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San Diego has started dropping bombs on Airbnb hosts.
In recent months, the city’s sent out more than 240 letters demanding that folks renting out their rooms or homes pay hotel taxes.
Since then, 175 of more than 3,100 local hosts have signed up to pay taxes, and at least a quarter of them have been told they’ll owe more than just future bills. At least 40 hosts have started to pay back taxes – which can include late charges of up to 25 percent – for stays that occurred weeks, months or even years ago, according to the city treasurer’s office.
The demand letters, coupled with the case of a 70-year-old Burlingame woman who’s been ordered to immediately stop renting out two rooms in her single-family home or face $2,500 in daily fines, have fueled an atmosphere of dread for local hosts who use the Airbnb website, which allows hosts to rent their homes or individual rooms on a short-term basis.
Several hosts told Voice of San Diego they want to follow the rules but aren’t certain what they are, or whether following them will open the door to being charged huge bills for back taxes. Some weren’t willing to comment on the record out of fear the city will crack down on them.
City officials say they’re simply trying to ensure Airbnb hosts follow city rules.
“We just want to make sure that every resident is aware that there are still obligations they need to fulfill when renting out their property,” said Charles Chamberlayne, a spokesman for Mayor Kevin Faulconer.
That means adding an 11 percent bed tax to the typical Airbnb bill, paying at least $50 annually in business taxes and, in some parts of the city, getting permits to operate.
The city stepped up enforcement of those rules after an April 2014 VOSD story featuring North Park resident John Anderson, who confessed he wasn’t sure whether he owed the city bed taxes. He’s since begun paying up but said he’s gotten a deluge of questions from fellow hosts.
Late last year, the city began tracking down dozens of Airbnb hosts through the site itself and from neighbors’ complaints, among other methods. Some hosts have received letters from the city that address them only by their first names, the way they’re identified on Airbnb.
Those piecemeal efforts could become more organized and aggressive later this year. The city’s five-year financial outlook released in November noted that the treasurer’s office proposed adding two full-time staffers “related to the enhanced enforcement of short-term rental properties” in the budget year that begins this summer.
That’s left Airbnb hosts like Paul Bedington, who historically hasn’t paid taxes, to weigh their next steps.
Bedington got a letter from the city treasurer in mid-January requesting that he begin tacking on the 11 percent charge.
Bedington, a widower who began taking in guests last March, said Airbnb has provided additional cash and companionship since his wife passed away. He’s made a couple close friends and enjoyed giving tours and recommendations to visitors.
He said he pays income taxes, and didn’t see the city’s request coming. He understands the city’s interest in getting Airbnb hosts to follow its rules but thinks it’s taking the wrong approach.
“If the city is trying to close people down with one department and trying to take money from them in (another) department then chances are it’s all going to go underground and the city will lose it,” Bedington said.
He’s also not certain it’s his responsibility to charge the tax. Airbnb guests don’t pay their hosts directly. The San Francisco-based company handles billing and doesn’t offer an online option to pay hotel taxes in San Diego.
So Bedington and other Airbnb hosts are grappling with how to cover the tax. Most say they’ll have to raise their rates – potentially making them less competitive than hosts who aren’t charging the tax – or eat the additional costs themselves.
That’s not the case in all cities where the platform operates.
Airbnb has started collecting taxes in San Francisco, Portland and Amsterdam, to name a few.
An Airbnb spokesman and City Treasurer Gail Granewich confirmed last week that they’re in talks to better ensure people play by the rules.
“San Diegans deserve clear, fair laws that make it easy for people to share their homes while contributing to the community,” Airbnb spokesman Christopher Nulty said in a statement. “As a first step, we are eager to work with policy makers on innovative, forward-focused solutions that enable platforms like Airbnb to voluntarily collect and remit hotel and tourist taxes on behalf of our hosts and guests in San Diego.”
But such a partnership wouldn’t clear up whether homeowners are allowed to rent out their homes or rooms in the first place, or whether hosts owe back taxes.
Alik Perakh, who rents out three units in Golden Hill, said he voluntarily registered to pay bed taxes last month after a friend received a letter about them. The city responded with an email notifying Perakh that he’d been audited and found to have used Airbnb and other online rental services since at least fall 2011.
That and other emails from the city imply that he may owe three years’ worth of taxes. Perakh hasn’t received an actual bill for them, though.
Perakh panicked. He’d searched the city code to see if he needed to pay bed taxes and decided he didn’t qualify. Now he estimates that he owes the city tens of thousands of dollars, more than the profits he’s made off those rentals.
“At this point I don’t know what I’m going to do,” he said. “I don’t have the money.”
Granewich said Perakh’s case is rare, but said the city will bill any hosts for past charges if officials do an audit and find they rented out rooms or homes without paying taxes.
“Taxes are due on all short-term rentals,” Granewich said.
Though other cities are similarly cracking down on Airbnb, at least one is going after the company itself for taxes, not individual hosts.
Renting Among Residents
Then there’s the issue of whether city zoning allows rentals in residential areas in the first place.
The answer isn’t simple. It varies by neighborhood.
The city’s decided the Burlingame woman, whose attorney requested she not be named to protect her privacy, needs a permit if she wants to continue to rent out rooms through Airbnb. She’s set to fight the city’s allegations – including the conclusion that she’s operating a bed and breakfast – at a city hearing next month.
City code enforcement chief Michael Richmond said the Burlingame woman lives in an area where zoning only allows single-family residential housing. According to the city, you need a special permit to operate a bed and breakfast in that zone. Getting it would likely gobble up months and thousands of dollars. It would also give neighbors, including those who complained to code enforcement, a chance to weigh in.
The city’s not barring Airbnb, Richmond said, but it is encouraging those who want to use it to look at the city’s zoning code – a tall order for inexperienced residents, he acknowledged.
“It really boils down to what’s in the code. There are a lot of uses in the code,” Richmond said. “People should learn what the allowable uses are and learn how to fit within the use regulations in their particular zone that are on the books already.”
A growing chorus of Airbnb hosts and at least two City Council members think that’s asking too much.
A group that’s dubbed itself the Short Term Rental Alliance of San Diego debuted a website this weekend promoting reform and greater clarity on the rules. They’ve scheduled meetings with a handful of city officials in coming weeks to push their cause.
And City Council members Chris Cate and Lorie Zapf are working on separate efforts to change city mandates.
Cate said last week he first learned of the issue after one of his constituents received a letter shortly after he took office in December. Since then, Cate’s office has been working on a reform proposal.
“We’re trying to look at a process that does not have to force those people to go underground and (where) they are playing by the rules,” Cate said.
Zapf, who chairs the City Council’s land use committee, also announced last week that she wants to address “quality of life issues related to vacation and short-term rentals” and discuss refining related at an April meeting. Her office didn’t elaborate on specifics.
Many opponents want reform, too.
Brian Curry, who chairs the Pacific Beach planning group, said residents’ increasing complaints about noise and other nuisance issues tied to vacation rentals led his group to create an ad-hoc committee to suggest new city regulations for hosts. The planning group is likely to vote on recommendations next month that may be forwarded to Zapf and other city officials.
Scott Gruby of West Clairemont said one of his neighbors abruptly began renting out his home to tourists year-round last June. He thinks short-term rentals should be banned in residential areas altogether, and created a website advocating as much.
“(The city should) look at legal and political ways to curb this issue because I think it’s the wild, wild west now,” he said.