No on Prop F

In a time of great unease over San Francisco's relationship with the industry that inhabits it, the 2015 election became a voter referendum on the tech world and its workers.

In response to the tech boom's effect on local real estate, there were two affordable-housing measures (one failed, the other passed) and a narrowly successful proposal to help legacy businesses survive among the city's new crush of coffee bars and $7 muffins. The most heated vote, by far, was Prop F. Dubbed the "Airbnb initiative"— and defeated 55 percent to 45 percent — it sought to place limits on short-term rentals like Airbnb, saying hosts could only rent out their space for less than three months total each year. Its opponents dropped more than $8 million to fight it.

Advertisement

Prop F quickly became a proxy war for San Francisco's complicated real estate economics. But for Airbnb, it was more consequential than that. Enmeshed in regulatory battles from California to New York and beyond, San Francisco was a proving ground for what's to come.

"The shape of regulation in San Francisco will serve as an example of what regulation will look like in a lot of cities," Arun Sundararajan, a professor at NYU who studies peer-to-peer markets, told me.

For a city ballot initiative in an off election year, this was a messy, messy fight. Taking a page from Uber's aggressive campaign against ride-hailing caps in New York, Airbnb blanketed local TV stations with ads, outnumbering backers of it at a ratio of 100-to-1. It spent almost $2 million on a campaign that organized more than 400 volunteers to go door-to-door. Airbnb contributed the vast majority of the opposition's $8 million war chest, far outspending the $300,000 raised by Airbnb backers. For context, last year the entire soda industry lobby spent just barely more fighting the city's controversial soda tax proposition.

Advertisement

Airbnb funded one of the most expensive fights against a city ballot initiative in San Francisco history not simply to protect local hosts, but to ward off a symbolic blow on its home turf.

At stake was Airbnb's ability to continue growing its 2 million listings under increasing regulatory scrutiny. If Prop F had passed, said Mai Thi Nguyen, a professor of urban planning at the University of North Carolina, other cities might have considered passing similarly aggressive regulations, especially cities like New York where housing affordability is also a concern.

And waging war in San Francisco was a chance for a company with a $25.5 billion valuation to flex new-found political might. It was a signal to regulators everywhere that it will put up a tough fight.

Prop F proposed putting a 75-day limit on all forms of short-term rentals, whether a host is living there or not. Airbnb was for the most part untouched by city regulation in San Francisco until last fall, when the city mandated that hosts register with the city. But housing activists and property owners argued that the law was too lenient, allowing hosts to rent out apartments for 90 days if they’re not there and an unlimited number of days if they are present, as well as failing to penalize platforms like Airbnb for hosts that didn't register.

Backers of Prop F, including the hotel workers union, argued that Airbnb is cutting into the city's affordable housing stock, which has long been strapped thanks to restrictive zoning, a widening income gap and a host of other issues. As author Steven Hill points out, multiple studies have found that 40 percent of the company’s revenue comes from hosts with multiple listings, an indication that they are renting out properties they don’t actually live in, as is intended. A San Francisco Chronicle investigation found that at least 350 homes listed on Airbnb in San Francisco appear to be full-time rentals, a number similar to one that Airbnb has floated itself.

Prop F's backers also saw the measure as a way to fix some of the problems with the current regulations, which the city planning department has said are difficult to enforce. The city has just four enforcement officers tasked with determining which of San Francisco's up to 10,000 Airbnb listings are legal and abiding by the number of rental nights allowed. But only 730 listings have thus far registered with the city, and Airbnb has refused to hand over data on who else is renting.

Advertisement

But opponents of Prop F said that it was too draconian, limiting how often a person can rent out their apartment regardless of whether they are living there at the time or not. Airbnb argued that in places where there was a lack of affordable housing, like San Francisco, Airbnb was actually helping people to hang on to their apartments, a boon for the middle class.

So far, cities have tackled regulating Airbnb in vastly different ways. In Charleston, for example, Airbnb rentals are restricted except in one neighborhood, where they require a particular kind of commercial license. In Austin, the number of homes in a housing tract that may be rented out short-term is capped at 3 percent. In Portland, short-term rentals are only permitted if they are owner-occupied.

Cities considering Airbnb regulation face a difficult balancing act: protecting the housing stock and the rights of neighbors as well as the rights of tenants. By beating back Prop F, Airbnb demonstrated that even in one of the country's most housing-strapped cities such aggressive restrictions wouldn't stand up to a public vote.

Advertisement

Sundararajan told me that trying to cap the number of days seems silly; it's hard to regulate and even harder to quantify just how many days is "too many." He told me that people should be able to do whatever they want with their own apartment so long as they actually live there and those that live near them are okay with it and have avenues to pursue legal action if they aren't. And instead of forking over data to local governments, he said, Airbnb should be tapped to help police abuses on its platform.

"We've entered a world where we're more and more comfortable with companies doing some of what government used to do," he said.

Christopher Nulty, a spokesperson for Airbnb, told me that the company would like to see more regulation efforts like that in Philadelphia,  where its city council recently unanimously passed a string of new regulations that legalize short-term rentals, but tax them, cap them at 180-days-per-year and require a license for rentals lasting more than 30 days.

Advertisement

"Our CEO, Brian Chesky has said before that to be regulated is to be recognized," said Nulty. "Regulation is a good thing."

But while Prop F was defeated, Airbnb hasn't won just yet — in San Francisco or anywhere else.

"A lot of cities are really starting to wake up to that they can't just let these companies come in and operate without thinking about what the impact is going to be," said Steven Hill, an author and Senior Fellow at the New America Foundation.

Advertisement

Hill pointed out that San Francisco often takes a version of the same measure to the ballot box two or three times before it eventually passes.

"If you have a lot more money than your opponents you can wield a big political axe," he said. "But if Airbnb thinks that it's over, it isn't."

But in the fight against Prop F, Airbnb showed us just how big that political axe is.

Advertisement

In a statement issued late Tuesday night after votes were tallied, Airbnb called Prop F "a decisive victory for the middle class."

"Voters stood up for working families’ right to share their homes and opposed an extreme, hotel industry-backed measure," the company said. "The effort showed that home sharing is both a community and a movement.”

Prop F is a snapshot of what's ahead for Airbnb. But it's also a preview of what's ahead in cities where one side of a vote is in the hands of the tech industry's deep-pocketed political might.