City Restrictions on Home-Sharing Battled at Ninth Circuit

PASADENA, Calif. (CN) – Attorneys for home-share companies Airbnb and Homeaway told a Ninth Circuit panel Friday that a strict Santa Monica, California, ordinance banning short-term rentals is frustrating their customers and disrupting their business models.

The attorneys also warned the panel about potential threats to local and national economies if cities and other jurisdictions are allowed to adopt “copycat laws” banning short-term rentals, which they said could disrupt interstate commerce.

The California oceanfront city has said in court papers that the 2015 ordinance – which bans rentals of less than 30 days without an owner present – will help preserve its supply of affordable housing by charging hotel taxes to home-sharers and allowing the city to go after companies that create false online home-sharing profiles for homeowners.

On appeal of a federal judge’s preliminary injunction, Airbnb attorney Donald Verrilli of Munger Tolles & Olson told the three-judge panel Friday that Santa Monica’s ordinance forces home-share sites to remove individual listings that may be out of compliance with the ordinance.

Verrilli said customers don’t want to saddled with the costs of that extra labor and don’t want to visit a website in the first place if it’s cluttered with potentially illegal listings they can’t book.

U.S. District Judge Michael H. Simon, sitting on the panel by designation from the District of Oregon, said home-sharing sites could determine the compliance status of each listing before posting them online. U.S. Circuit Judge Jacqueline Nguyen offered a similar suggestion, asking Verrilli if the company would consider adding a notice to each listing alerting customers to potential noncompliance with the ordinance.

Verrilli said modifications would be costly to customers and disrupt the “innovative business model” Airbnb has created. He said Santa Monica should instead “enlist the cooperation” of home-sharing sites.

But Santa Monica attorney George Cardona told the panel the city believes it reserves the right to enforce the ordinance against offending hosts and the website they use to list their homes.

A 2017 amendment to the ordinance required home-sharing hosts to be listed on a public registry. Cardona said the city would be open to sharing registry-related data with companies.

The city has also argued that the online platforms violate a section of the Communications Decency Act by actively booking illegal listings for customers. The city has called this “nonpublishing conduct” in court papers.

But Verrilli said the platforms are being forced to either protect their “innovative” business model or “give up their immunity” under the act.

Los Angeles-based attorney Jordan Esensten, representing plaintiff Arlene Rosenblatt, told the panel the ordinance tips the economic scale in favor of local hotels at the expense of out-of-state travelers and residents who want to rent out spare rooms for extra income.

Santa Monica attorney Yibin Shen disagreed, saying the city reserves the right to enforce its zoning authority because it wants to preserve the “quietude and character” of local communities.

Shen said the real threat to communities comes from individuals who abandon their homes in order to create “de facto hotels” that take affordable housing stock off the market.

In court papers the city has said 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.”

Rosenblatt, a retired Santa Monica teacher who sought to list her home on a home-sharing site, argued in her lawsuit against the city that the ordinance violates the Constitution’s dormant Commerce Clause.

U.S. District Judge Otis D. Wright II disagreed, throwing out the Commerce Clause claims in 2017 and finding payments, ads and communications over the internet don’t constitute interstate commerce.

Wright said the ordinance doesn’t discriminate against out-of-state businesses or customers since in-state interests are also barred from operating short-term rentals.

Highlighting what he believes is an overreaching ordinance, Esensten warned the panel Friday that it wouldn’t be a stretch to assume the city would soon ban out-of-state tourists from visiting local parks.

Rosenblatt’s attorney Esensten said Congress could pass legislation to regulate home-sharing.

“We can’t allow states to do in piecemeal fashion what Congress should do in one fell swoop,” Esensten said.

U.S. Circuit Judge Mary M. Schroeder rounded out the panel, which took the case under submission.

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