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Airbnb landlords may owe Palo Alto taxes

Original post made on Jun 9, 2013

Since its founding in 2008, Airbnb has exploded in popularity. Its website states that there are listings available in 33,000 cities in 192 countries. But the legality of renting out space in a house is complex, and not always well understood by the site's users.

Read the full story here Web Link posted Sunday, June 9, 2013, 9:37 AM

Comments (46)

Posted by YSK, a resident of Community Center
on Jun 9, 2013 at 9:56 am

More greed in Palo Alto. There are people who are not making the millions that their neighbors do, who work here, have family here, and would like to live here. I've been looking for something affordable for years. It's disgusting to be priced out of a place that I've lived in for 39 years. I hope the City does start taxing them.


Posted by Marianne, a resident of Downtown North
on Jun 9, 2013 at 10:13 am

For the sake of safety, and fairness to the hotels; lest's hope that the City cracks down on this practice. I personally think is very nice to be able to live with the locals when traveling, and to stay in a hotel when I want. However, it is a service that needs to be taxed like a hotel. And some sort of license to protect the consumer should also be necessary.


Posted by Butch, a resident of Midtown
on Jun 9, 2013 at 10:51 am

This is not a good idea in a residential neighborhood and I'm surprised its legal.
I have small children and like to know who's coming and going in the House across the street ! My neighbor has been renting a room he illegally converted In his garage
daily weekly for some time . Strange people come an go all the time ,an my ,an other neighbors complaints to the city have been ignored .


Posted by anonymous, a resident of Duveneck/St. Francis
on Jun 9, 2013 at 11:21 am

I can see arguments on both sides. In one way, I don't like more government taxation, regulation, and associated bureaucracy. In another, I can see possible safety issues - if there are often transient people, do they have they keys....it's not quite a hotel situation, sort of an odd middle ground. What happens if they make a bunch of noise and then leave, for example.
In I think it was the New York Times, I have read about NYC residential co-op buildings that have screened tenants now having a mishmash of transient folks traipsing through and I can see that would be dubious and downgrade the experience living there for the rest of the residents.


Posted by resident, a resident of Adobe-Meadows
on Jun 9, 2013 at 11:37 am

Why doesn't this company provide guidance and tools to its users to simply the filing of these taxes. Maybe automatically collect the tax so that the landlords don't have to deal with the paperwork. This is not a new tax right? The same tax that applies to hotels also applies to these rentals.

City taxes like this are what pay for our schools and roads and emergency services. If you think these programs are underfunded, then don't cheat on your taxes.


Posted by Not an issue, a resident of Community Center
on Jun 9, 2013 at 12:47 pm

Butch is it really your business who is coming and going into the house across the street? What ave the neighbors been complaining about? How do you know the conversion was illegal? It would be nice if people minded their own business for a change


Posted by Resident, a resident of Another Palo Alto neighborhood
on Jun 9, 2013 at 1:29 pm

I have stayed in bed and breakfasts in the UK and gites in France which are basically something similar. As far as I know they are always licensed properly with local rules, but they are a great way to get to know local people and see how everyday life is like in another country. You get a completely different experience to staying in a hotel as well as a more affordable bed for the night.

The widow who owned our 4 bedroom home before us rented out a couple of her rooms to Stanford students for a while since the house was much bigger than her needs. She benefitted from the company and having the security of not being on her own overnight as well as the income and the students got home cooking and their laundry done as part of the deal.

As long as this is for short term stays and legal, I see no problem with any of it.


Posted by palo alto renter, a resident of Barron Park
on Jun 9, 2013 at 2:01 pm

This seems like one of those rare cases where the solution is both readily apparent and fair. A tax administrator at City Hall could iteratively build a database of local Airbnb hosts by searching Airbnb every few weeks. Then send out a form letter to each host's address describing the procedures for paying the transient occupancy tax.

In any case, presumably local hotels will push for action since they are apparently currently competing against other businesses that have an unfair advantage by not paying the appropriate taxes.

Long-term renters don't have any representation, so they can't do anything about this, but it might be worth pointing out the obvious fact that not paying appropriate taxes makes short-term renting more attractive than it really is, putting pressure on long-term rent availability.

There's nothing wrong with Airbnb-based short-term renting, but we ought to do it fairly and legally so that positives and negatives are properly distributed.


Posted by Terry, a resident of Palo Alto Hills
on Jun 9, 2013 at 3:21 pm

This practice is very common. We have used it many times in the US. Everyone wants cash ONLY for obvious reasons.


Posted by Hmmm, a resident of East Palo Alto
on Jun 9, 2013 at 4:08 pm

Butch - you can call a city building inspector if you suspect that the conversion is illegal. The problem w/the illegalities of these conversions is many of them are done dangerously, so that there's risk of fire, too many people per square foot, amenities, plumbing & electrical badly installed. It's not about being nosy & spying on one's neighbors, it's about having a general sense of who lives around you, what the norm is & what may be out of place. If your neighbor's nice, has an illegal but safe conversion & folks in their household are legit, no problem. If not, there is action you can take.


Posted by Craig Laughton, a resident of College Terrace
on Jun 9, 2013 at 4:13 pm

>This is not a good idea in a residential neighborhood and I'm surprised its legal.

I have small children and like to know who's coming and going in the House across the street ! My neighbor has been renting a room he illegally converted In his garage

Butch, I completely agree with you. Residential neighborhoods should not be subjected to such abuse. I don't object to B&Bs, as long as they are registered, regulated, taxed and tasteful. But turning our neighborhoods into diffuse, under-the-radar stuff, is a license to destroy property values. I would put it in the same general category as car campers...which MUST be banned!


Posted by Not an issue, a resident of Community Center
on Jun 9, 2013 at 4:25 pm

This is not an example of " abuse" . As it stands, it is currently legal in palo alto. The issue of tax collection needs to be worked out, but that should not be a problem.
Since it is legal, it is not under the radar, either. Has anyone heard of any crimes committed by these guests. Should we start regulating unpaid guests as well? Before this article came out, how many people were aware of this business being used by palo alto residents. If you have a problem with this, you can go to the website and find which houses are taking part. Approach the homeowner and say you object and explain your reasons. I am sure someeople would not be happy with others telling them what they can legally do with their property.
Craig, care to,step to the plate, since you have sch vehement objections?
Looks like once again palo alto is getting all worked up over nothing with thesual suspects stirring the pot


Posted by Terry, a resident of Palo Alto Hills
on Jun 9, 2013 at 4:59 pm

No different than people swapping houses. My neighbor is always swapping houses when he and his family go on vacation.


Posted by Not an issue, a resident of Community Center
on Jun 9, 2013 at 5:08 pm

Besides the tax issues, are this any different than the B&Bs in residential neighborhoods? What about are local hotels-- should we monitor who comes and goes into them. If they have a car, they can easily enter our neighborhoods.
This is a tempest in a teapot, that surely some people will try to blow out of proportion.


Posted by Craig Laughton, a resident of College Terrace
on Jun 9, 2013 at 5:26 pm

>Craig, care to,step to the plate, since you have sch vehement objections?

Sure.

Back in the day, about 40 years ago, it was, as I recall, illegal to car camp on our streets, or to have more than a certain number of non-related people living on a given property. I should know, since I violated those rules, when I was young, and was contacted by a city inspector. Once I had kids, and thus grew a mature brain, I was confronted with car campers in front of my house. The police told me that they could do nothing. I couldn't believe it! When did the rules change?

The transient rentals, are illegal, at this point, unless they pay the transient rental tax. Just make it illegal, then there will not be an issue. In general, it is like the car campers, who are not illegal, but they soon will be be. Palo Alto needs to wake up, before it is too late.

I suggest that the PA city council put both issues on the ballot, to allow PA citizens to express their will, with a binding resolution. Of course, it (the council) could simply do the right thing, and ban both.


Posted by Not an issue, a resident of Community Center
on Jun 9, 2013 at 5:46 pm

This discussions are not about car camping, so stop muddying the waters.
Right now the practice is legal in the city and of course you have no way of knowing if the owners ARE NOT collecting the tax.. Correct?
And if they are not, the the city can work with the company to address the matter.
This is a non issue that our city council does not need to get involved in. They have more important issues to address. And of course, where do you draw the line-- what about house exchanges, guests, sub leasing etc???? Why make something illegal that is not harming anyone? Just to be a curmudgeon? To deny people a small source of extra income? To be mean spirited?
I bet you that the has been no crime problems or decline in property values because of these paid guests. I bet most people would not even know if their neighbors were having guests staying at their house. Plus what about the moneybthatbthese guests spend in the city? Some people just like to hate on people just for the sheer satisfaction they get from it!!!!!


Posted by Craig Laughton, a resident of College Terrace
on Jun 9, 2013 at 5:58 pm

>And if they are not, the the city can work with the company to address the matter.

Wrong. Read the small print from the company. It is up to every individual renter to transients to collect the taxes. Guess what? This is not going to happen, especially with cash transactions. Dah!

Turning Palo Alto into a diffuse transient hotel would be a disaster to Palo Alto, at several levels. Just shut it down, before it grows.


Posted by Not an issue, a resident of Community Center
on Jun 9, 2013 at 6:11 pm

Just because the company says something h does not make it true. But I guess you are stating that all the renters are criminals because they are not collectngbthe tax. Proof, please.
Anyway, the number of homes that take part in this program is small compared to,the number of homes in palo alto, so palo alto would not be turned in a "diffuse transient hotel" .this is a perfect example of fear mongering.
Nothing to shut down, nothing for the council to bother with. No real effect on the city residents at all. Bigger problems facing the city-- infrastructure, development on may ell, buena vista etc.


Posted by Craig Laughton, a resident of College Terrace
on Jun 9, 2013 at 7:31 pm

>Anyway, the number of homes that take part in this program is small compared to,the number of homes in palo alto, so palo alto would not be turned in a "diffuse transient hotel" .this is a perfect example of fear mongering.

The analogy is the teenage girl talking to her mother, and saying, "What's the big deal, I'm only a little bit pregnant?"

This thing, along with car camping, needs to be shut down, now.


Posted by Wayne Martin, a resident of Fairmeadow
on Jun 9, 2013 at 7:35 pm

> Thomas Fehrenbach, the city's economic development manager,
> sees the company's entrance into the hotel space as a potential
> drain in the funds the city gets from the tax.

Airb&B seems to be little more than a on-line booking service. There doesn't seem to be any evidence of its being in the "hotel space".

Shouldn't Mr. Fehrenbach make an effort to actually determine the possible "loss of funds" associated with the roughly 100 residents offering guest accommodations in their homes before being concerned?

> It's expected to make the city almost $9.6 million

This $9.6 million is generated by thousands and thousands of visitors--many paying top dollar for accommodations because they are traveling on corporate accounts. Just how many guest-nights are 100 B&B-style accommodations likely to generate? Say the tax for a 100-130 room averaged out at $20/room/night, 50 guest-nights would generate only $1,000. It's hard to see how high-flying corporate types would start staying in a back-yard granny unit, so concerns about loss of funding seem almost comical. Even if there were as much as $100K at stake, this is still such small potatoes, it is not worth being concerned about.

Hopefully, Mr. Fehrenbach can find something more meaningful to do that harass local residents over renting out a little spare room to cost-consciencious travellers.


Posted by Not an issue, a resident of Community Center
on Jun 9, 2013 at 7:44 pm

False analogy , Craig. And this discussion is not about car camping- try to stay on topic. And we can do without the fear mongering as well.
This is not a problem and not an issue the council needs to be nvolved in. Sounds like some people, besides being curmudgeons, want to be " big brother " and regulate everything and anything.
No one has actually stated what the problem with this room rental is ( and do not say the tax matter since that's not what you are harpingon) and how it negatively effects palo alto? I bet most people, including Craig, were not even aware that this program existed in palo alto.
Time for the city to address more important issues and not try to ,satisfy the demands of vocal single issue residents


Posted by Craig Laughton, a resident of College Terrace
on Jun 9, 2013 at 8:00 pm

>Shouldn't Mr. Fehrenbach make an effort to actually determine the possible "loss of funds" associated with the roughly 100 residents offering guest accommodations in their homes before being concerned?

No, he should not, because he cannot predict the actual numbers, going forward. Will it become 1000? 2000? The issue is the structure, and he is right about that.


Posted by Not an issue, a resident of Community Center
on Jun 9, 2013 at 8:18 pm

Well stated, Wayne. This is a non- issue. If you think about the structure of this service nd who,participates it is doubtful that it will increase to 2000 .
The people who oppose this service have yet to show that the owners do not pay the tx, tht it creates a problem for palo,alto, that it is harmful to the neighborhoods or that palo alto will become a diffuse transient hotel. Why we have is baseless rhetoric nd fear mongering.


Posted by Wayne Martin, a resident of Fairmeadow
on Jun 9, 2013 at 8:24 pm

> No, he should not, because he cannot predict the actual number

While no one predicts "actual numbers", reasonable estimates can be made. He could informally interview 10-15 of those posting on "Airb&b" and ask for some data about their businesses. At least one person is paying the tax, so it would not be hard to come up with a reasonable "guess" based on the data he has, and probably could gather.

This is a simple problem he should have made an effort to solve before bringing the matter up.


Posted by Wayne Martin, a resident of Fairmeadow
on Jun 9, 2013 at 8:29 pm

Airbnb.com/Palo Alto:
Web Link

Many of these accommodations are single rooms at less than $100/night.

There are a number of reviews on the PA page. Summing up the nights, and the rates, gives a back-of-the-envelope calculation that would be better than nothing.



Posted by Craig Laughton, a resident of College Terrace
on Jun 9, 2013 at 8:48 pm

>This is a simple problem he should have made an effort to solve before bringing the matter up

Wrong. Once the barn door is open, it can expand exponentially. Mr. Fehrenbach is correct to be very concerned about reduced revenues to the the city, due to decreased revenues from standard hotel taxes. This is a no-brainer understanding.


Posted by Not an issue, a resident of Community Center
on Jun 9, 2013 at 9:01 pm

Do you understand what exponential growth means? THe chances of the number of homes in plao alto that take part in ths program growing exponentially is very low. Think about the number of homes that would have to be-- that is the no brainer.
Read waynes post above about the revenue generated from hotels and who stays there-- they are highly unlikely to all switch to airbnb.
And currently the practice is legal n palo alto and no proof has been provided that taxes are not paid to the city.


Posted by Wayne Martin, a resident of Fairmeadow
on Jun 9, 2013 at 9:04 pm

> Wrong!

Really? Don't think so.

There are lots of rooms in surrounding cities--Mtn. View, Menlo Park, Los Altos, Sunnyvale and Burlingame. People who don't stay in Palo Alto certainly are not paying their TOT to PA when they don't stay here. The idea that 100-120 rooms that are rented occasionally will generate a huge syphon of TOT is just silly--given that thousands of visitors/travellers are NOT staying in PA, either in the commerical accomodations, or these informal "guest accommodations".

There are only so many people who are willing to open their homes to strangers. Any claim that there are an "exposnential" number of such folks in this little down is not realistic.


Posted by common sense, a resident of Midtown
on Jun 9, 2013 at 9:32 pm

100 rooms at $100/nite for 100 nights = $1 million, which is $120,000 in hotel tax.

It's costly for the city to chase collect this money because of the number of different property owners, and most ads don't have specific addresses; however AirBNB could make the city's job easier by providing the booking data.

There are zoning rules on separate units in R1 neighborhoods which some of the ads are for. Some of those unit don't meet the zoning requirements like lot size. Other city statues apply to running a business out of a residence.

Some of these rentals should count against the ABAG housing requirements.


Posted by homeless , a resident of another community
on Jun 10, 2013 at 4:37 am

home is wherever heart is.Life is about art, love , all the beautiful gifts within each one of us. Life is a gift from God. So we can evolve , for the true home waiting. Each moment on this light time counts, including the scatters points beyond the normal curve.No one should be afraid to Love one and other. Life is a precious gift! Each moment is special.


Posted by anon, a resident of College Terrace
on Jun 10, 2013 at 10:52 am

I believe it is not legal to rent any structure that exists in the rear setback in residential neighborhoods.


Posted by sw, a resident of Midtown
on Jun 10, 2013 at 12:58 pm

I would be surprised if many Palo Alto homeowners would be willing to take on the risk of having multiple people on their property, who are casually renting through an online site. What if something happened to that person or he/she caused harm or damage to the property or people while staying there?

I highly doubt one's homeowners insurance would coverage damage in this situation unless you had declared in advance that you were going to use your home as a hotel and the insurance company approved it -- which I don't think it would.

I know I tend to me more risk-adverse than many, but I have known people who have lost everything due to lawsuits and bad luck. I don't know what Airbnb's policies are on liability, but I would imagine they don't take it on.


Posted by amused, a resident of Downtown North
on Jun 10, 2013 at 2:43 pm

Airbnb is in the best position to collect for the bookings per night as well as whatever the local municipality law and regulations require, including the collection of the hotel tax. So, Palo Alto should sue Airbnb for the taxes owed, like Amazon.com, and see how quickly they will agree to collect the required taxes...


Posted by Craig Laughton, a resident of College Terrace
on Jun 10, 2013 at 3:15 pm

To legitimize this hair-brained scheme is to open up all neighborhoods in Palo Alto to a diffuse hotel/B&B model. There is no way to stop it, except with a bunch of new bureaucrats to monitor it, and collect taxes...care to think about the cost of that? However, that is not the main issue, which is the invasion of residential neighborhoods with out-of-town strangers as your next door neighbors, night after night. Don't forget the parking issues. And how its affects on property values.

It is time to stop it, before it grows to much more than 100. Other cities have already stopped it.


Posted by Not an issue, a resident of Community Center
on Jun 10, 2013 at 3:33 pm

This " hair brained " scheme is quite popular with travelers and homeowners. It has filled a needed niche. The number of homes in PA that take part is small, so there is no " invasion" of residential neighborhoods ( but dos Craig feel the same way about guests staying over? Maybe that needs regulation also") . While it may be illegal in NYC it is only actionable as a secondary offense. In fact PA law is just the opposite- NYC says it cannot be done for less than 30 days, PA says it cannot be more than 30 days.
Many of these visitors come by public transportation, since it is hotel guests that tend to drive ( again, what about parking when guests come to visit-- are there no problems then) .
If Craig has any evidence of,a negative effect n property values he should present it to us. Anyway, Craig has not provided ANY evidence for his claims.
Otherwise we are just hearing fear mongering and mean spiritedness.


Posted by Craig Laughton, a resident of College Terrace
on Jun 10, 2013 at 3:42 pm

>It has filled a needed niche

Whos niche?

Put it to a vote, along with the car camper issue. Let's find out what the PA citizens really want. I can live with the outcome. With two major issues in front of us (car campers and host renters), it is worth a special election.

Of course, the city council could just do the right thing, and ban both of them.


Posted by Not an issue, a resident of Community Center
on Jun 10, 2013 at 4:01 pm

This thread is not about car camping so try to stay on topic. I am not sure this is an issue that is a problem for many PA residents -- of course there is always the local curmudgeon, who is against any visitors coming to town. You have to laugh when someone suggest that we spend a few hundred thousand dollars for a special election for a matter that is legal in the city and nt a problem, except to a select few.
As for your question about who' s niche-- that is a no brainer. Figure it out yourself.
Of course given the doom and gloom that Craig forsees, perhaps we should also ban hotels and house guests in town, since they bring the same problems that Craig is complaining about regarding Airbnb. Also hard to imagine that people would begrudge a homeowner making a few extra dollars occasionally.
I think that before any action is taken ( IMHO no action néeds to be taken), those that are complaining the loudest need to,provide solid proof that the problems they are complaining about actually exist. The city council does not have the time to deal with single issues brought up by disgruntled residents, no matter how vocal they are.


Posted by Craig Laughton, a resident of College Terrace
on Jun 10, 2013 at 6:02 pm

>The city council does not have the time to deal with single issues brought up by disgruntled residents, no matter how vocal they are.

Yes it does, if enough citizens complain. A major example is the car campers...it looks like the council is, finally, waking up. This host/rental deal is hidden, but it has the potential to become a real problem. Just put both of them both on the ballot, with a special election, then let the chips fall.

Unless the city council decides to step up to the plate.

Both of these issues remind me of the historic homes issue...the city council got its butt kicked, and those council members decided to punt to a vote...where it got defeated. I am suggesting a much sweeter approach, namely, a ban on both issues by the council. However, if they decide to hold tight to unpopular issues, then put it to a vote. What's wrong with that?


Posted by Not an issue, a resident of Community Center
on Jun 10, 2013 at 6:24 pm

This thread is not about car camping-- try to stay on topic. Seems like right now only one person is complaining.
Regarding the historic ordinance, you have it wrong. The council passed the ordinance. Citizens were upset me got signatures for a ballot measure to verturn the ordinance, which won. You canrefsh your memory with this story about it:
Web Link
Of course whtbthtnhs to do with the current issue is beyond me.
Also in order to ban the airbnb thing ( and I think if we do tht, then hotels nd house guests would have to be banned as well) the city would first have to,repeal the law that currently allows such occupancies for less than 30 days.
Do we really want the council to waste their time on this minor issue, that seems to upset certain people that are never happy? Should we waste hundreds of thousands of dollars on a special election just to,satisfy one person?
Anyway before the issue is even brought before the council, the people who are complaining should have to provide evidence of the problems that have arisen.
The service is used by a few homes in palo alto. It is not a problem and not an issue for concern. It is a way for homeowners to make a few extra dollars and it is also a way for our local residents to make a positive impression on visitors to our city. Can't see anything wrong with that
I am not sure why some people dislike " outsiders" in their city.
Anyway my friends Ruth and gary have used the service in their travels and were very pleased with it.


Posted by No opportunity , a resident of Barron Park
on Jun 10, 2013 at 9:56 pm

Craig: I don't know where all this "exponential" growth in rentals is coming from. There is no evidence that says this is a growth market.

No one knows the number of rental units which exist or how many will be added if people knew of the opportunity. Few homes have the space to build or add a granny cottage on their lot. I'd be surprised if many would want the hassle of this "business" in any event.

Mr. Martin made some cogent observations.


Posted by Jennifer, a resident of Leland Manor/Garland Drive
on Jun 10, 2013 at 10:52 pm

this is common practice in beach communities. People coming and going is nothing new.


Posted by Craig Laughton, a resident of College Terrace
on Jun 11, 2013 at 10:28 am

>this is common practice in beach communities. People coming and going is nothing new.

Charming. However, Palo Alto is not a beach community, so what is your point?


Posted by Hulkamania, a resident of Duveneck/St. Francis
on Jun 11, 2013 at 7:45 pm

The undergouund economy is alive and well.


Posted by Craig Laughton, a resident of College Terrace
on Jun 11, 2013 at 9:55 pm

>The undergouund economy is alive and well.

It always is, until it gets big enough to surface.


Posted by greenleafhill, a resident of Crescent Park
on Jun 12, 2013 at 9:12 pm

Having just joined the discussion, I am dismayed by the mean-spiritedness displayed here. My neighbor's decision to rent her room out has had NO impact on me whatsoever. Most of her guests arrive by public transportation, and if they do drive, she has a driveway to accomodate them. Most of the Airbnb community does NOT have a big corporate expense account which would allow them to stay at one of our very expensive hotels. Airbnb fills an important niche for the independent traveler, and if the city thinks that Airbnb hosts are sucking business away from the hotels, they are sorely mistaken. Most Airbnb guests either can't afford or can't get a hotel room, especially during the week, because of our over-heated economy. If the city is so desperate for this extra revenue, they should collect it through cooperation with Airbnb, and people should stop harassing neighbors who open their hearts and houses to people from all over the world.


Posted by Gary, a resident of Downtown North
on Jun 14, 2013 at 2:50 pm

I rent out rooms, and have done for years. It is called the free market. I shall continue to do so, matter what the "Craigs" of this town have to say about it.


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