Airbnb Is Contributing to the Displacement of Long-Term Tenants in San Francisco
The following is an excerpt from the new book Raw Deal by Steven Hill (St. Martin's Press, 2015):
More than any other company, Airbnb has come to personify the sharing economy ethos. As one of the movement’s most successful and recognizable faces, Airbnb keeps its sharing philosophy at the forefront of its marketing strategy. “Belonging is the idea that defines Airbnb,” says its 34-year-old CEO and founder Brian Chesky. “Really, we’re about home. You see, a house is just a space, but a home is where you belong. That is the idea at the core of our company: belonging.” In a confusing, topsy-turvy world, his words sound reassuring, and Chesky in his many interviews comes across as sincerely believing it.
Truly a modern business miracle, Airbnb was started in San Francisco rather haphazardly by a couple of twentysomethings, Chesky and his roommate Joe Gebbia, both graduates of the Rhode Island School of Design. Unemployed in 2007 and having difficulty paying their rent, and noting the lack of available hotel space for attendees to an industrial design conference, Chesky and Gebbia threw air mattresses on their living room floor (hence, the name “air” bnb), turning their apartment on Rausch Street in the South of Market area into a cross between a flophouse and a short-term bed-and-breakfast. With that quick money in their pockets, they expanded by focusing first on conferences and events where lodging was scarce. They drew in friends who wanted to make a few extra dollars subrenting their apartment for a few nights. They added computer programmer Nathan Blecharczyk as a cofounder to build a website, and the whole enterprise took off like a rocket.
They tapped into a rich vein of people, at first in urban areas in the U.S. but eventually all over the world, who grasped for the financial benefits of hosting travelers. Those hosts in turn filled a niche for travelers looking for low-cost accommodations, particularly during high-season times when hotel vacancies were scarce. Airbnb has become an impressive commercial empire, yet its appeal has been authentically grassroots.
The young entrepreneurs had no idea what they had wrapped their arms around. Now, less than eight years later, Airbnb is a global success story, valued at $25 billion—the same as the 100-year-old Hyatt chain—and self-reporting a mind boggling 25 million nights booked since its inception, with a million current listings across 34,000 cities and 192 countries. It employs a thousand people around the world, and has become not only an economic but also a cultural phenomenon, already an iconic company in its short life. Its young founders have become wide-eyed billionaires who at times seem to barely believe their good fortune in stumbling upon a fabulous new innovation in global hospitality and travel.
But in San Francisco, New York City, Los Angeles and elsewhere, the legacy of their gold rush has been decidedly mixed. Airbnb is not merely a “community-driven hospitality company,” as its founders like to say, but also a catalyst for massive lawbreaking, a tax rogue and, tragically, an impetus for the eviction of longtime tenants, including the elderly, the disabled, children, even people with life-threatening illnesses. Other short-term rental brokerages such as VRBO, FlipKey, Roomorama and Home Away, while much smaller in size, have followed the Airbnb model. For reasons that will be elaborated below, many cities have been left reeling from the bitter disruption of entire neighborhoods, as well as from poisoned landlord-tenant relations that were based on laws that had been stitched together over decades, yet now are being flushed as Airbnb’s investors and local real estate interests rush to cash in. If “belonging” is the idea that defines Airbnb, it depends a lot on whether or not you belong to the right club.
Down and Out in North Beach
Theresa Flandrich is a retired nurse who has lived for 30 years and raised her son in a two-bedroom, rent-controlled apartment on North Beach’s Lombard Street—and now is desperately fighting eviction as a greedy landlord tries to remove her (and other tenants in her building) to make room for Airbnb-ing her apartment (yes, Airbnb has become a verb, with nasty connotations).
Theresa gives me a tour around her North Beach neighborhood. North Beach is one of San Francisco’s most historic and loved districts, also known as “Little Italy” because it was the borough where many Italian immigrants settled in the early 20th century. Seeking opportunity in the wave of European immigration that flooded America, the Italians opened shops, built homes and churches and, with North Beach abutting Fisherman’s Wharf, anchored the then-thriving fishing industry. Joe DiMaggio’s father was a fisherman in the Bay Area, and Joltin’ Joe married Marilyn Monroe at San Francisco City Hall; Joe DiMaggio Playground is located a block from Theresa’s apartment. The North Beach neighborhood was a multigenerational place, where families thrived and kids played stickball in the streets, with grandparents in close proximity to their extended families. Neighbors knew and helped each other and felt a measure of post–World War II security. “It was a real neighborhood,” says Theresa.
But now things look very different. Just on her street alone, on a single block, Theresa can point to five buildings (including her own) where all the tenants have received eviction notices. Around the corner there are several more buildings with threatened tenants. “Most of these buildings,” says Theresa, “were owned by the old Italians who took care of their community. They kept rents reasonable, and didn’t mind rent control because, well, we were all neighbors.” That word says a lot to Theresa. “They wanted to help each other, and as a nurse when they needed medical care I helped them. Everybody took care of each other.”
But then the Italian patriarchs grew old and died, and many of their kids didn’t live in San Francisco anymore and so, for one reason or another, they wanted to sell. A new breed of landlords bought the buildings. Owners like Peter Iskandar of Bubble Realty (yes, that’s really his real estate company’s name), a speculator from Indonesia who saw this neighborhood as his personal gold rush. Like a Monopoly game board, he purchased property after property and began evicting tenants—often using questionable means—so that he could get them out of their rent-controlled apartments. Then he would jack up the rents, sell them as condominiums or, more recently, Airbnb them. The Anti-Eviction Mapping Project shows Mr. Iskandar as having bought at least 10 buildings in the neighborhood.
To make way for his ambitions, he has evicted a 68-year-old woman with breast cancer; Carlo Tarrone, in his seventies and using a walker, who had lived in his apartment for 56 years; and Sandy Bishop, who is 70 and has lung cancer. “I can’t even find a place to live because I don’t make enough money,” Bishop said. “Maybe I should just stay and let the sheriff carry me out.” Iskandar is a one-man wrecking ball, demolishing the lives of elderly and sick people, seemingly targeting the most vulnerable. Some have accused him of bending the rules to commit naked acts of what amounts to “elderly cleansing.”
Just down the street, Theresa shows me a four-unit building that is accessed via a quaint, brick alleyway, reminiscent of the honey-hive maze around Piazza Navona in Rome. All the tenants have been evicted and now, she points out, four lockboxes are visible on the banister outside the front entryway for the apartments—the telltale sign that this building has been Airbnb-ed. The constant carousel of new faces coming and going can check themselves in and out of each apartment, accessing the key via the lockbox for which they are given the combination, without ever meeting the landlord or manager. The transaction can be completed anonymously, facelessly, over the Airbnb website. Where before this building housed families who were part of the neighborhood, now it’s an Airbnb tourist hotel.
Theresa’s building has met with a similar fate, though the circumstances are somewhat different. The owner of her building died at 96 years old. “She and I were close,” says Theresa, “I used to help her take her medications.” Everyone in the four-apartment building was close, including the Palestinian shopkeepers who run a small grocery store on the street level. “They let the neighbors run a tab; if you had a short month, they would let you pay the next month. It was close knit,” says Theresa.
The deceased owner had willed the property to her niece who lives in faraway Laguna Beach, in Southern California. Within a week after getting her hands on the deed, the niece served notice to everyone in the building to clear out, including a man in advanced stages of Parkinson’s disease. The niece claimed she was going to invoke a legal loophole called an “owner-occupied move-in”—moving in members of her family, including herself, none of whom actually lived in San Francisco.
“Seven o’clock in the morning on April 11th, the doorbell rang. And, there was a server,” says Theresa. “My son answered the door and he was just given the papers. I was offended. I was hurt. I was shocked. My son had to go off to work. And he said, the first thing he said was, ‘Oh my God. This is the only home I’ve ever known. I didn’t expect to live here all my life. But I expected you to be here, Mom. This is where we’d continue to celebrate all our holidays and the neighborhood.’”
According to a report by San Francisco’s Rent Board, nearly 2,000 units were evicted in 2013, a 13 percent increase from 2012. Since most rented locations house more than one person (San Francisco is too expensive for most people to have their own private place), housing experts have estimated that figure represents at least 5,000 people evicted in 2013. The landlords have been relentless in using different tactics, some of them illegal, to evict, such as claiming they’re going to rehabilitate their building. The landlords know that, by law, tenants have the right to move back into their unit at the same rent after the rehab is completed. But the tenants don’t know that, and the landlord usually does not tell them because their goal is to remove these tenants from their rent-controlled apartments. They offer them a few thousand dollars to move out, telling the tenants they have no choice, and the tenants— especially when they are elderly, disabled, ill or language-challenged—often don’t have the will or tenacity to fight back. After a few take the buyout and leave, the landlord can really put the squeeze on any that refuse. They harass and threaten them, they cut off garbage service, they refuse to do repairs . . . suddenly water or electricity becomes unreliable.
Property owners also have ramped up their use of “gotcha evictions” to remove tenants from their rent-controlled apartments—trumped-up, petty violations for alleged “nuisances,” such as carrying your bicycle through a common hallway, painting the walls of your apartment or leaving a baby stroller in the common area. In Chinatown, tenants have been threatened with eviction for hanging laundry outside their windows and displaying Chinese New Year decorations in the hallways. Since there is no clear legal standard for what constitutes a “nuisance,” the landlord issues an eviction notice, initiating a legal battle that most tenants are ill-positioned to wage.
In 2014, more than a thousand San Francisco tenants were intimidated out of their homes over these kinds of trumped-up charges. Breach of lease and nuisance violations have become the leading causes of evictions in San Francisco. Most tenants, especially seniors, do not know their rights or are afraid to assert them. Once evicted, most move out of the city because, having been ousted from their rent-controlled apartment, they can’t afford to remain when the median monthly rent for a one-bedroom apartment zoomed in 2015 to nearly $3,500 (up from $2,795 in 2013), and a two-bedroom apartment to $4,500. Under this kind of price pressure, the San Francisco Controller’s Office estimates that the city lost 1,017 rent-controlled housing units in 2013. “When this happens year after year, as it has for many years in a row,” says Sara Shortt from the Housing Rights Committee of San Francisco, “the very fabric of our neighborhoods, our communities and our city is ripped apart.”
But Theresa has successfully fought her eviction by organizing her building and her neighbors. They formed the North Beach Tenants Committee, and at the first meeting the turnout was strong, over 100 people. She has helped Diego resist his eviction, and other people are fighting back. Joe Tobener, a local San Francisco attorney, has represented many tenants against greedy landlords and their illegal evictions. Tobener is a straight-talking people’s lawyer who grew up poor, raised by a single mom with six kids on a cashier’s salary. “I feel like Robin Hood sometimes,” he told me, defending so many vulnerable tenants against the wealthy interests behind these Airbnb-fueled evictions. “We get about 60 calls a week,” many of them from tenants being illegally displaced so landlords can use Airbnb, VRBO, Roomorama, FlipKey or other services to rent to tourists. “There’s so little enforcement, it’s like the Third World,” he says. “Airbnb is contributing to the displacement of long-term tenants in San Francisco.”
San Francisco, like New York City and other major urban areas, has a complicated code of laws and regulations that oversee real estate and landlord-tenant relations. One of the laws prohibits the renting of apartments or homes for fewer than 30 days, to prevent exactly the type of shenanigans that afflict Theresa and her neighbors—property owners who decide it’s more lucrative to turn their property into tourist hotels, thereby reducing the supply of housing available for local people who need permanent residence. That practice is called “illegal hoteling” and was banned decades ago by the Apartment Conversion Ordinance.
Property owners have always tried to skirt this law, but even when Craigslist became the first online service to facilitate short-term rentals, the small number of lawbreakers was ignorable. Now, Airbnb and other short-term rental brokerages, with their sophisticated Web- and app-based portals, have made it super easy for virtually anyone with property to find a short-term tourist to rent to. They have facilitated lawbreaking on a massive scale, and an investigation in May 2014 by the San Francisco Chronicle found 4,798 properties listed on the Airbnb website, and another 1,200 properties on the VRBO site. A colorful map showing the location of each listing was produced, and the thousands of dots covering the map (especially the eastern half of the city) made San Francisco look like it was being swarmed by insects.
In the meantime, much damage has been done to the fabric of San Francisco. Not the least because Theresa and her neighbors have received little help from City Hall. Indeed, San Francisco mayor Ed Lee’s chief financial benefactor, Ron Conway, is a Silicon Valley venture capitalist with a significant financial stake in Airbnb. And Conway is not the only local investor banking on Airbnb. Tech investor billionaire Peter Thiel, a politically connected San Francisco resident who cofounded PayPal and owns a big chunk of Airbnb (as well as Facebook), saw his net worth in 2013 shoot up from $1.4 billion to $2.2 billion, as Airbnb’s value steadily climbed. Tragically, while the new sharing economy service offered by Airbnb is lucrative for a small number of people, it is forcing out longtime San Franciscans and pushing up rents by shrinking the supply of available housing, particularly rent-controlled apartments, from the permanent housing stock. This is what life has become in a gold rush city, where regulations to protect longtime tenants are not enforced because public officials are in thrall to the techno sapien gurus of Silicon Valley.