New limits proposed on extended-stay rentals

Legislation introduced Tuesday aims to regulate a growing trend of companies leasing out units in projects approved for housing as so-called “corporate rentals,” or extended-stay apartments.

The San Francisco Examiner has previously reported that some developers who have won approval to build housing are instead leasing out large portions of the constructed units to third-party companies that specialize in furnished apartment rentals advertised for limited stays of 30 days or more.

An ordinance introduced at Tuesday’s Board of Supervisors meeting by Supervisor Aaron Peskin would amend The City’s planning code to add a new “residential use” characteristic, called “intermediate length occupancy,” in an effort to define corporate rentals.

Developers proposing to construct projects with ten or more units may ask to establish this new use, which would be subject to review by the Planning Commission by way of a conditional use permit approval. According to the legislation, no more than 500 intermediate length occupancy units would be permitted in San Francisco.

Below-market-rate, inclusionary, and rent-controlled units would not be eligible for this type of use, which also would not apply to hotels or student housing. Owners or operators of intermediate length occupancy units would be required to report back to The City annually.

“If there is a role for these types of units in our new market rate housing, they should be documented and regulated appropriately,” said Peskin on Tuesday. “In our rent-controlled housing stock, though, I think these corporate rentals really have no place.”

The legislation also creates an explicit ban on corporate rentals in rent-controlled housing, according to Peskin. It would amend The City’s rent ordinance, which protects tenants in covered rental units from evictions without just cause, to extend protections to tenants in corporate rentals and restrict when landlords can allow their units to be occupied by “non-tenant” entities.

Beginning on Feb. 1, 2020, renting units for “non-tenant” uses would be prohibited, with a few exceptions. Landlords would also be required to include a disclosure stating that “corporate rentals” are subject to the rent ordinance when advertising their units online.

The legislation authorizes the city attorney or nonprofit tenants rights organizations to sue for civil penalties over violations.

Peskin said that the legislation directs the city controller to conduct a nexus study to help inform this board and our future approach to gauging appropriate housing impact fees.

He called the legislation a “year’s worth of work between my office, the planning department, the rent and tenant advocates,” including the Housing Rights Committee, Unite Here Local 2, the Anti-Displacement Coalition and the San Francisco Tenants Union.

In 2015 the city passed short-term rental laws, but Peskin said these regulations don’t address “the proliferation of 30-plus day corporate rentals, which have long been an issue in my district and in rent controlled housing throughout the city.”

Earlier this year, planning commissioners were outraged that Sonder, a licensed hotel operator and San Francisco-based startup that renovates and operates hotels but also runs a “boutique residential service,” had leased 52 of 60 residential units at 2100 Market St. which it plans to rent out as furnished extended-stay apartments.

“The Sonder case prompted a renewed interest in how to address this multi-billion industry as more and more developers seek to capitalize off of what are essentially quasi-hotel operations,” Peskin said.

S.F. Examiner Staff Writer Joshua Sabatini contributed to this report.

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