Herrera repels legal challenge to short-term rental law, secures settlement with Airbnb and HomeAway

Deal protects homes, clears way for city enforcement, makes mandatory host registration easier

City Attorney Dennis Herrera announced a settlement with Airbnb and Homeaway that dismisses the legal challenge to San Francisco’s short-term rental rules, makes it easier for people to register and comply with the law, and better protects the city’s housing supply.
City Attorney Dennis Herrera announced a settlement with Airbnb and Homeaway that dismisses the legal challenge to San Francisco’s short-term rental rules, makes it easier for people to register and comply with the law, and better protects the city’s housing supply.

SAN FRANCISCO (May 1, 2017)—City Attorney Dennis Herrera announced that a settlement agreement was signed today ending the legal challenge that companies Airbnb and HomeAway had brought in federal court against San Francisco’s law regulating short-term rentals.

“We have successfully defended San Francisco’s common-sense regulations on short-term rentals,” Herrera said.  “This agreement helps protect the city’s precious housing supply by obligating these companies to ensure that all their listings are legal and properly registered. This is a game changer. The settlement will also make it easier for residents who follow the rules to supplement their income by renting out a spare room or their home while on vacation.”

The settlement does three main things: It dismisses the legal challenge to San Francisco’s short-term rental rules, makes it easier for people to register and comply with the law, and better protects the city’s housing supply.

Some of its requirements include:

  • Residents looking to list a rental on Airbnb or HomeAway will have to input their city Office of Short-Term Rental registration number (or application pending status) to post a listing
  • Airbnb and HomeAway will be able to use a “pass-through registration” system on their sites that sends individuals’ registration application information directly to the Office of Short-Term Rentals for consideration, simplifying the process for hosts
  • Airbnb and HomeAway will provide the city’s Office of Short-Term Rentals with a monthly list of all San Francisco listings with sufficient information to allow the city to verify that the unit is in fact registered
  • Airbnb and HomeAway will cancel future stays and deactivate listings after receiving notice from the city of an invalid registration

“This is a turning point when it comes to enforcement,” Herrera said. “This settlement ensures that the two largest rental platforms in San Francisco will only include legal listings. It also guarantees that enforcement with real teeth begins in short order. This will help prevent our precious housing stock from being illegally turned into de facto hotels as we work hard to turn the tide on San Francisco’s housing crisis. At the same time, we’ve crafted this agreement to give people enough time to comply with the rules and to make it easier for them to follow the law.”

Currently, there are only 2,100 registered short-term rental hosts in San Francisco, but Airbnb alone has more than 8,000 listings in the city.

“I’m glad that Airbnb and HomeAway decided that fighting San Francisco’s common-sense regulations was not in anyone’s best interest,” Herrera said.  “They came to the table at the court’s direction and worked hard to hammer out a deal. Now we have one. This agreement ensures these companies will play by the rules, it makes it simpler and more convenient for their users to follow the law, and it makes our enforcement more effective. It’s a good deal for everyone.”

City Regulations

San Francisco’s pioneering rules on short-term rentals are designed to strike a balance, allowing residents to supplement their income by occasionally renting out a spare room or their home while at the same time protecting the existing housing supply from being cannibalized by the lucrative travel market.

“We need to protect our neighborhoods,” Herrera said. “While we’re happy to see a homegrown San Francisco company like Airbnb succeed, it can’t be at the expense of residents being evicted or units being removed from the housing market so people can make more money putting apartments on Airbnb.”

San Francisco requires anyone providing a short-term rental to register with the city, obtain a business license and comply with limits on the number of days per year the property can be rented.

To prevent housing that could serve city residents from being used exclusively for travelers, the person renting out the unit must be the permanent resident and no one may rent out more than one unit as a short-term rental. 

Residential units that are subject to the Inclusionary Affordable Housing Program or those designated as below market rate or income-restricted under city, state, or federal law are not eligible to be used as short-term rentals.

Airbnb and HomeAway sued after San Francisco amended its short-term rental laws so that online hosting platforms face penalties, including fines of up to $1,000 for each illegal booking transaction, if they provide booking services and receive a fee in connection with an illegal short-term rental.

The settlement agreement comes after U.S. District Court Judge James Donato on Nov. 8, 2016 rejected the three main arguments that Airbnb and HomeAway had made in court.

Settlement Terms

The settlement agreement provides terms for Airbnb and HomeAway to be in compliance with the law.  It includes firm but reasonable dates to accomplish that.

Within 120 days, Airbnb and HomeAway will require their new hosts to be registered with the city before posting rentals on their sites.

Existing hosts will be phased in over several months to ensure a smooth transition for both hosts and city enforcement staff. Listings linked to suspected bad actors will be among the first ones required to come into compliance. Everyone must be registered by the end of 240 days.

The agreement also requires these hosting platforms to regularly provide the city with specific data about San Francisco listings that will allow for effective city enforcement.

The U.S. District Court will retain jurisdiction throughout implementation to ensure that any disputes can be resolved quickly.  This settlement is contingent on endorsement from the Board of Supervisors. Once that happens, Airbnb and HomeAway will drop their lawsuit.

“This will be a powerful deterrent for those tempted to illegally convert the city’s housing stock into mini hotels,” Herrera said.  “For those who have been turning badly needed rent-controlled units into vacation spots, that is coming to an end once and for all.”

The case is Airbnb, Inc. v. City and County of San Francisco, U.S. District Court for the Northern District of California, Case No. 3:16-CV-03615, filed June 27, 2016.

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