San Francisco is in the midst of a housing shortage, fueled by huge demand and exacerbated by decades of wrongheaded regulatory intervention and, more recently, by professional troglodytes.
Firms such as Airbnb, a peer-to-peer lodge-sharing service, could mark a step toward a market-driven solution to San Francisco's housing problems by allowing individuals to participate in previously unavailable markets. In response, existing power structures are seeking to place their incumbent interests ahead of ordinary San Franciscans.
The genesis of San Francisco's housing shortage can be laid squarely at the feet of The City's political administrators. San Francisco long has demonstrated a preference for strict control of its housing market. As a result, perverse regulatory incentives have chilled the market for property owners who operate long-term rentals.
For instance, effective June 1 this year, property owners who wish to rent their property on a long-term basis are subject to a schedule of steep charges, more than $100,000 in some cases, should they ever choose to cease renting their property. Characterized as a “relocation payment” to the tenant, including any subtenants, these funds also can be used for purposes other than resettlement.
Small-time renters have few options if they wish to avoid the charge. They can continue to rent against their will or they can wait out their tenant and then leave the unit vacant. Neither of these options furthers The City's goal of providing available and affordable housing.
By erecting such formidable barriers to prevent long-term renters from leaving the market, San Francisco is effectively discouraging property owners from entering the market in the first place. Lodge-sharing arrangements may provide an alternative for small-property owners who would otherwise have strong incentive not to contribute to the supply of available rental properties.
Missteps aside, threats to disruptive enterprise can, and will, come from anywhere. Last week, plaintiffs attorneys filed a class-action lawsuit against Airbnb alleging the firm “participates in, facilitates and enables the illegal short-term rentals (sic) for rooms and apartments in the City and County of San Francisco.”
This approach is interesting, in that it shifts opposition from politics to litigation. Removing a live public-policy dispute to the courts may temporarily grant some legal clarity. Regrettably, that clarity comes at the expense of disenfranchising voters from an opportunity to express their will.
Allegations of individual harm have a questionable nexus with lodge-sharing activity. Enterprising plaintiffs attorneys have shown they are willing to fill their wallet at the expense of innovation. If anything, San Francisco should intervene on behalf of Airbnb, since its model encourages small-property owners to make their units available for public use.
While there is no panacea for San Francisco's housing shortage, market-oriented reforms that accommodate lodge sharing are an essential first-step toward a long-term fix. Neither a maladapted state regulatory apparatus nor a phalanx of greedy troglodytes should have the last say on innovation.
Ian Adams is the state director and a senior fellow of the R Street Institute, a nonprofit, nonpartisan public-policy research group.