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Airbnb Loses Fight Over City’s Strict Rental Rules

LOS ANGELES (CN) – The Ninth Circuit affirmed dismissal Wednesday of claims by Airbnb and HomeAway that a Southern California city’s ordinance slapped unfair requirements on home rental transactions.

Santa Monica, a coastal city of over 90,000 residents located west of Los Angeles, sees as many as 500,000 tourists on weekends and holidays. In order to preserve its supply of affordable housing in the wake of huge demand for vacation rentals, the city adopted tough regulations on the more than 2,000 homes listed for rent by residents and developers on home-sharing sites.

The city’s ordinance regulating home-sharing, as amended in 2017, bans rentals of homes not listed through a mandatory city registry, requires home-sharers to pay city hotel taxes and grants the city authority to go after false third-party home-sharing profiles online.

Santa Monica says it passed the ordinance – with the state’s larger housing shortage in the backdrop – because platforms like Airbnb and HomeAway “contributed to the proliferation of illegal short-term vacation rentals.”

Attorneys for the home-sharing companies said at a October 2018 hearing that the ordinance frustrated their customers, disrupted interstate commerce and unfairly required them to monitor and remove third-party content, which they claimed was a violation of the Communications Decency Act. The companies said the requirement to report false profiles on their websites interfered with federal laws protecting companies from liability for third-party online content.

Their appeal stemmed from a ruling by U.S District Judge Otis D. Wright of failure to state a claim under the Communications Decency Act and the First Amendment. He also ruled that the ordinance doesn’t discriminate against out-of-state businesses or customers since in-state interests are also barred from operating short-term rentals.

On Wednesday, a three-judge Ninth Circuit panel rejected the companies’ appeal. Writing for the panel, U.S. Circuit Judge Jacqueline H. Nguyen said the ordinance only requires the companies to monitor booking requests, which are internal and nonpublic, not the listings provided by hosts.

“Here, the ordinance does not require the platforms to monitor third-party content and thus falls outside of the Communications Decency Act’s immunity,” Nguyen, a President Barack Obama appointee, wrote in a 20-page opinion. “The ordinance prohibits processing transactions for unregistered properties. It does not require the platforms to review the content provided by the hosts of listings on their websites. Rather, the only monitoring that appears necessary in order to comply with the ordinance relates to incoming requests to complete a booking transaction – content that, while resulting from the third-party listings, is distinct, internal, and nonpublic.” 

The ordinance requires only that transactions involve properties licensed by the city, the panel held, adding it is not intended to regulate speech by the companies or their hosts.

The panel also held that even if the ordinance required the companies to remove advertisements for lawful rentals there would be no “severe limitation on the public’s access” to ads since alternatives sites like Craigslist could also host home-sharing ads.

“We are thrilled to have confirmation from the Ninth Circuit that our balanced approach to home sharing is working at a time when housing and affordability continue to challenge the region,” said Santa Monica Mayor Gleam Davis. “This is a big win for Santa Monica residents and our residential neighborhoods.”

Santa Monica City Attorney Lane Dilg said the city looks forward to "collaborating and cooperating with technology companies to advance the community’s best interests."

Attorneys for Airbnb and HomeAway did not respond to requests for comment by press time.

U.S. Circuit Judge Mary M. Schroeder, a Jimmy Carter appointee, and U.S District Judge Michael H. Simon, sitting by designation from the District of Oregon and an Obama appointee, rounded out the panel.

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