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Homeowner Fined $25,000 For Renting Out Home On Mobile App, Without A Permit


(Dorian Hargrove)  An administrative law judge ruled last week that homeowners wishing to rent out rooms or their home on mobile apps such as AirBnB need to obtain a conditional use permit before doing so or be at risk for hefty fines up to $250,000.

During the course of the past year, City of San Diego staffers and elected officials have scrambled to catch up with what has been a growing popularity of home-rental websites. In February 2015, new regulations were posted on the city’s website notifying AirBnB hosts that they are required to pay transient occupancy taxes and other taxes. There was also mention that some hosts may need to obtain city permits to rent out rooms on home-sharing apps, a long and tedious process, as reported by the Voice of San Diego. Before that, however, there was little information from the city on the requirements for home-sharing. Currently, several hundred homeowners rent rooms or their home on AirBnB as well as other similar websites. None, as of now, have obtained permits, leaving all at risk for hefty fines.

AirBnb host Rachel Smith, owner of a large historical house in the affluent Burlingame neighborhood near North Park, has been the most visible homeowner to suffer the fine.

On August 5, judge Catriona Miller sided with the City of San Diego and fined Smith nearly $25,000 for operating a bed-and-breakfast establishment without the necessary permits.

As reported by the Reader in May 2015, from 2013 to August 2014 Smith listed two rooms in her five-bedroom house on AirBnB; that came to an end, however, when Smith’s neighbors complained to councilmember Todd Gloria’s office about lack of parking and unwanted foot traffic in the neighborhood.

Gloria’s office responded by passing along the neighbor’s complaints to the city’s code-enforcement division. In July 2014 a code-enforcement officer notified Smith that she violated the municipal code by operating a bed-and-breakfast without proper permits. Smith argued that she was not running a business and did not offer food or any other amenities to guests other than a bed to sleep in.

Administrative law judge Miller disagreed. In her ruling, Miller stated that even though Smith did not offer breakfast to guests, she was essentially operating a bed-and-breakfast.

“The elements of a bed and breakfast statute were met: [Smith], while present, used her primary residence to provide lodging for less than 30 days to paying guests,” reads Miller’s ruling. “While [Smith] did not serve breakfast regularly in this establishment, it is the type of establishment where breakfast is typically served.”

Smith’s attorney, Omar Passons, says the ruling puts homeowners at risk.

“It must be explicitly clear that according to this ruling, the city’s view of its law stands: If you rent rooms, home swap, share, couch-surf, open your home to foreign exchange students or the military, for less than 30 days in nearly all single family zones and you haven’t gotten a conditional or neighborhood use permit, you are breaking the law and the city can fine you thousands of dollars.”

Adds Passons, “The judge’s ruling said it was clear that [Smith] violated this law by renting rooms in her home for less than 30 days even though the law doesn’t actually say anything about renting for less than 30 days nor about the primary residence requirement.”

Smith, who must make out a check to the City of San Diego within 30 days, has a more personal reaction to the city and the neighbors who waged a political war against her without her knowledge.

“No, I do not believe that the city handled this matter properly. But even before I talk about the city I have to emphasize that I feel my neighbors handled the situation poorly. I may be naive in thinking this but I was under the impression that I had a relatively decent relationship with all my neighbors, especially the ones closest to me.

“I am a good neighbor. I have always intended to be a good neighbor. Unfortunately, it seems that gossip and subterfuge and tattling to city officials is more ‘neighborly’ where I live. As for the City, I cannot imagine a city councilmember who, after hearing only one side, would so quickly reach out to City Development Services’s Code Enforcement division, if it weren’t somehow political. I want so badly to remind Mr. Todd Gloria that I am his constituent, too. And I voted for him. And why was it that I was the last person in the room to know what was brewing? I have not donated to Mr. Gloria’s campaign, but I gave him my vote. I didn’t know that some constituents are more important than others….

“Because of my costly hearing, I’ve learned a lot about how the city functions, or sometimes doesn’t function very well. The zoning codes are not clear, especially for laypersons. The confusion stems from an inability to imagine that these ‘disruptive technologies,’ as they are often called, defy zoning codes that haven’t been updated to accommodate our contemporary reality. In fact, I also learned, that the last time this city issued a Conditional Use Permit for a bed and breakfast was 10 years ago. And since that time, hundreds of local residents find themselves excited about new technologies that allow them to take part in something that we haven’t seen before: it allows for residents to share their neighborhood with people from all over the world, suggesting local businesses and restaurants; it allows for first-time homebuyers to feel more secure in an already unaffordable market; and it allows for people like me who love opening my home to keep my house full of life. So, if there are hundreds of people, nine in Burlingame where I live, that have listings on AirBnB, and that, to my knowledge, I am the only one that has been investigated and fined, it seems clear that the ‘rules’ or ‘laws’ are not clear at all. Either that, or I’m a ‘scofflaw’ as deputy city attorney Markecia Simmons called me in her closing arguments.”

It is unclear whether Smith intends to file a lawsuit or whether AirBnB will file one on her behalf.