>> good morning and welcome to the wednesday, january 17th, meeting of the government audit and oversight committee. my name is jane kim and i'm joined by our vice chair, supervisor aaron peskin and acting mayor, london breed. thank you to our committee clerk, john carol, and i would like to acknowledge jessie lawrence who who -- ensure the meetings are available online. >> please make sure to silence cell phones and electronic

devices. items acted upon will appear on the january 23rd, 2018 board of supervisors agenda. >> can we call item one. >> hearing on short-term residential rentals registration and any need for a -- additional resources. >> i want to acknowledge and thank you supervisor peskin who is the sponsor. i will hand the hearing to you. >> supervisor peskin: thank you madame chair and colleagues. as you will both remember, in august of 2016, the board of supervisors unanimously passed an amendment to the previous short-term rental law which held hosting platforms accountable for ensuring that hosts are properly registered and i want

to acknowledge the chief sponsor of that legislation, our former college, supervisor david compos, who authored that legislation, which subsequently was subjected to a lawsuit that air bnb brought. i want to acknowledge the city attorney and the city attorney's office for settling that lawsuit which happened in may of 2017. this is one of a continuing set of hearings that we have had to look at the progress and those settlements. the office of short-term rentals headed by kevin guy is here today to present what has happened in the various settlements, the last one which took effect yesterday at 5:00 p.m. this is a timely hearing. with that, madame chair, with

your consent, i would like to turn it over to him who has a presentation for us. >> supervisor kim: thank you for being here. >> supervisor breed: just some quick remarks. we reached a critical deadline in the implementation of the legislation regarding short-term rentals and the settlement agreement reached with airbnb and home away. i'm excited about that. i guess today is wednesday. this happened yesterday, tuesday. throughout the last three years of debate on this issue, i've said consistently we need robust regulations of short-term rentals to protect the housing stock, while also enables our residents to reasonably share their homes and we need to make changes when something isn't working. i believe we also need to continue using data to inform

our policy and enforcement decisions and not, you know, anything other than that. today is an important opportunity for us to hear from the office of short-term rental on where we are in registration and the enforzment pro-- enforcement process. i look forward to hearing from the department today and would like for us to discuss our enforcement is being conducted at the platform level and through responding to individual complaints. and i'll just say on a side note, i really truly appreciate the leadership of kevin guy and the work that he's done around regulations. i think he has been fair. he has tried to work with people who we know are not within compliance. people who have good intentions, but unfortunately, the law is the law. and we set up this law for a reason, because of the challenges that we were having with this platform. and now at the conclusion of the timeline, i think this is going

to make such a huge difference. and i'm hoping for yes, an update. but i'm looking forward to the data that has -- will clearly demonstrate from the conversations that we've had that what we have done, the various regulations that we put in police station have immediate a significant difference and have also made it easier for this office of short-term rentals to get people to comply with the law. and that's what this is all about. and so, thank you for being here, today, mr. guy. and i'll turn it back over to our chair. >> good morning and thank you for the remarks. i appreciate that. i'm kevin guy, director of the office of short-term rentals. i'm here today to give the very update that was described. the status of our office and focus on the 2016 amendments to the short-term rental program

and the associated settlement agreement with airbnb and home away. if i could get the powerpoint up on the screen, please. so, i think supervisor peskin hit a lot of these points. but just as a refresher, there were amendments that were enacted by the board in august of 2016 to ensure all hosts are properly registered. home away and airbnb filed suit in 2016 after four months of medation from january to april, we finally reached a settlement agreement with those platforms in may of 2017. so, i do want to echo the thanks very much to the city attorney's office and they've incredible diligent work in reaching that

agreement. on a side note, following the adoption of the settlement agreement, the office of short-term rentals was okay with transitioning to an online format. in collaboration, we were able to launch our online application for hosts who wish to apply in summer of 2017. so, just in terms of the basic legislation that was passed in 2016, which applies to all platforms other than airbnb and home away, the office of short-term rentals issued guidelines. they had to inform hosts of the registration requirements. not allow bookings for any hosts that were not registered with the office of short-term rental.

s. they needed to -- short-term rentals. they needed to register and just quickly, they could choose an api option, a dialogue set up between the platform servers and the city's hosted servers with our database just to give a verification that a host does indeed have a valid certificate. they could provide monthly spreadsheets and they would have to have the host display their short-term rental numbers so we could properly do our auditing or upload copies of the host certificates. physical copies. this is an appealing option for smaller platforms. and they could negotiate for a different application. so, an overview of the settlement agreement, some of the details here.

the agreement was structured to allow a time for the development of a password application system. this was something at the time that was very important to the platforms, the ability to collect all the same information that the city does, but do it in a way that is hosted on their native site and scanned and made to look in concert with sort of their aesthetic of their particular platform, which we were certainly amenable to. and we received quite a number of applications from airbnb through this application system. then beginning in september, the platforms are required to short informing host of the registration requirements and deadlines. that was split up into three phases with separate deadlines. and if the host did not apply or receive the certificate number by that particular deadline, the

platforms were required to ru move any list -- remove any listings for non-registered hosts. the last one occurred midnight last night. airbnb ran the script essentially and allowed people to apply up until midnight. but anybody who had not submitted an application by that time was removed. i will get into a little more of the data on that shortly. we are through the initial clean-up phase. verification of compliance will move forwards on a monthly basis. they send us information about the registration numbers corresponding to each listing. we verify the numbers are correct and that nobody is using duplicate numbers or something like that. and we also inform the platforms on a weekly basis of any new applications that have come in and been approved and any that we've denied and subject to

delisting. sort of any fraudulent numbers we see. it establishes a frame work of working collaboratively, having a dialogue and ensuring that in real time the hosts we see are indeed truly registered. so, this begins to sort of tell the tale of the outcomes of both the implementation of the basic legislation and the settlement agreement. the blue line that you see here sort of traversing upwards represents the number of applications received by month. you could see there was an initial surge of applications right when the program launched in february of 2015. a lot of hosts who had been operates short-term rentals wanted to come in and get legal and make sure they had a certification in place. and after that initial surge, we experienced a steady rate of

applications coming in. but definitely not at the rate that we would like to see and certainly still a delta between the number of registered hosts and number of folks operating on the platforms. you see around about august of 2017 where airbnb and home away and the other platforms began the notification. you see the upswing in the number of registrations received by month. this goes through december. just to give you a sense of what's been going on in the last few days. we were averaging in the dates before that led to the climb you see, average after about two applications per day. the notification and deadline

process -- and increase of 20 a day. monday we received 88 applications and yesterday received 86 applications. plenty of folks rushing to meet the deadline and get their applications in, which really is due and credited to the legislation and the settlement agreement and everything. >> supervisor peskin: and that means you have got about a thousand pending applications now? >> that is correct. >> supervisor peskin: and just relative to the split between airbnb, which has the market share and the other platforms, do you have any data as to how that splits out given their different business models? >> yes. i will get into that a little bit further into the presentation. we did not really receive that many applications in terms of home away. we did receive a lot of applications from the airbnb

site as well as our city hosted site and we saw a trickle of folks coming in submitting applications in person as well. but the vast received recently have come through the airbnb passer application. in 2015 -- >> supervisor peskin: i'm sorry. do any of the other platforms also have the pass through system? >> no. other platforms have that option. o one of the requirements is to submit a sizable fee to cover the cost of engineering on our end. we don't want that cost to be borne by the general tax payers. if you're a relatively small platform, there's maybe not an incentive to create that system. but it is an option available to any platform that wants to take advantage of it. so, the numbers, we see the applications received each year if you are looking on an annual

basis have been consistent. however, over 1,200 applications have been received in the last quarter of 2017, plus the first two weeks of 2018. so, again, the legislation settlement agreement have driven a substantial increase to our office. and reaching an average of 20 applications per day and culminating in a peak of 26 yesterday, 88 on monday of this week. we have received a total now of over 4,100 applications. we currently have 2,170 registered hosts with active registration and another approximately a thousand applications under review when i prepared this presentation yesterday. we received another 86 yesterday. we are looking at about a thousand applications under review. i should note that applicants may choose to host while applications are pending. we made that decision in

recognition of the fact when we get applications, it will take us time to get through it. but if the application is denied, they have to take down the listing and cancel any future bookings if we do deny their application. to talk a little more about outcomes in the legislation and settlement, you can recognize the effects on the hosting mratd -- platforms themselves. through december which represents the first two phases of the delisting process, 2,178 listings were removed from airbnb and flip key alone. we had an estimate that the delistings occurred overnight. we don't have exact data. but we have an estimate from airbnb which i believe to be accurate of approximately 2,500 additional listings being removed from the site last night, which would represent the

biggest removal of listings of the three phases. here's listing counts as of december 2015. i should note that when i'm referring to these listing counts, i'm excluding hotels, timeshares. airbnb in december of 2017 after the first two phases of delistings had around 5,900, so that was reduced in december of 2016. flip key saw a very dramatic reduction of 550 listings before the issuance of the administrative guidance. we haven't gotten phase by phase numbers by home away. the number of listings removed. we did a survey and it appears

maybe less than a hundred and possibly as few as 50 short-term rental listings remain on the home away sites. it is important to recognize the distinction when we talk about listings versus hosts. the listing number is always going to be higher for a number of reasons. so, as of december 2015, there was 4,625 hosts on airbnb. so, there's a couple of different factors that lead into this distinction. the most important is which i already cited is the fact we have listings that are tradition hotels, timeshares, 30-day plus rentals, those categories that are exclutd -- excluded but still appear. also about 15% of hosts have multiple listings which could be

okay. they have one wlising for each of -- listing for each individual bedrooms. so they can have combination of travelers and they may have a fourth listing for people to rent the entire unit. they are certainly entitled to have that hypothetical four listing scenario i described. you are always going to have a higher listing count number than host count number. so, given again that we had a pretty substantial delisting that occurred overnight, we can presume that the number of host listing will go down from what i'm showing here, december 2017 numbers. i should also note we recently seen an increase in the application rejection rates. so, early in the program we were rejecting applications at a rate after about 15%-20%.

most recently that increased before the tranching process up to about 26%. we have a relatively small sample size but rejection rate is around 38% right now. >> supervisor peskin: and that's due to occupancy? >> primary residences is the main issue. and it's not necessarily that -- what we find a lot of times is that folks may live in their home for some portion of the year, but don't necessarily live there for the 270 nights per year standard that makes them a permanent resident or makes them eligible for the program. there's a misunderstanding about -- and an understandable one, about what constitute as dwelling unit. some people will own a two-unit building and treat the entirety

of the space as their single-family home. but by the city's records or regulations, those are two separate dwelling units. if they are renting one out and living in the other, they may not be able to qualify for the program. so, in those cases we sort of let them know, you really need to establish residency in one unit. you may be eligible to come in and apply at a later date once you have done that. right now, you haven't met the standard for permanent residency. >> supervisor peskin: and given the uptick in recent applications, are you making when necessary on site visits? >> yes. every applications are different. some are much more easy to confirm permanent residency. but we scrutinize every application pretty extensively. whatever information is lacking from the basic application, we want to engage with that applicant and try to find out

more information about things that doesn't add up and sometimes that involves a site visit. we certainly ask for their permission. we don't have any authority to barge into their home and nor would we want to. sometimes see the physical layout of the unit can help us understand what is often times and is common in san francisco -- okay now i understand better. this is really part of your unit. and we are fine approving your application. >> supervisor kim: can i can how long it takes getting approval or denial? >> historically when applications were coming in at a much slower clip, we were averaging two to four weeks turnaround time. we have short-staffed. we got new staff on board. but we have a lot of applications that have come in.

people sort of waiting for the last minute. i would say there's probably a 4-8 week turnaround time at this point. we hope to get that down as we process through the applications back to sort of a standard state of a 2-4 week turnaround time. people should expect longer review times because we want to apply rigorous scrutiny and diligence to these applications. but just to reiterate, folks have the option of listing and hosting short-term rentals while the application is pending. >> supervisor peskin: now you have a full complement of six staff? >> correct. >> supervisor peskin: how are those divided between application review and enforcement? >> the way we've structured our team is very fluid. so, whatever the you are jebt need is -- urgent need of the moment, we make sure everyone is cross trained and able to wear different hats. at the moment, everyone is

concentrating on the applications and also processing renewals for folks who registered two years ago. but we are really all in on reviewing the applications and making sure we get through these in a timely fashion. >> supervisor breed: can we talk about what you mentioned before you answered the last question about those whose applications are pending are able to host. what do we need to do to change that policy? because that's been a bit of a problem with -- as you know, some of my constituents who had been denied and there were some complications and their situations were a little different than the average situation. i don't think it's a good idea until an application is approved to allow people to host because again, those situations happen

where they could potentially be denied. and so, how do you propose we address that issue? because that has just been a problem. >> that's a very good question. i will acknowledge there are pitfalls to that. we made that very clear to the applicant up front. we say to them, look, you have the option. you're not required to, but you have the option of hosting while the registration is pending. but it does come with the hazard if you are denied, you have to take down your listings and cancel the reservation. it is not a requirement that anybody start listing certainly. i recognize there have been situations where people fall into that category of -- >> supervisor breed: based on your experience of those kind of applications, would you say thrice -- there's a lot? i dealt with two. maybe that's not a lot. the situation was so complicated

and confusing that it didn't seem appropriate to allow it to even happen in the first place. so, i just wanted to get your feedback on that particular issue because in my opinion, i don't think that should be the case. i think that they should have to go through a process and once they get approved, they're able to do it and that's how it should be. and so, i think part of it is trying to understand the number of issues like that. but more importantly, making the change in order to make sure that it's not a challenge in the future. >> right. you raise very important points. i think it's always a balance. we recognize these the potential for folks again falling into the situation of getting denied. kind of getting their hopes up and getting reservations canceled and having their listings come down. but on balance, i think there's an advantage because we want to

presume good intentions on behalf of our applicants. >> supervisor breed: don't you think we should close that loophole so we don't run into this problem? >> it is strictly a policy call. it is nothing legislatively that can't be undone. i think you will find, respectfully, there are a lot of folks in the public who appreciate that they have this option to do so. we do try to inform them up front that, look, this is totally your option and comes with some hazards. but it is a strong desire to roll back the policy, we could talk about it. again, there's nothing legislative that requires us to do that. that was just a policy call we made some time ago when we were short-staffed and facing sort of longer turnaround times on applications. again, recognize thanks we do end up a-- recognizing we do end

up approving the jorlt -- majority of applications. >> supervisor breed: what's the percentage of the applications you don't approve who you've allowed to move forward in this way? >> right. as i mentioned, we have seen -- although with a small sample size, we have seen an uptick in the number of applications rejected recently. with the applications submitted from september on when our forced registration process started, that's natural i think to see that folks that maybe -- this program has been in effect for nearly three years with a registration requirement and mechanisms to do so. we're tried to make it an easier and simplified process. but when it is all said and done, folks have waited this long to submit their applications. so, it's natural unfortunately that some of those applications might be folks in the situation

of look, i probably don't qualify, but what the heck, i'll submit an application and see if i get approved. >> supervisor breed: i'll just say i'm of the mind that we should wait until these applications are approved before we allow the rentals to take place. so, that's just my two cents on it. >> i understand. if that's a strong desire, again, it's nothing -- it's simply a policy and something we could disallow moving forward. >> supervisor peskin: and supervisor breed, we could certainly legislate that addition if we so chose. >> supervisor breed: or you could just do it. >> right. correct. yes. [laughter] >> nothing set in stone on that whatsoever. >> supervisor breed: great. >> so, i did want to touch upon some of the advantages of the settlement agreement

specifically. the lengthy discussions and the culmination of a settlement agreement back in may for -- that would apply to airbnb, home away, really gave us some distinct advantages just over what we would get out applying the underlying ordinance and their obligations. so, number one is that hosts can apply through a variety of motor vehicle nifrms -- mechanisms. the settlement agreement got us as an office to where we were comfortable doing our own online applications and allowed the development of a pass through application system. and we also accept by the more tradition method in person application and u.s. postal service. it gave us the comfort level to expand the breadth of options.

it allowed us to really take on those platforms that presented the largest market share and work things through in a systematic way and have auditing protocols in place to make sure listings were coming down when they weren't being registered. it requires hosts to enter their str certificate number which isn't necessarily a requirement for other mratd forms. -- platforms. platforms must have the number displayed so we can facilitate auditing by our office and we that ache look at the numbers and see if someone has stolen a dup cat -- duplicate number or displayed a fraudulent number.

it is hugely helpful to us. one huge advantage of the settlement agreement is platforms are obligated to deactivate any ineligible listings and cancel and rebook guests of those listings within six business days after notify case from the office of short-term rentals. if someone has an application in and a certificate that has been approved but they have parties every weekend and causing a lot of quality of life issues and we get complaints from neighbors, we can tell the neighbors we will notify airbnb and home away and within six days you will never have to deal with this activity again because we have revoked their certificate rather than folks who may sort of game the system and still try to host even after their certificates are canceled. platforms remain liable if they

continue to host bookings. it is conducted a little different fashion than the underlining ordinance. but there's still ultimately liability if we don't see compliance and the office of short-term rentals is able to monitor at the much higher 10,000 foot platform level in addition to doing host by host enforcement. to mayor breed's point, i wanted to talk about the enforcement efforts to date. office of short-term rentals has enforced 677 units for short-term rental violations. we also have a lot of other enforcement conducted in the manner of getting in touch of property managers, working with them to get illegal listings taken down. formal violation protocol, 677 units for short-term rental violations. we've assessed $1.7 million,

collected $953,000 to date. one particularly case recently settled and i want to give kudos to the hard work of the city attorney's office, this was actually one of the earliest enforcement cases, nine units within the building that were taken out of the long-term rental pool and were being illegally short-term rented. at the time of our original enforcement action, we held a hearing and assessed $192,000 in penalties and i'm pleased to report that as of the settlement at the end of last year, we've settled with collection of 19 $2,000 in penalties that was originally assessed. >> supervisor peskin: congratulations to the office of short-term rentals and city attorney's office. they wanted a mills act tax credit, which this panel was not in a mood to do unless they settled their outstanding violations. we're very familiar with the 973

market case. >> appreciative of that. so, our enforcement really has focused on high volume rentals, hosts with multiple units and rentals with the quality of life impacting neighbors. weekend parties every weekend and improper trash disposal, people double parking or parking in front of neighbors' driveways. we're heard all of it. vandalism. things like that. recognizing that we couldn't praktd cli go out and pursue enforcement against -- practically go gout and pursue enforcement against all of them. so, those high volume rentals came with both quality of life impact and housing impacts and folks with multiple units across the property were problematic for housing.

moving forward, the office of short-term rentals will monitor in accordance with the property coals i have described so far. -- protocols i have described so far. everyone on a platform should be registered. but we anticipate there will be some people who might move over to craigslist or enter a fraudulent certificate number, stolen from another listing. and so, we will be able to audit those and inform the platforms and get them taken down and also pursue enforcement against the individual host. i don't want anyone to get the impression we are laser focused solely on airbnb. it's about much more than that. there are multiple platforms and we understand there are mechanisms and ways people can try to game the system. but we are going to be very vigilant in pursuing enforcement actions against those hosts. not just have their listings

taken down but let them know there's going to be financial penalties. >> supervisor peskin: and relative to single resident occupan occupancy hotels that are not under your jurisdiction and i have had a few cases that have come to me that i have referred to your unit then you have to coordinate with dbi on, how are those going? >> you are right. sro's fall within a gray air what. they are not addressed by the short-term rental legislation. so, we have been tackling those issues as they come up and tackling them pretty aggressively as well as some of the other -- cross pollinated enforcement issues. we have a good working relationship with dbi on those and that's something we will

also continue to monitor diligently. the nice part about being able to monitor and do enforcement at the platform level is it does free up enforcement staff time to go after those kind of cases, those more nuanced, complex cases where you want to get folks from department of building inspection, other agencies involved and really tackle a problem comprehensively. >> supervisor peskin: as to the abuse of corporate rentals, how's that working? >> abuse of corporal rentals in terms of -- >> supervisor peskin: 30 days or more but being listed as short-term rentals? i assume they all come off immediately because the residency issue trumps. >> exactly. those should have already come off. and if a listing like that on

airbnb toggles to less, it will come off. other platforms operate differently where you can think of the platform as a match maker and then the most and the guests get in contact offline. and create an agreement of the particulars of how long they're going to stay and things like that. there's some potential for abuse of people listing for 30 days but renting for less. but those are the kind of cases -- again, we have opportunities now, resources to monitor those types of listings and say if you are saying you only rent for minimum 30 day says but we are seeing two or three reviews a month, we have the ability to enforce against that host. we have the ability to issue straitive subpoenas for the -- administrative subpoenas for the records. we have a lot of mechanisms at our disposal. and just as a reminder too in

terms of getting data from hosts, one of the things that's always been there in the legislation for all the registered hosts we can request of them that provide business information for the last two years of their records and they are obligated to provide it. if we have some suspicions about people fudging the numbers in terms of number of nights they're hosting and things like that, we have the ability to obtain records either from the host and/or through adds minute administrative subpoena. >> supervisor peskin: do you collect enforcement data? >> i don't know that we have been tracking it on those specifically. i can get a better profile for the next hearing on that specific topic. we've certainly pursued those cases but i can compile better data to