San Francisco fines landlords $2.25 million for illegal Airbnbs

A couple in San Francisco will pay $2.25 million in a settlement with the city over a chain of illegal Airbnb short-term rentals the landlords operated.

Darren and Valerie Lee, who own or manage 17 buildings in San Francisco, agreed to pay the amount in fines and investigation costs to settle the city’s case against them. They’re prohibited from operating any short-term rentals for at least seven years.

The Lees previously settled another short-term rental case in 2014, when they evicted tenants to convert a property from long-term to short-term rentals. They settled for $276,000 and agreed at that time to stop offering short-term rentals. According to the city attorney’s office, they violated that injunction thousands of times.

When investigators visited the properties the latest time around, they said it was clear the landlords were making an effort to make the units look lived-in by long-term tenants — although identical props and placements were used in each. The Lees also used the same IP address for Airbnb accounts for several of the listings.

“The serious financial penalty is an important deterrent,” City Attorney Dennis Herrera said in a statement. “It sends a clear message to those looking to illegally profit off of San Francisco’s housing crisis: Don’t try it. We will catch you.”

Although few cities have short-term rental laws as strict as San Francisco’s, more and more cities have their eye on short-term rentals and the thorny issues of how to regulate them, reap tax revenues from the growing industry, and enforce the rules.

At the beginning of this year, San Francisco implemented one of the toughest short-term rental laws in the country, resulting in thousands of listings dropping off Airbnb. The law prohibits Airbnb, HomeAway, and other short-term rental platforms from including listings on their sites that aren’t registered with the city.

In order to be allowed to list their properties on short-term rental platforms, San Francisco hosts must register as a business entity with the city’s Treasurer & Tax Collector and register with the City of San Francisco’s Office of Short-Term Rentals for a certified host certificate, which is good for two years. Hosts are largely prohibited from having more than one listing.

Hosts must also be permanent residents, defined as living in the short-term rental unit for at least 275 nights a year. New residents must have lived in their unit for at least 60 days before applying to become a short-term rental host.

Hosts are also prohibited from renting out their property for short terms for more than 90 nights per year while not present overnight, and they cannot make more in a month in short-term rental fees than what they pay in monthly rent.

Short-term rental hosts must also collect San Francisco’s 14 percent lodging tax from guests. Airbnb has an agreement with San Francisco to collect this tax on behalf of its hosts. However, hosts using any other short-term rental platforms, such as HomeAway or VRBO, are responsible for collecting and remitting all local lodging taxes themselves. California doesn’t have a statewide lodging tax.

MyLodgeTax can help short-term rental hosts using any platform comply with all their local lodging tax obligations.