Short-term rentals disrupting SF housing market

I, like the others in this thread, can only speak to Chicago laws. Here, a verbal lease is a perfectly valid lease, subject to the laws of the city and state (we usually call it "month-to-month"). I wouldn't say it's exactly common, but it's not exactly uncommon either. My last apartment was rented month-to-month for 4+ years (and was a nice apartment with a nice landlord).

In the cases I'm most familiar with, the apartment starts with a lease, and rather than renew the lease specifically, just shifts to a verbal lease, provided the landlord and tenant trust each other. (Were I renting an apartment to someone else, there isn't a chance in hell I would do it without a lease, though.)

"Breaking that agreement for profit is unethical."

Of course it is. There was another story about a tenant in NY getting sued after his landlord started renting out apartments.

But it is also true that your lease could allow you to sublet with an AirBnB type arrangement, so for AirBnB they probably have you sign up saying "Yes, I am allowed to do this." and leave it up to the participants to be legal and if they aren't having the landlord deal with it.

A number of stories we have yet to hear are "AirBnB got me kicked out of my apartment." or "I was arrested sued by a hotel chain." kinds of stories. I think of them as the sounds of disruption. Basically they have created a market, very much like eBay created a market, or Craigslist, and suddenly there are commerce opportunities that didn't exist before, combined with a tight economy and poof, disruption.

The owners might also have to pay the piper with regards to their mortgage holder unless they own the property outright - I'm pretty sure my mortgage prohibits commercial activity like this without prior approval, similar to what a lease agreement would say. (Of course, a bank is far less likely to find out than a landlord.)

Not really, when you think about the number of units in those buildings total (I'd guess a few thousand at most) versus the boom in Bay hiring.

I lived in NY before SF and at least subjectively, it feels like more new (incremental, not replacement) apartment units were put into say, Sixth Avenue between 23rd and 35th in the last decade than in all of San Francisco. (I'm guessing that is about ~3,000 units based on 10 blocks of ~40-story apartment buildings on two sides of the street.) SOMA lofts are nice but at only 3-4 stories high, they don't add a lot of units to the count.

SF is the second most densely populated city in the US behind NYC. If we need more housing, we need to build upwards.

Generally, the mortgage doesn't prevent this -- the insurance does. It is extremely unlikely that your mortgage would be in default because of this. However, your insurance company can refuse to pay out certain damages if they feel you have an uninsured business at home. This usually requires an insurance policy with business and/or rental coverage. I don't see anywhere in my mortgage that says I would be in default if I sublet rooms, and mine is a fairly vanilla mortgage from a large lender.

In fact, many home owners regularly rent out rooms without risk of mortgage "cancellation" or default [1]. They do however need to have suitable insurance to cover losses associated with renters and the business of renting. It's possible the insurance companies might catch onto this with AirBnB the way that landlords have and put the squeeze on homeowners and require they buy greater coverage, but there's really little chance that a mortgage holder would find the homeowner in default just because they have renters.

However, the only caveat is that FHA loans, conventional loans backed by Fannie Mae and Freddie Mac and Veteran's Administration loans as well as some State-backed loans do have a requirement that a homeowner not rent out their mortgaged property within the first year of the loan, especially if you have financed as a primary residence and/or a first-time home buyer. While the mortgage holder has the right to call the loan if this happens, in reality, they wouldn't as rental income would serve to make it more likely for you to pay your balance. [2]

And all this really applies if you are renting out your entire house and plan to live elsewhere, thereby making it a secondary residence. If the house remains your primary residence and you are subletting a room, or even the whole house while you are on vacation, then these restrictions are not in place. If you are curious, read the terms of the mortgage loan agreement. There should be something about conditions of occupancy in there.

For example, here is the Occupancy Clause in the Freddie Mac Fannie Mae Uniform Instrument:

"6. Occupancy. Borrower shall occupy, establish, and use the property as Borrower's principal residence within 60 days after the execution of this Security Instrument and shall continue to occupy the Property as Borrower's principal residence for at least one year after the date of occupancy, unless Lender otherwise agrees in writing, which consent shall not be unreasonably withheld, or unless extenuating circumstances exist which are beyond Borrower's control" [6]

In addition, some home owners associations (HOA), co-op boards, and condo associations limit rentals. If you run afoul of those rules and you could face fines. So, perhaps HOAs and Condo associations might start to take notice and put the squeeze on property owners. You can also lose first-time home buyer tax credits if you rent out your entire mortgaged property and live somewhere else, but once again, that is not the typical scenario for AirBnB hosts.

A bigger issue is that many cities restrict rentals based on zoning restrictions. Plus you have other obligations when it comes to tenants and being a landlord -- I'm not sure if the duration of the rent matters, so AirBnB hosts might have to check their local zoning and Tenant's Rights statutes. [3] [4]

But all of the above is not equivalent with a tenant violating their rental lease. In this case, the tenant can face an immediate eviction for violating their lease terms. This is much more frightening than risking uncovered liability in the case of an insurance claim, fines from HOA and Condo associations, and the extremely unlikely risk of mortgage call, if you happen to have a loan that prevents such a thing.

[1] http://www.ehow.com/about_5398870_can-rent-out-home.html

[2] http://budgeting.thenest.com/happen-rent-out-mortgaged-prope...

[3] http://www.trulia.com/voices/Property_QandA/can_I_rent_rooms...

[4] http://www.trulia.com/voices/Rental_Basics/Can_I_Rent_Rooms_...

[5] http://grassrootsmotorsports.com/forum/off-topic-discussion/...

[6] http://socialize.morningstar.com/NewSocialize/forums/t/22063...

[7] http://budgeting.thenest.com/occupancy-clause-mortgage-20795...