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Corporate Rentals Move Into San Francisco's Rent Controlled Buildings

SAN FRANCISCO (KPIX 5) -- It's an $18 billion industry in the United States and San Francisco is at the center of it. Short-term rental laws that were designed to preserve the city's existing housing stock back in 2015 spurred growth for yet another tech disruptor.

Sites like Zeus, Nestpick, Sonder, Airbnb for Work and nearly a dozen others advertise the opportunity to "feel like you live in San Francisco."

For tenants like Sara Weed, who actually do live in San Francisco, it has them worried about being squeezed out. She's lived in a rent-controlled apartment for more than a decade on Powell Street where cable cars cross in front of her doorway, but now instead of knowing her neighbors, she sees strangers every couple of weeks.

"It's very interesting because you look in there and it looks like a hotel," Weed said.

For the people renting the room down the hall, that's essentially what it is--her entire building used to be rent controlled apartments, but recently, her landlord, Veritas Investments, started renovating vacant units and turning them into corporate rentals.

Internal documents obtained by KPIX 5 show this was the company's "game plan" all along. They're looking for "small, cheap, and quick improvements" to convert rent controlled units to "temporary furnished rentals."

"Corporate rentals take away from rent controlled units that should go to people like myself," Weed said.

The sites abide by short term rental laws put in place in 2015 that forbid rentals of fewer than 30 days in second homes, or vacant properties. Short-term rental owners must register with the city and spend 275 nights a year in the unit where you host short-term rentals.

These sites have worked around that law by exclusively renting for more than 30 days. Usually, it's large corporations picking up the expensive tab. Supervisor Aaron Peskin co-sponsored the 2015 law.

"Small property owners are not doing corporate rentals. This is a phenomenon of large corporate apartment owners," Peskin said.

He plans to introduce a new ordinance this fall targeting corporate rentals. It would make it outright illegal to turn rent-controlled apartments into corporate rentals.

"So it's not as if they cannot rent the units for lots of money, it's just that they're going to have to rent them to a real person and they will be subject to rent control," Peskin said.

The ordinance would also crack down on new buildings that are 100% corporate rentals, which often sit empty. Kelly Hill, who lives in the Mission district, says it's these new builds that bother him the most.

"When you look at the homogenization and a building like this, you see the same floor lamp and the same chair, probably the same desk in every single unit," he says, pointing to a corporate rental on Capp street.

Hill has been pushing the city to take action on corporate rentals for several years now.

"We are building this housing but it is actually not going to the people who need it," Hill said.

Peskin's ordinance would attempt to regulate this, too; new construction would be required to have affordable units included. Often times, these large buildings sit empty for months.

"We tracked the building at 600 South Van Ness for almost a year and a half. It has almost 40% of its units occupied, and it mostly remains empty," Hill said.

The average corporate rental in San Francisco runs $160 a night. A hotel in the city is likely to be more than double that at $400 a night. In Weed's building, rent controlled units that used to be priced at $1,500 a month now rent at $4,960.

Peskin calls this yet another loophole in the Bay Area's ever-fluctuating housing market, one he intends to close so visitors can stay in hotels, not homes.

"If they stay in hotels, that would help reduce the housing crisis and housing burden because less people would be looking for housing and that's the reality," Peskin said.

Tenants say that would give them the chance to know who their neighbors are.

"It's just eroding away at the community of San Francisco," Weed said.

Airbnb, Zeus, and Sonder declined KPIX 5's requests to be interviewed for this story.

Veritas told KPIX it no longer operates corporate rentals out of 634 Powell Street, and the last time there was a corporate rental in that building was two years ago.


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