Short-term Rental Platforms: Consumer Convenience or Headache for Local Regulators?

About the Author: Grace C. Fraser is a second year law student at American University- Washington College of Law. Grace graduated from Georgetown University and hopes to work on tech-law’s intersections with financial regulation, data and consumer privacy, and financial services after graduating law school.

 

By instantaneously connecting property owners with prospective guests, short-term rental platforms offer an easy and sometimes more affordable alternative to hotels. Many technology-based services and short-term rental platforms, such as Airbnb, HomeAway, and HouseTrip, have ambiguous applications in the law. These types of services offer property owners an extra source of income and may even raise the overall value of their properties.[1] However, as companies like Airbnb have grown in popularity, local governments have made efforts to regulate their business activities as they pose a threat to communities’ affordable housing stock.[2] When making decisions on how to appropriately regulate short-term rentals, local governments are forced to walk a fine line between mitigating negative externalities that arise out of these businesses’ presence and protecting the rights of the individual.[3] Because short-term rental platforms like Airbnb are both a business and a consumer facing tech-based service, they are linked to garden-variety legal issues.[4]

As demonstrated by recent case law, businesses like Airbnb have challenged local regulations that obligate record disclosures or demands in court.[5]  For example, Airbnb and HomeAway challenged a San Francisco Ordinance that would only permit a hosting platform to “operate, Booking Services in connection with short-term rentals for Residential Units located in the City and County of San Francisco only when those Residential Units are lawfully registered on the Short Term Residential Rental Registry” at the time of rental, and noncompliance with this ordinance would result in a misdemeanor offense.[6] Booking services have also challenged cities’ attempts to regulate short-term rental platforms in New York City, Boston, and Santa Monica.[7]

Although there is ample evidence of booking services challenging government regulations in court, it is important to note that few of these efforts have been successful. In Airbnb v. New York, the case that came the closest to taking down an ordinance regulating record demands and disclosures, Airbnb and the city reached a settlement, which they submitted to the District Court on June 12, 2019.[8] Under the settlement, Airbnb agreed to drop its legal challenge to the 2018 ordinance when the city amended the regulation to require quarterly, instead of monthly, reports.[9] Additionally, the city agreed to limit the content of the reports to listings booked five or more nights per quarter involving entire apartments or allowing three or more people at once.[10]

Although booking services for short-term rentals may seem like a simple and accessible concept for a weekend getaway, they have recently proven to pose more complicated issues for legal communities. As the intersection between consumer services and technology-based applications widens, local agencies and lawyers should be aware of such businesses’ pushback to regulation and be prepared with creative approaches to privacy, constitutional, and tech laws.

 

[1]  See Allyson Gold, Community Consequences of Airbnb, 94 Wash. L. Rev. 1577, 1580 (2019) (citing Kyle Barron, Edward Kung & David Proserpio, The Sharing Economy and Housing Affordability: Evidence from Airbnb (Mar. 29, 2018) (unpublished manuscript) [https://perma.cc/7CAC-LQK2]).

[2] Id. at 1580 (highlighting Airbnb’s business correlating with increased gentrification, housing displacement, and inherent discriminatory practices).

[3] Id. at 1577; See also Jake Wegman and Junfeng Jiao, Taming Airbnb, 69 Land Use Policy 494-501 (2017), https://casci.umd.edu/wp-content/uploads/2019/09/Taming-Airbnb-Toward-guiding-principles-for-local-regulation-o_2017_Land-Us.pdf.

[4] See infra notes 6 and 7. Short term-rental platforms have pushed back on local regulation on the grounds of the Section 230 of the Communications Decency Act, the First Amendment, the Fourteenth Amendment, the Fourth Amendment, and the Stored Communications Act.

[5] See infra note 6.

[6] Airbnb, Inc. v. City and County of San Francisco, 217 F. Supp. 3d 1066 (N.D. Cal. 2016) (denying plaintiffs preliminary injunction against the ordinance on the grounds of preemption under the Communications Decency Act, content-based speech under the First Amendment, and imposition of criminal strict liability).

[7] Airbnb, Inc. v. City of New York, F. Supp. 3d 467 (S.D.N.Y. 2019) (granting plaintiffs motion for preliminary injunction on grounds that a new ordinance implicated the Fourth Amendment and the Stored Communications Act); Airbnb, Inc. v. City of Boston, F. Supp. 3d 113 (D. Mass. 2019) (enjoining the enforcement provision of a local ordinance on the grounds it is preempted by § 230 of the Consumer Decency Act) (appeal dismissed); HomeAway.com v. City of Santa Monica, 918 F.3d 676, 680 (9th Cir. 2019) (upholding dismissal of claims challenging ordinance prohibiting completion of booking transaction and collection of fee for rental of unregistered property in violation of the Communications Decency Act, First Amendment, Fourteenth Amendment, and Stored Communications Act).

[8] Dave Embree, Airbnb settles lawsuit over NYC short-term rental ordinance, 2020 WL 3272722 (Westlaw, Daily Privacy Data Briefing 0078).

[9] Id.

[10] Id.

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