Supervisor's Report

Striking a balance between fostering innovation and government regulation

In the past few years, we have seen the onset of the “sharing economy,” which has sprouted companies such as Uber, Airbnb and countless others that are revolutionizing our existing economy with their new peer-to-peer business models. These innovative new companies are helping individuals make greater use of their existing assets and become more entrepreneurial. Whether people are using their cars on the weekends with Lyft to make extra income, or offering their time and a service on TaskRabbit, there is one thing for certain: The sharing economy and the companies produced as a result are here to stay.

The rise of these companies has been accompanied by some controversy, which is to be expected as existing economic models are challenged and broken. The rise of these companies brings interesting questions and challenges, and as a government it is crucial that we respond appropriately to the questions and impacts now brought to the forefront. How do Airbnb and VRBO affect our city’s housing market and stock? How do Uber, Lyft, and Sidecar affect our transportation system and public safety?

As a legislator, I worry about advancing reactionary policies that have the potential to over-regulate emerging businesses and industries like the ones we’re seeing today and in turn stifle innovation where demand was obviously not being met.

These companies, some of them homegrown and based in San Francisco, are creating jobs and added benefits to our city. But, as these companies continue to grow and have an impact on the public sphere and our local infrastructure, I feel responsible as a legislator to help in creating regulatory frameworks when necessary that allow these companies to operate while addressing public concerns and impacts appropriately.

Here at the Board of Supervisors, we just passed a regulatory structure to better regulate short-term rentals, which allow tenants and property owners to rent their units or spare bedrooms on a short-term basis, under certain conditions. With more than 5,000 listings nightly for short-term rentals in our city, the short-term rental industry had reached a tipping point where I believe it needed to be addressed. For years, the city has operated in a gray area, allowing the companies that list these units to exist with little to no regulation or enforcement. I felt it was important for the city to put a regulatory structure in place rather than continue with the status quo.

The short-term rentals regulatory structure that passed at the Board of Supervisors 7–4 sought to strike a balance between preserving our housing stock in this tight housing market, and allowing city residents to earn extra income under certain conditions while also ensuring that neighborhood concerns and impacts were addressed. Over the course of the many months that this ordinance was being discussed, I heard directly from and met with both supporters and opponents of short-term rentals and the proposed ordinance.

As the legislation progressed through the legislative process, I wanted to ensure that our regulatory structure met the concerns of my constituents and our residents. Previously, the legislation did not include a form of property owner notification when a tenant wanted to do a short-term rental, or any insurance liability threshold. I worked with my colleagues to insert amendments that required property owner notification anytime tenants want to use their units as short-term rentals, and made sure that every host of a short-term rental had at least a minimum of $500,000 in liability insurance. Both of these amendments were made to address neighborhood quality of life issues, as well as concerns regarding public and personal safety.

Though not everyone may have been completely satisfied with the final regulatory structure put in place, I feel that the ultimate package was a reasonable compromise that brought the short-term rental industry out of operating in the shadows and into the light, and also protected most neighborhood residential concerns. As the short-term rental industry continues to operate and grow, I pledge to keep an active eye on the situation and propose and advance necessary updates to the law as needed to continue to protect the quality of life that we value across our neighborhoods.

If you have any specific questions about this legislation, including the amendments put in place at the end, please do not hesitate to reach out to my office. You can reach me directly at mark.farrell@sfgovorg, or in the office at 415-554-7752.

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