Updated: Feb 1
San Francisco has banned leases ranging from one month to one year on all but 1,000 units, or 0.25% of the city’s housing stock
The law was intended to regulate rental startup Sonder, which rented out an entire building on Market Street and planned to turn it into corporate rentals. Sonder has since largely exited the San Francisco market.
Residents who violate the law will be fined $100 per day, up to $1,000
Opponents of the new law call it poorly timed, with the unfortunate side effect of stifling mobility amid widespread migration due to COVID and rising demand for flexible leases
Some cities have used COVID to figure out how to entice people to move there. Not so in San Francisco, despite signs of a resident exodus and an office space vacancy rate eclipsing what it was in the dot-com bust years. On the contrary, San Francisco lawmakers used COVID to push forward a law that critics say will make the city more unwelcoming to new residents.
The law establishes and heavily restricts a new type of rental called Intermediate Length Occupancy (ILO), defined as leases between 30 days and one year. These rentals, which were legal before, will now require City permits. The law took effect last year, but the City's Planning Department just released details on its implementation.
Members of the Board of Supervisors, which unanimously approved the law in May 2020, argued that it preserves affordable housing for long-term residents by ensuring signed leases will be one year or longer. Opponents say the law is an example of half-baked regulatory overreach that could have unintended consequences for current and future residents.
“Somewhat ironically, the number of situations where somebody wants to sign a shorter lease grew with COVID,” Laura Campbell, senior associate at KDV law and a San Francisco land use law expert, said. “I’ve been getting more calls on my end saying that tenants really want a 6 month lease, which is now no longer possible.”
Under the new law, only 1,000 ILO permits will be issued, which translates into .25% of San Francisco’s 400,000 units of housing stock. Single family homes, buildings with 3 or fewer units and units under rent control are ineligible to receive these permits, and two-thirds of the permits must be located in the City’s “downtown core”. Though ILO rentals are technically illegal already, there won’t be any enforcement until 2022, Planning Department spokeswoman Candace Soohoo confirmed to Public Comment in an email. Once enforced, landlords who violate the law will be fined $100 per day, up to $1,000.
The restrictions mean that newcomers who might want to find a foothold in the City for a few months are now required to sign up for a one-year or longer lease, incurring the financial liability that comes with it. And on the other end, homeowners who may want to rent out their homes for a few months are now barred from doing so.
So why were ILO rentals a priority during a pandemic year marked by soaring unemployment, remote work and widespread migration?
It’s the fallout of a battle between the City and a rental startup called Sonder. In 2019, Sonder rented an entire 52-unit building at 2100 Market Street to turn into furnished corporate rentals. Back then, the rent was too damn high, and Sonder’s move, while technically legal, was seen as brazen and warranting punishment: “[Sonder] riled many who, despite recognizing intermittent stays as legal, felt victim of a misrepresentation of the project’s ultimate use,” a San Francisco Planning Department document states.
The City’s rebuke of Sonder was the new ILO law. Sonder complied, and made a hasty exit from San Francisco. (As of last summer, they were locked in a legal battle with the building's developer because they had not paid rent and wanted to exit the lease. The two parties have since "reached an amicable agreement," a Sonder spokesperson told Public Comment). A Sonder spokesperson confirmed to Public Comment that the company has only one property available in San Francisco and that they do not plan to operate any corporate rentals in San Francisco in the future. Ironically, Sonder is headquartered in San Francisco.
Certain categories of units are exempt from the law, including student housing and single-room occupancy units, according to the Planning Code.
In addition to Sonder, the new law is expected to decimate the corporate rental industry that has long existed in San Francisco. A City report found about 2,700 Airbnb listings for stays longer than 30 days, and a trade organization for corporate housing estimated an additional 3,000 corporate housing units in San Francisco. Only 1,000 will survive.
While the law does what it is intended with corporate housing, some are concerned that new or temporary residents will bear unintended consequences of the restrictions. Those could include residents facing uncertain circumstances due to COVID-19, or workers in the “mobility sector,” comprised of professionals like traveling nurses or performing artists, who often need intermediate length leases.
Long-term homeowners are also protesting that they, too, are collateral damage.
“Senior homeowners who can already barely afford to live in San Francisco will be negatively affected,” said Cathryn Blum, who has owned a home in Potrero Hill for over 24 years. “Many of them would like to travel for a portion of the year or care for a loved one, while offsetting home expenses. Now these new ILO restrictions have eliminated that option entirely, which is very frustrating and disheartening. It’s an example of serious government overreach at the expense of many long-time homeowners.”
Rather than having the intended beneficial impact on the City’s housing stock, Blum believes that the legislation will make the housing problem worse, saying that homeowners would prefer to leave their homes empty than sign a year-long lease and not be able to return home.
Blum is hoping to convince the City that times have changed since this legislation was put forth and the City should change their tune.
“This legislation came down the pipe pre-COVID, and now that COVID has been here, it’s become apparent that people need the flexibility of staying at a place for an intermediate time period,” she said. “The timing of it doesn’t make sense. We need to have flexibility these days.”