Summary: The city of San Francisco has been sued by HomeAway for its new law regarding how home rentals can be handled within the city.
The largest vacation-home rental site in the country, HomeAway, filed a lawsuit against San Francisco on Monday, according to SFGate.
The lawsuit claims that the new law in the city to regulate short-term rentals in private homes benefits Airbnb at the expense of the company and other rival companies.
The lawsuit also claims that the law violates the Constitution of the United States because it creates a burden on interstate commerce. It asks for the U.S. District Court for Northern California to dismiss two provisions before it goes into effect on February 1, 2015.
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“It is shocking the Supervisors passed a law that, in our opinion, stifles opportunity in such a discriminatory manner,” Carl Shepherd, co-founder of HomeAway, said in a statement. “In its apparently single-minded goal to ‘legalize Airbnb,’ we claim the Supervisors ignored the benefits of responsibly regulating a well-established industry, and embraced an unconstitutional and unenforceable regulation.”
Dennis Herrera, the attorney for San Francisco, said the following about the lawsuit:
“I intend to vigorously defend a law that offers San Francisco residents reasonable flexibility to rent their homes on an occasional basis. HomeAway’s challenge pushes a dubious legal theory that the U.S. Constitution’s Commerce Clause somehow prohibits local jurisdictions from making local land use decisions. San Francisco is well within its authority to ensure that scarce housing resources are used primarily for housing.”
David Chiu, the Board of Supervisors President, drafted the law, which passed by a vote of 7-4 and was signed by Mayor Ed Lee. Short-term rentals in the city have been illegal for quite some time, but were only enforced loosely.
The new law requires that homes can only be rented to short-term travelers if the homes are owned by permanent residents of the city. More than 1,200 listings on HomeAway are secondary homes, which means the owners do not live in the city permanently.
The law also says that vacation-rental platforms have to collect and remit San Francisco’s 14 percent hotel tax, something that Airbnb started doing in October, although it’s been mum about any plans to pay an estimated $25 million in back taxes. But HomeAway and VRBO function differently than Airbnb, acting as classified-listing services rather than middlemen, which means they don’t have the ability to collect the hotel tax — or even to know when homes were rented out via their sites.
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“Our goal is to work with the city to amend the law to one that balances the needs of the community with the rights of all people to rent their properties, regardless of who they are, where they choose to live and how they choose to market those properties,” Shepherd said. “We expected any ordinance in San Francisco would be thought-leading public policy, but instead it fails on all counts resulting from a desire to anoint winners and losers, not to create policies that are fair to all.”
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Image credit: HomeAway