AirBnB, the elephant in the room

Burlingame resident fined $25,000 for not having permit

Rachel Smith with her granddaughter in front of her historic home
  • Rachel Smith with her granddaughter in front of her historic home
  • Image by Howie Rosen

An administrative law judge ruled last week that homeowners wishing to rent out rooms or their home on mobile apps such as AirBnB need to obtain a conditional use permit before doing so or be at risk for hefty fines up to $250,000.

During the course of the past year, City of San Diego staffers and elected officials have scrambled to catch up with what has been a growing popularity of home-rental websites. In February 2015, new regulations were posted on the city's website notifying AirBnB hosts that they are required to pay transient occupancy taxes and other taxes. There was also mention that some hosts may need to obtain city permits to rent out rooms on home-sharing apps, a long and tedious process, as reported by the Voice of San Diego. Before that, however, there was little information from the city on the requirements for home-sharing. Currently, several hundred homeowners rent rooms or their home on AirBnB as well as other similar websites. None, as of now, have obtained permits, leaving all at risk for hefty fines.

AirBnb host Rachel Smith, owner of a large historical house in the affluent Burlingame neighborhood near North Park, has been the most visible homeowner to suffer the fine.

On August 5, judge Catriona Miller sided with the City of San Diego and fined Smith nearly $25,000 for operating a bed-and-breakfast establishment without the necessary permits.

As reported by the Reader in May 2015, from 2013 to August 2014 Smith listed two rooms in her five-bedroom house on AirBnB; that came to an end, however, when Smith's neighbors complained to councilmember Todd Gloria's office about lack of parking and unwanted foot traffic in the neighborhood.

Gloria's office responded by passing along the neighbor's complaints to the city's code-enforcement division. In July 2014 a code-enforcement officer notified Smith that she violated the municipal code by operating a bed-and-breakfast without proper permits. Smith argued that she was not running a business and did not offer food or any other amenities to guests other than a bed to sleep in.

Administrative law judge Miller disagreed. In her ruling, Miller stated that even though Smith did not offer breakfast to guests, she was essentially operating a bed-and-breakfast.

"The elements of a bed and breakfast statute were met: [Smith], while present, used her primary residence to provide lodging for less than 30 days to paying guests," reads Miller's ruling. “While [Smith] did not serve breakfast regularly in this establishment, it is the type of establishment where breakfast is typically served."

Smith's attorney, Omar Passons, says the ruling puts homeowners at risk.

"It must be explicitly clear that according to this ruling, the city's view of its law stands: If you rent rooms, home swap, share, couch-surf, open your home to foreign exchange students or the military, for less than 30 days in nearly all single family zones and you haven't gotten a conditional or neighborhood use permit, you are breaking the law and the city can fine you thousands of dollars."

Adds Passons, "The judge's ruling said it was clear that [Smith] violated this law by renting rooms in her home for less than 30 days even though the law doesn't actually say anything about renting for less than 30 days nor about the primary residence requirement."

Smith, who must make out a check to the City of San Diego within 30 days, has a more personal reaction to the city and the neighbors who waged a political war against her without her knowledge.

“No, I do not believe that the city handled this matter properly. But even before I talk about the city I have to emphasize that I feel my neighbors handled the situation poorly. I may be naive in thinking this but I was under the impression that I had a relatively decent relationship with all my neighbors, especially the ones closest to me.

"I am a good neighbor. I have always intended to be a good neighbor. Unfortunately, it seems that gossip and subterfuge and tattling to city officials is more 'neighborly' where I live. As for the City, I cannot imagine a city councilmember who, after hearing only one side, would so quickly reach out to City Development Services's Code Enforcement division, if it weren't somehow political. I want so badly to remind Mr. Todd Gloria that I am his constituent, too. And I voted for him. And why was it that I was the last person in the room to know what was brewing? I have not donated to Mr. Gloria's campaign, but I gave him my vote. I didn't know that some constituents are more important than others….

"Because of my costly hearing, I've learned a lot about how the city functions, or sometimes doesn't function very well. The zoning codes are not clear, especially for laypersons. The confusion stems from an inability to imagine that these 'disruptive technologies,' as they are often called, defy zoning codes that haven't been updated to accommodate our contemporary reality. In fact, I also learned, that the last time this city issued a Conditional Use Permit for a bed and breakfast was 10 years ago. And since that time, hundreds of local residents find themselves excited about new technologies that allow them to take part in something that we haven't seen before: it allows for residents to share their neighborhood with people from all over the world, suggesting local businesses and restaurants; it allows for first-time homebuyers to feel more secure in an already unaffordable market; and it allows for people like me who love opening my home to keep my house full of life. So, if there are hundreds of people, nine in Burlingame where I live, that have listings on AirBnB, and that, to my knowledge, I am the only one that has been investigated and fined, it seems clear that the 'rules' or 'laws' are not clear at all. Either that, or I'm a 'scofflaw' as deputy city attorney Markecia Simmons called me in her closing arguments."

It is unclear whether Smith intends to file a lawsuit or whether AirBnB will file one on her behalf.

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Yikes. It seems like the city should have just written new laws specific to AirBnB operators instead of going after them using bed and breakfast code requirements. As Smith clearly states here, there is no breakfast portion of her business. Technically, this ruling sets the precedent that anybody who lets a buddy stay in their apartment for a case beer could be prosecuted under this same law. The sample apartment would most likely have a kitchen, and that kitchen would have (at one time or another) most likely served a meal commonly referred to as "breakfast." I have no issue with the city going after AirBnB operators if they decide they don't approve of the idea of the short-term rentals. If you don't like it, just outlaw it. It's simple. You may have to deal with an excess of anger from local constituents and potential tourists, but if you are clearly against something, come up with some laws that specifically state how clearly against this thing you are. This case is akin to arresting someone for jaywalking who is just out jogging because you want to outlaw jogging, but since there are no specific laws against jogging you just chose the closest illegal activity. Are all the drivers working for rideshares in danger of losing lawsuits since they don't follow the same operating codes as cab drivers? Both services pick up passengers and transfer them to destinations for a fee. One could argue they are remotely similar. If anything, this ruling shows that cities like San Diego need to do a better job of staying ahead of the curve when it comes to new technologies such as AirBnB and Uber. If you see something coming that you don't like, either outlaw it or regulate it quick. If you wait too long and start retroactively going after individuals operating legally within the city you're just going to look silly. All this ruling shows is that the city is either too scared to outlaw AirBnB, or too afraid to deal with the wrath of a handful of neighbors dealing with two extra cars parked on their block.

Perhaps a better choice for Mrs. Smith would be rent rooms to students, a halfway house or to sex offenders full time. I'm sure they would love to reside in charming Burlingame and she would not only earn enough to pay her fines and legal fees, it would be completely legal as well. Granted her neighbors might object to the full time parking required but the city streets are fair game for everyone.

Allan

There are thousands of houses being rented in San Diego tonight under identical circumstances. Legal or not, it isn't fair to this one woman. They are all advertised on the Internet. If every tourist in the country can find them, surely the City Attorney should be able to find them also.

Regardless of the fairness of this penalty, once the word gets out, and it will, many of those who have been binging on AirBnB income, to the wrath of their neighbors, will surely cut back sharply or stop. Right here in the Reader I've been seeing postings from folks who say that homes near or next to theirs have been turned into tourist accommodations with no permits or other release. Yeah, it's a nice way to get sorta-rich for an absentee homeowner who sells the place on a night-by-night basis, and actually sleeps far away from the madding crowd. His/her neighbors pay the price for his profit with noise, not being able to park by their homes, trash, loss of sleep, and other joys of providing tourist accommodations. Hoo boy, 25 large will get their attention, and how!

Funny, but I thought zoning regulations made much of that sort of tourist accommodation illegal in most neighborhoods. So why not just invoke the local zoning, and declare the operation in violation?

Oh, and to Todd Gloria's involvement, he was actually doing what many of his colleagues on the council claim and then fail to deliver. He got complaints and made sure the sluggish city bureaucracy acted on them. She complains that she's a good neighbor, but too many of them thought otherwise. Once in a while the city of SD gets something right, and this time actually DID something.

Thank you for a great comment! We have just endured 2 weekends of huge parties in the airbnb/vrbo rental next door to us. Last week, there was a party on Sunday that exceeded 35 people. Not sleeping there, just spilling all over the street, cars parked everywhere....and lots and lots of noise. To their credit, they were quiet at night.

This past weekend, people came and went all weekend. Day after day, taxis pulled up and brought some people, carted others away. Friday must have been a wedding of some sort; guests were picked up in a large (aka tourist-type) bus. Again, for all the noise during the day, they were quiet at night. I imagine the owner of the property (ALWAYS ABSENTEE) has laid down the law about the patio and noise since we have made it clear we will have zero tolerance for this.

You are correct. Mass profits for the owners at the expense of the people who live here daily, pay taxes and work hard to live in these very small houses, in the most desirable neighborhoods of San Diego. And, if we ever want to sell our house, as long as this operates as a "hotel", which it is! - we have to declare it as a nuisance to any potential buyers. Just think what that does for property values.

I'm glad the city ruled this way. We will be watching carefully to see what happens next both in our neighborhood (not Burlingame) and other single family residential neighborhoods throughout San Diego that are plagued by this "sharing" community.

I can't believe the comments supporting this blatantly selective enforcement totally out of proportion to the "infraction." Making this one person pay 25 THOUSAND DOLLARS and not doing anything to any of the other hundreds of people doing the same thing she is, and not fixing the statutes so that they address the actual situation, intuitively should be considered unacceptable to anyone worried about abuse of power.

Typical that Toad Gloria would be behind this, once again leaving his real person constituents in the dust in order to serve his corporate contributors. If you don't think the hoteliers aren't behind this, you haven't lived here long enough.

Voice of San Diego did a great job showing that the worst offenders of the AirBnB system are property management companies working the beach front housing. But rather go after the worst but again moneyed and well connected offenders, the city decides to squash the low-hanging fruit.

Nailed it. This is a total "low-hanging fruit" lawsuit.

What if she, and everyone else wishing to rent rooms or homes this way, just asked for donations instead of charging fees? Looks like Christian Cullen already mentioned this above but everyone kept complaining about the city and the problem instead of thinking of solutions. Everyone knows that kids cant sell lemonade without having permits so they ask for donations instead, which is legal. So why doesn't everyone just start listing their properties with donations requested instead of fees charged? Seems simple to me.

"You can't let people stay in your house for money! That's terrible! You're destroying the community! Oh, wait... you filled out paperwork and paid money to government? Alright then, carry on..."

I think people should be able to rent rooms or give rides in their cars for pay. I also believe that they should pay the taxes and enjoy some of the expences that those in business also get to enjoy. If not just to pay their fair share, then so that they could learn why things cost what they cost. Fees, paperwork and expences, time and money to stay complient, and taxes on the money you bring in. That is also part of it.

Many want businesses to carry the heavy load with taxes. OK, and that should include all businesses. Even single person business. Even the tech facilitators.

So AirBnB and Ubers, do your part, play by the rules, and be part of the adult world.

Our elected officials need to pull their head out of their @sses. Many people want to come to San Diego for weddings, conventions, tournaments, etc, but don't want to stay in a hotel. I see nothing wrong with someone renting out their home, through a legitimate business, such as VRBO, rather than some loser jerk buying a house they can't afford and renting out rooms to random people, with questionable backgrounds, who aren't qualified to rent elsewhere. I had a dirtbag neighbor, several years ago, who did just that. One of his tenants broke into my car and stole the stereo, in the middle of the night, when he was moving out. I imagine he was probably skipping out on his rent, too.

If my neighbors start renting out their places on AirBNB, I'd probably find a nice Hells Angels biker club to rent my place to.

While I agree that this woman shouldn't have been singled out, I also agree that AirBNB is getting out of control in the city. In my neighborhood (ocean beach), people are buying homes ONLY to use them for AirBNB -- they buy the beach cottages, fix them up, and rent them nightly. I fail to see how this is any different than running a hotel in a residential neighborhood. Not only is it a nuisance in terms of noise, parking, trash, etc. but it's hurting the locals by reducing the available rental properties (because why would an owner rent a 1-bedroom for $1400/month, when they can rent it on AirBNB for $200+/night). The city needs to catch up to the times and write some codes specific for AirBNB so single individuals aren't targeted and our neighborhoods don't get turned into hotels. There has to be some middle ground.

Im Vehemently against Airbnb. They are very unfair & discriminate toward hosts & guests. They say when you sign up that they take control of decisions. (you wont get a say) My friend recently signed up to airbnb host. She got her 1st tenant from airbnb. The guest showed up late, left after 1st night when it was a 3 night stay, & messed up the room, took showers then left. Airbnb never gave the host their money, & allowed the guest to stay free & gave no ligit reason to the host as to what the problem was. Basically Airbnb-Ripped off the host. The host could never get a response as the what really happen. Airbnb has been allowed to become rich while skewing over guests, hosts, & cities. They are a real estate broker with no responsibilities, license, nor scruples. I say Let get rid of Airbnb. No one there is reachable by phone & thus no one there is responsible unless you bring a suit against them. They are layered & only to rip off others by their evasive system. Basically, this Lady in San Diego became a victim of them too. Shouldn't Airbnb have to pay part of the $25,000 that she was fined? They also took money as fee from her & her guests. Lets look at the big picture here. Im sure other cities, guests, hosts, are getting railed from the Rotten company of Airbnb. Wake up folks. There are many ligit companies that pay tax & allow follow up. Even hotes with discounts are out there. Lets keep zoning Legal & appropriate. I agree with special-use zoning for B&Bs. I hope all cities will get on board with this & its also security & revenue for them. I love the village atmosphere & this can work well if we work appropriately & for the good of all.

Just about every city, big and small, have regulations for rentals under 30 days. I live in a village of 2,000 and they do. I own a bed and breakfast and I am tired of following the rules, paying the taxes, getting the licenses and doing everything legal when the people who sign up for airbnb DO NOT!!!!!! It's time to play fair. I get my place inspected by health inspectors, I pay the city, country, state and federal taxes. They don't. If you want to rent out rooms to people, play by the rules and you won't get fined. I don't feel a bit sorry for her. They are called LAWS for a reason.

I've been in the Vacation Rental biz for 20 years, starting with the advent of the commercial internet and well before the likes of Airbnb and Homeaway (VRBO, vacationrentals.com, etc) essentially took over our industry. Airbnb, Homeaway, and Tripadvisor/Flipkey all sidestep their responsibility and liability by relying on the same type of small print form that no one ever reads and you just have to hit AGREE to in order to list with them. When issues arise due to the wide open black markets they have created and pushed into neighborhoods they tend to do what Airbnb just did. Blow it off in hopes it will go away. If it doesn't go away, they then get into damage control which never has anything to do with legalizing and cleaning up their marketplaces as might be expected by good industry partners. Instead they tend to obfuscate the issue by blaming other entities like the municipalities.

For instance, a guest was just raped by an Airbnb host in Madrid. When he texted his mom in the US for help from a locked bedroom prior to the actual rape, she then called Airbnb and they refused to help in any way. They would not provide her with the address of the property and would not initiate any help or investigation. Not their problem.
In the interim, the guest was raped. link text

They did the same thing, denying any responsibility, years ago when a host's apartment in NYC was totally destroyed by Airbnb renters. They blew off the host until it became big bad news for them and then proudly announced an insurance guarantee for hosts. Professionals would figure out things like that ahead of time. Outfits like AirheadBnB don't bother unless it looks like it will effect their billions. They're too busy counting their money.

The sharing economy appears to be just a scam enabling illegal, unlicensed businesses like taxis and vacation rentals to the huge profit gains of the marketplaces that host these "economies" like Uber and Airbnb. Should I be allowed to sell take out pizzas out of my unlicensed and un-inspected home kitchen just because an internet code could be written to enable it? I don't think so.

My guess is that those who freak out about Big Gov't and licensing and health and safety regulations will be the first to look to the authorities when they or someone they know are poisoned, burned to death, or raped due to a black market business unwittingly accessed through these websites.

In my opinion, ALL those marketplaces should be required to grow up and actually verify the legality of the businesses they profit from.

So this woman is miffed at her neighbors for blowing the whistle on her shady rentals? What about her neighbors having to deal with strangers coming in and out of this woman's house on a regular basis, the noise, the parking, the traffic, etc.? A good neighbor wouldn't subject the people living close to her to that kind of nuisance. I was reading an article the other day about a dentist who bought four homes strictly as temporary rentals. He doesn't live in those houses, and doesn't rent out his house, he just turns over the keys to these "luxury homes" in different areas of the county. Imagine how the people in those areas feel about the hordes of strangers who suddenly appear and move into a house then leave a few days later, only to be followed by the next horde of strangers -- or what could be worse, a house sitting vacant for weeks, even months. This doesn't create a sense of community or neighborliness, just the opposite. Residential areas were never meant for these purposes, and it shouldn't be allowed.

Todd Gloria is perfectly happy when residents in his district are punished for operating a non conforming use without a Conditional Use Permit, but when it comes to non conforming businesses, like microbreweries, he is just as happy to ignore the Municipal Code in favor of placing these obnoxious breweries and beer bars next to residences.

It is certainly interesting that the City would fine this lady based on what are admittedly technically applicable, but outdated laws. There seems to be a culture whereby they are keen to enforce these laws, when they could just as easily be interpreted differently or not imposed at all. And on that point, this says it all: “In fact, I also learned, that the last time this city issued a Conditional Use Permit for a bed and breakfast was 10 years ago”. This implies that the enforcement of by City Development Services’ Code Enforcement is not enforced consistently. So why enforce it in this case? Services like Airbnb and Pillow have totally changed the bed and breakfast/rental property landscape and City regulation must react to it and treat homeowners fairly. Perhaps the likes of Airbnb and Pillow Homes should work with City authorities to increase knowledge and awareness? Millenials are showing a huge interest in short term vacation rentals for business and liesure travel compared to baby boomers and one day they will be shaping our laws.

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