidates to start talking about fixing the institutional reasons behind inequality.

“The two factors once used to pull people out of poverty were home ownership and education,” he says. “Those have now become the two factors by which people are being pulled into poverty because of the underwater mortgage problem and the fact that kids are coming away from college with massive debt and no ability to get a job. We think that these are issues that the politicians need to be forced to respond to and rethink.”


April 17, 7pm, $20

Commonwealth Club

595 Market, second floor, SF.

(415) 597-6700