Airbnb’s Settlement with San Francisco Could Change how the Home-Sharing Industry is Regulated

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Jul 16, 2021

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cityEarlier this year the city of San Francisco, California settled a lawsuit with the popular home-sharing businesses Airbnb and HomeAway which will allow the informal room rental enterprises to operate within the city limits providing users agree to a number of stipulations. 

The agreement, which came under intense scrutiny by the judge presiding over the lawsuit, addresses concerns that the municipal government has with the rapid spread of private apartment and home sharing transactions, and will likely change how cities across the country regulate the industry.

Airbnb Lawsuit against San Francisco

Friction between the city of San Francisco and the home-sharing industry began in 2016 when the city passed an ordinance which closely regulated rent-sharing services using sites like Airbnb or HomeAway.  The ordinance required all short-term rentals to obtain a business license prior to listing property, limited the type of property which could be rented out to permanent residences, restricted hosts from renting out more than one unit, and required renters who listed on Airbnb or HomeAway to have permission from their landlord or condo association before listing property.  Most significantly, San Francisco included in its law an enforcement provision which levied steep fines against Airbnb and HomeAway for host non-compliance.

The companies responded to San Francisco’s new policy by filing a joint lawsuit which argued the ordinance violated their rights under the Communications Decency Act, a federal law which protects Internets service providers from legal consequences arising from content or postings generated by the users of the site. 

Although the CDA had not been applied to home-sharing content, the companies argued the provisions extended to protect them from hosts who failed to meet local registration requirements. Following hearings last fall, US District Judge James Donato ordered the two parties to the negotiation table in order to develop a system whereby the companies could comply with the city law forcing host registration.

Airbnb, San Francisco Settle Lawsuit

After several months of negotiations, Airbnb and HomeAway announced they were able to settle their lawsuit against San Francisco by working with the city to develop host registration procedures amenable to both parties.  Under the new agreement, Airbnb and HomeAway will be allowed to control the host registration process through their platforms, which will give users an easier path to complying with city licensing requirements. 

While the companies can still be heavily fined up to $1,000 per night for non-complying hosts, they are given the opportunity to build a new online platform which prevents hosts who have not met the city’s registration requirements from listing a rental unit.

Going forward, the settlement agreement looks to improve registration rates and give the city of San Francisco better control of the informal home-sharing environment created by Airbnb and HomeAway.  Although hosts have been required to register with the city since 2015, information from the city suggests that only 2,100 short-term rental hosts are registered out of the more than 8,000 homes listed on Airbnb alone. 

Under the new settlement, Airbnb and HomeAway have eight months to revamp their online platform in order to comply with the new law.  After the websites are updated, hosts will have to demonstrate they are registered with San Francisco — which can be done through Airbnb and HomeAway — before being allowed to list a short-term rental unit.

What the Settlement Means for Home-Sharing Services

Following the settlement, San Francisco officials expressed satisfaction by the proceedings and called the conclusion of the legal case a victory for the city.  City officials, which had come under fire from landlords, hotel workers, hotel owners, and other traditional property rental services, have been trying to crack down on the relatively unregulated home-sharing market for several years, and the agreement finally provides the city with a legally enforceable mechanism for doing just that. 

Under the new procedures, the home-sharing market will likely be as intended: private users renting out their homes to guests, rather than mini-hotel operators who use Airbnb or HomeAway to rent out property while avoiding city oversight.

While Airbnb and HomeAway acknowledge that the new requirements may make it difficult for hosts to rent property, both companies also expressed satisfaction with the proceedings for offering clarity and making the registration process significantly easier for hosts. 

With hosts able to satisfy San Francisco’s requirements through an online process, the companies will be able to provide simple and streamlined services that will continue to offer informal home-sharing opportunities.  Although there may be a temporary dip in host availability, both Airbnb and HomeAway will still be permitted a strong presence in the short-term rental market. 

The agreement also carries broad consequences beyond San Francisco, as several large cities are grappling with the explosion of home-sharing services.  Over the coming months, other cities mired in legal action with Airbnb may look to San Francisco’s agreement for guidance in order to develop effective regulation of a booming industry.

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