Landlord will let its tenants list on Airbnb
5 S.F. buildings in pilot program
One of San Francisco’s largest residential landlords, Veritas Investments, is joining forces with Airbnb to allow tenants in five Veritas buildings to offer short-term rentals of their apartments. At the same time, Airbnb is teaming up with a company called Pillow Residential to offer management and support to Veritas and other building owners that countenance Airbnb rentals.
Airbnb has often clashed with landlords, who resent tenants renting to tourists over concerns about security, noise,
loss of control, and wear and tear. Some landlords in San Francisco and elsewhere have sought to evict tenants for violating their leases by renting on Airbnb.
But the San Francisco company is trying to make nice with building owners through the yearold Airbnb Friendly Building Program, under which landlords let their tenants rent on Airbnb in exchange for a cut of the proceeds. Equity Residential, another landlord with hundreds of Bay Area units, already participates in the program, but without the Pillow aspect.
For tenants, having a green light to rent their apartments when they’re out of town could make them more affordable, said CEO Yat-Pang Au who founded Veritas in 2007. For Veritas, it could increase the buildings’ cachet and attract tenants who appreciate its stance. While Veritas will take a 10 percent cut of vacation-rental income, that’s trivial for a company with a $2 billion real estate portfolio.
“We are looking at ways to provide more affordable and diverse housing options,” he said. “This is also about experimentation. In a city with tight regulations, and a lot of people who really fear change, it’s an opportunity to go ahead and provide a new option, try it out, get feedback from residents.”
Veritas is starting with a pilot program of five buildings with about 100 units. After six to 12 months, it will assess whether to expand, he said. It surveyed tenants before beginning the program and found that most were either positive or indifferent about it, while a handful voiced concerns, he said. Veritas owns more than 200 midsize buildings with more than 5,000 units in San Francisco, which is currently its only market — though it plans to buy Oakland properties and is looking to expand elsewhere in the Bay Area.
Veritas’ strategy is to buy older buildings and add modern touches such as Zipcars on site and Google Fiber.
“We own 100-year-old Victorian buildings where you cannot build a rooftop bar or gym on site,” Au said. “We turn that challenge into an opportunity by embracing the new world of digital economy services. Airbnb and Pillow is a natural next step.”
Akash Desai, who rents a Mission Dolores apartment in one of the five Veritas pilot buildings with his boyfriend, thinks the program sounds exciting. “We travel to visit family often, so it would be great to make use of our empty apartment to help cover our costs,” he said in an email. “It’s great that as renters we would have the same opportunity to use our empty place the way homeowners in San Francisco already do.”
The Airbnb Friendly Buildings Program has 13,000 enrolled units in about 35 buildings nationwide and in Canada, said Jaja Jackson, director of global multifamily housing partnerships at Airbnb. It’s now expanding to Australia and Japan. Two other major San Francisco landlords in downtown and South of Market, both with new buildings, are also participating, but Airbnb said it did not have permission to name them — a sign of how controversial vacation rentals remain here.
For owners, having transparency about what’s going on in their building, and knowing that Airbnb offers a $1 million primary insurance policy to cover liability and damages, both in units and in common areas, are selling points, Jackson said. Some of the landlords previously had unauthorized vacation rentals, he said, but resident complaints about those decreased once an official program was in place.
Most landlords take a 10 percent cut of revenue, which they use to improve the buildings, for neighborhood events, or sometimes to donate to charity, he said. In cities that don’t impose limits on rentals, landlords implement their own, averaging 180 to 200 nights a year, far more generous than most municipal caps. (San Francisco’s limit is 90 days a year for entire-home rentals.)
Most of the enrolled units are personal residences, although a few may be guest suites run by the building. Generally those unoccupied units would be offered for rentals of 30 days or more, making them exempt from short-term rental regulations in most cities.
San Francisco’s Pillow, which started out as one of dozens of companies offering property management for Airbnb rentals, created Pillow Residential this year to help owners of multifamily buildings track and manage short-term rentals on their properties. Pillow has raised $18 million in venture backing, putting it far ahead of most other Airbnb-services companies, many of which are mom-and-pop concerns.
“We decided to put everything into multifamily,” said co-founder Sean Conway, pointing out that it’s a huge market that is still relatively untapped by Airbnb.
Pillow’s tools will help landlords execute lease addenda covering shortterm rentals, incorporate building rules into tenants’ Airbnb listings, and view all short-term rentals in their properties in a single dashboard. For tenants, Pillow will manage their rentals so they can simply leave town and have Pillow handle guest check-in, cleaning and other tasks. Pillow takes a 15 percent cut of short-term rental fees.
“Pillow helps make sure that buildings are in compliance with local regulations,” such as San Francisco’s cap on whole-home rentals, Conway said.
Airbnb’s relationship with its hometown has been contentious. But under a judge’s order, the company and rival HomeAway now have agreed to ensure that all their San Francisco hosts comply with the city’s registration requirement, which was widely flouted. The registration process will be complete by early January after which both companies have agreed to jettison any unregistered San Francisco hosts.
The trade group San Francisco Apartment Association has been a fierce foe of Airbnb, but expressed cautious openness to the new program.
“There will be some buildings that are a natural fit, and we recognize that it could be a good thing for some property owners,” said Charley Goss, government affairs manager. “But we’re wary about issues of safety, security and liability. We have concerns if Airbnb is going on and keys to the building are being given to strangers who haven’t been vetted. We’re also concerned about other residents who signed a lease for an apartment building, not a hotel. That’s something that probably has to be hashed out.”
Au said he hopes that Veritas’ experience might be a model for other landlords.
“We would like to set a positive example for other owners of classic building stock to consider utilizing this (Airbnb) program,” Au said. “People will think what they want to think; groups are not used to change. We think it is a very high likelihood that it will be a positive improvement for residents’ lives.”