Online vacation rental marketplace HomeAway Inc. has filed suit against the City and County of San Francisco in an attempt to block a new law restricting home rentals in the City. HomeAway is requesting an injunction to prevent the City from enforcing its new ordinance, which was passed last month.
That new ordinance would legalize some short-term rentals, like those provided by Airbnb, yet it requires that “hosts” renting out space be permanent residents of San Francisco. The goal of this provision is to keep housing in San Francisco from transforming into permanent de facto hotels, being rented out year-round to tourists without any permanent resident on site. HomeAway argues the rules unfairly limit rentals on its site, which caters toward vacation rentals and second homes. Many of HomeAway’s San Francisco properties (1,200 properties in the City are currently listed on its site) would thus be illegal under the new ordinance and may be forced off the site entirely. HomeAway also argues the ordinance is designed to accommodate Airbnb’s business model, while its structure would make collection and remittance of taxes much more cumbersome.
The suit highlights the legal challenges that are likely to face cities attempting to regulate online vacation rental marketplaces. Even a city like San Francisco, which by all accounts crafted this ordinance in an effort to liberalize its approach to these sites, is still finding itself in opposition to some marketplaces that may be harmed by it. San Francisco City Attorney Dennis Herrera claims the lawsuit is without merit and plans to vigorously defend it. San Francisco is just one of dozens of cities across the nation currently attempting to pass legislation regulating online vacation rental marketplaces, while even more localities struggle to come to terms with how best to approach this new and growing market within their jurisdictions. The success of San Francisco’s ordinance will remain untested until it takes effect in February, but cities hoping to follow its lead should keep an eye on the regulation’s success or failure in the months to come.
