The complicated question of what sort of “business” an Airbnb rental qualifies as has gotten even more sticky with a case currently pending in San Diego, California. 70-year-old retired schoolteacher Rachel Smith had decided to supplement her income by using the phone based service to rent out two spare rooms in her house to travelers for $80 a night. (And if you’ve spent any time visiting San Diego, that’s a pretty good deal.) Unfortunately for Rachel, some of her neighbors decided to complain which brought the city government running. After battling against City Hall for months, Ms. Smith was forced to curtail her use of the service and has now been handed a bill for more than she made renting out the rooms. (NBC San Diego)
In her decision, hearing officer Catriona Miller wrote that Smith had accrued $22,400 in civil penalties, but she would only have to pay $15,000 — plus $2,968 in city investigation fees — if she stopped renting her rooms and has no similar offenses for two years.
Smith began listing her 1912 Craftsman home located in Burlingame, east of Balboa Park, on Airbnb in May 2012, offering two rooms for $80 each per night. While she initially considered opening up her house as a bed and breakfast, she liked the discretion that the website offered…
According to Miller’s decision, Smith made about $13,800 from room rentals since the October 2013 inspection.
“She did not feel she should have to cease renting through Airbnb unless and until a judge told her she could not,” Miller wrote in her findings. “She believed the City was wrong in its application of the Bed and Breakfast law to the Airbnb rentals and did not have the authority to stop her.”
As with so many of these cases, the government is wading into uncharted waters here. Nobody is exactly sure whether people renting out rooms in their primary residence qualify as a hotel, a “bed and breakfast” or a short term real estate rental. In the case of San Diego, the court freely admits that they don’t even have a code designed to handle short term rentals, thus the charges of failing to properly operate a bed and breakfast. But is it a bed and breakfast? It’s not even clear how that’s defined.
A second, and more ironic twist to the story was that the city was apparently quite happily collecting a Transient Occupancy Tax for each rental which Smith was obediently paying the entire time she was operating. If it was an illegal operation, how does the city collect a tax on it?
The fact that Smith’s neighbors were complaining of the “revolving door” of strangers taking up parking and roaming about their area doesn’t really seem to be the issue here. You’d have the same situation if any neighbor had friends or people they were dating staying over on a regular basis. There were at most two extra cars on the block on any given night, assuming that visitors didn’t take a cab to get there. That sounds like a fairly petty complaint to begin with. Far more likely is that the powerful hotel associations and the unions which represent hotel workers were once again at work in the background. They’ve been lobbying heavily in California for some time now in an effort to shut down Airbnb the same way the taxi cab companies and unions have tried to close down Uber. They just don’t like the competition and will play any level of dirty pool to stop them.
The beauty of services like Uber and Airbnb is that they cut a lot of the government regulation and associated costs out of the loop and give people a chance to make a little money through entrepreneurship or save a few bucks while traveling. As you might suspect, the government just hates that.