SAN FRANCISCO (CN) – Airbnb competitor HomeAway sued the city of San Francisco in federal court on Monday over a controversial new ordinance that it says would regulate it out of the short-term rentals market.
HomeAway, which says it runs the world’s largest online vacation rental marketplace, claims the ordinance commonly referred to as the “Airbnb law” has created a local monopoly for Airbnb.
For decades, short term rentals were illegal in San Francisco although those rules have not been well enforced. In late October, however, the city’s board of supervisors passed a new law to legalize and regulate these rentals – typically offers made to vacationers by homeowners, building owners and even leased tenants.
HomeAway says the new ordinance is tailored to Airbnb’s business model and “makes illegal” any competing business model, according to the complaint. While Airbnb collects and holds rental payments, HomeAway’s model allows the homeowner to control the transaction.
HomeAway says because the law only allows rentals by companies using an “agency model” like Airbnb, HomeAway is blocked out of the market altogether.
Also, the ordinance only allows permanent San Francisco residents to take advantage of short-term rentals, the complaint says. That excludes potential customers who may own or lease property in the city, but do not live there most of the year.
HomeAway says in its complaint that the law gives Airbnb a “local monopoly” by “naked economic protectionism,” and that it violates the Constitution’s commerce clause.
HomeAway also documents the relationship between Airbnb lobbyists and Board of Supervisors president David Chiu, who sponsored the law.
“Airbnb was actively involved in drafting the ordinance and lobbied extensively for its passage,” the complaint says.
The suit also names John Rahaim, the director of San Francisco’s city planning department, as a defendant.
HomeAway seeks judgment that the San Francisco ordinance violates the Constitution, and a ruling that bars the city from enforcing the law’s residency restriction and business model rules.
The company is represented by Rex Heine of Los Angeles-based Akin Gump Strauss Hauer & Feld.
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