Corporate Housing in Redwood City

What’s the Latest?

By Aaron Aknin, Assistant City Manager, City of Redwood City

Earlier this year, the City became aware of several apartment buildings that were being rented as “corporate housing”. Reports varied, but at worst, it was reported that 100% of the units in several new apartment buildings were operated as hotels (daily and weekly rentals). This was a huge concern to the City as the buildings were approved as housing, not as hotels. The City began an investigation and issued Cease and Desist to several properties based on the early findings of the city led investigation.

Fortunately, we found that the problem was not as extreme as first reported, although there were some violations. Most importantly, all apartment building owners have agreed to comply with the City’s rules moving forward.

Apartment owners must sign minimum 30-day leases with an individual in order for it not to be considered a “transient use” (aka a hotel). Below is what the City learned about the corporate housing industry, as well as the findings for the addresses investigated:

Basic facts about the corporate housing industry in Redwood City and the region:

• Most corporate housing providers have followed the same business plan for decades. They rent out a “block” of rooms in an apartment building, furnish the units and then sublet the units to employees of their corporate clients. When the demand is there, some corporate housing providers will buy buildings, too. The average stay of corporate housing residents is about two months. In addition, those same renters often begin renting a corporate housing unit, and end up as long-term residents in a standard unit within the same building.
• As a matter of practice, most apartment building owners do not allow more than 20% of their units to be corporate rentals. For the apartment owners, this is an investment protection strategy. Building owners do not want 20% of their units go vacant all at once, if a large corporate housing client stops leasing.
• Corporate housing companies operate in many Bay Area cities. Redwood City appears to be the first city to flag the issue and issue cease and desist orders. Corporate units are also not a new thing, they have been around for a while, with demand tightly correlated to the job market.
• The City confirmed there was a corporate housing listing on Expedia (and perhaps Travelocity) for at least one of the addresses investigated in Redwood City, that were a result of webcrawlers. You could not actually book a room through these website, though it appeared you could. The booking process ended up referring you to the property manager onsite.
• There are a number of Corporate Housing providers in Redwood City. Oakwood Corporate Housing and Synergy Corporate Housing are two of the largest providers in Redwood City. Oakwood is the only corporate housing company which owns a building in Redwood City. There is also smaller company, RESI, who operates less than five units in Redwood City.
• AirBnB short-term rentals are separate from Corporate Housing and corresponding policy. You can still find units listed on Airbnb and other short-term vacation rental platforms throughout Redwood City. Although the impacts can be overlapping, the City sees this as a separate and distinct policy issue from corporate housing. AirBnB units are typically listed by the primary long-term resident, which is different from a corporate housing company renting units directly to a corporation (a business to business transaction). The City is currently developing regulations for AirBnB units, and expects the City Council to review these regulations in early 2016.

Here are the findings for the 5 addresses that the City investigated:

Investigation Outcome: There were actually very few units that were being leased for less than 30 days, as the standard corporate housing practice is to sign month-to month leases. Fortunately, after receiving the City’s Cease and Desist Order, all property owners and corporate housing providers investigated agreed to sign minimum month-to-month leases. With exception of 2580 El Camino Real, 80% or more of units in the buildings below operate in a traditional manner, which entails an initial 6–12 month lease that goes to “month-to-month” after the first year.

By the Numbers:

• 201 Marshall: 116 total units, 17 corporate rentals.
• 640 Veterans: 260 units, 39 corporate rental units.
• 333 Main: 132 total units, 25 corporate rentals.
• 2580 El Camino Real: 141 Units. With the exception of the 5 affordable units onsite, the entire building is owned by corporate housing provider and operated as corporate housing. The affordable housing units will remain and are now managed by a separate entity with affordable housing experience.
• 885 Woodside Road: There are no longer corporate housings units in this building. Outdated information on a corporate housing provider website will be taken down.

The enforcement actions outlined in this post deal directly with “corporate housing” — specifically, corporate housing companies that have agreements with companies to lease a certain amount of units to their employees. As noted, these companies will no longer offer rentals for less than 30 days.

The City will continue to monitor this issue closely. These buildings and others were approved as housing and need to continue to offer housing, not act as hotels.

For information on the City of Redwood City’s housing policies and affordable housing information, visit: www.redwoodcity.org

*This blog was amended on November 16, 2015 to include notes about AirBnB rentals, and for minor grammatical corrections.