Vacation rental marketplace HomeAway is looking to block legislation designed to make short-term rentals legal in San Francisco. To do that, the company has filed a lawsuit seeking a declaratory judgment against the city, claiming that its new “Airbnb law” violates the U.S. Constitution’s Commerce Clause.
Last month, the San Francisco board of supervisors voted to legalize and regulate short-term stays in the city. In doing so, they passed a controversial piece of legislation that sought to balance Airbnb hosts’ ability to make their homes available for rent with opposition from housing interests claiming the law would make housing in the city more scarce than it already is.
As part of its compromise, the legislation limited the length of time hosts could make their homes available to 90 days a year, required them to register with a public registry, and to pay the city’s hotel taxes on stays booked through the Airbnb platform. It also limited rentals to full-time residents, seeking to weed out landlords tying up housing stock for short-term rentals in a constrained housing market.
Surprisingly — or perhaps not — it’s the compromises aimed at making the legislation more palatable to local residents that HomeAway is calling into question. Many of its listings comprise second homes or vacation properties for its hosts, which means its hosts wouldn’t be able to rent out their homes under the legislation passed last month.
HomeAway argues the legislation was crafted specifically for Airbnb’s platform, despite HomeAway’s attempts to work with the city on it. And it claims “any asserted local benefit of the Ordinance’s residency restriction and Hosting Platform rules is outweighed by the substantial burdens they impose on interstate commerce” and as a result it violates the Constitution’s commerce clause.
As part of its complaint, HomeAway alleges:
First, by its express terms, the Ordinance allows only permanent San Francisco residents to rent out on a short-term basis (which the Ordinance defines as thirty days or less) residential property they own or lease in San Francisco. Non-permanent residents of San Francisco who own or lease property in San Francisco are barred on the face of the Ordinance from renting out their property on a short-term basis. Second, the Ordinance requires entities that provide “Hosting Platforms,” on which owners and lessees of property may advertise their property for short-term rentals, to conform their business operations in San Francisco to one particular model, and no other, under pain of monetary penalties.
There are a number of reasons why the legislation would keep HomeAway from being able to operate legally in San Francisco, including the local resident requirement, as well as the need to collect hotel taxes. Since HomeAway’s business doesn’t manage payments or operate under an agency model for connecting property owners and renters, it’s not able to comply with those rules. As a result, HomeAway argues that the law is anti-competitive in the short-term rental market.
Airbnb tells TechCrunch in a statement: “Airbnb is focused on fair rules that allow regular people to share the home in which they live. If other companies feel differently, that’s up to them.”
It remains to be seen if HomeAway will be able to work with San Francisco to operate under its rules. In the meantime, it’s hoping the courts rule in its favor to force the issue.
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