San Francisco lawsuit, NYC law highlight
global risks for Airbnb
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[October 21, 2016]
By Heather Somerville and Tina Bellon
SAN FRANCISCO/BERLIN (Reuters) - Airbnb,
the online lodging service that investors now believe is worth $30
billion, faces a reckoning.
In eight years of torrid growth, the company has often clashed with
local public officials seeking to minimize the impact of short-term
rentals on neighborhoods and urban housing markets. Now, those simmering
tensions are starting to boil.
The New York state legislature has passed regulations that Airbnb says
could seriously damage its business in New York City, the company's
largest U.S. market; Governor Andrew Cuomo has until Oct. 29 to decide
whether it will become law. The German capital of Berlin recently passed
a law banning most short-term rentals, and Barcelona and Amsterdam are
imposing steep fines for listings that violate laws there.
Ground zero for Airbnb’s fight against tightening regulations is its
home of San Francisco, where the company has sued to block a new
requirement that it reject booking fees from property owners who have
not registered with the city.
The case is a crucial test of Airbnb’s business model. The company
argues it cannot legally be held responsible for how landlords use its
platform. If it is required to enforce local laws on short-term rentals,
that could drastically reduce listings - and revenue - in some of its
biggest markets.
Other cities looking to rein in Airbnb are watching the proceedings and
looking to the city's law as a potential model, said James Emery, deputy
city attorney of San Francisco.
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"Throughout the country, people representing cities have called me to
ask what's going on with the litigation," he said.
Airbnb's legal argument relies on a 20-year-old statute designed to
protect free speech online, known as Section 230 of the Communications
Decency Act. The company asserts in its lawsuit that San Francisco
"impermissibly treats Airbnb as the publisher or speaker of third-party
content" when it is merely a platform for communications between
property owners and guests.
Other online marketplaces - such as Amazon <AMZN.O>, eBay <EBAY.O>, and
Craigslist – have cited the same law to shield themselves from liability
for any improper transactions among users of their services.
In the San Francisco case, U.S. District Judge James Donato said at an
Oct. 6 hearing he wasn't "seeing the link" between free speech
protections and San Francisco's short-term rental regulations. Donato is
expected to issue a ruling soon.
Airbnb has also sued the Southern California city of Anaheim, home to
the Disneyland theme park, and the nearby beach city of Santa Monica,
over regulations that the company contends are illegal.
'ILLEGAL' BUSINESS MODEL
Airbnb takes a cut of the revenue when a room or a home is booked and
charges a service fee to guests. The company says it helps communities
by enabling middle-class families to make extra money.
It also points to agreements with officials in nearly 200 locales around
the world, mostly for tax collection and in some cases for broader
short-term rental regulation.
Critics counter that, in popular tourist destinations, Airbnb takes
affordable housing off the market, drives up home prices and disrupts
neighborhoods with streams of transient visitors.
As regulatory threats loom, Airbnb on Wednesday announced it would
create an online registration system for property owners and automate
the enforcement of Airbnb's existing rules in New York and San
Francisco, which limit operators to a single listing of an entire
residence.
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New York Assemblywoman Linda Rosenthal, sponsor of the New York
legislation, was unimpressed by Airbnb’s announcement.
"It's preposterous. Maybe half their listings are illegal" in New York
City, she said. "It's part-and-parcel of the business model.”
Existing New York state law bars most urban apartment-dwellers from
renting out their units for less than 30 days if they are not present.
The law recently passed by the state legislature would bar even
advertising a rental that violates that existing law, which could help
regulators crack down on Airbnb itself in addition to the users of its
service.
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A 3D printed people's models are seen in front of a displayed Airbnb
logo in this illustration taken, June 8, 2016. REUTERS/Dado
Ruvic/Illustration
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Airbnb has said it will sue New York state if the governor enacts
the law. The company said it has taken down nearly 3,000 illegal
listings in New York City over the past year, and reports 44,622
total listings in the city as of Sept. 1.
BATTLE IN BERLIN
In Berlin, Airbnb is fighting a city demand that it turn over
information to help enforce a new law imposing fines of up $110,000
on people renting out more than 50 percent of their homes for less
than two months - among the strictest regulations worldwide.
Airbnb is "confident it would find a favorable agreement" with the
city," said Peter Huntingford, Airbnb head of public affairs for
Europe.
But with the city intent on collecting data and Airbnb intent on
refusing, another legal battle looms.
"If Airbnb intends to risk a trial, we are prepared to walk down
that path,” said Martin Pallgen, a Berlin Senate spokesman.
In Barcelona, Airbnb's third-largest market in Europe, the city is
imposing fines that exceed $65,000 for listings without proper
licenses. Amsterdam city officials in April started scraping data
from Airbnb and other short-term rental websites to root out illegal
hosts because Airbnb will not turn over details on violators.
In its Wednesday announcement, Airbnb put forward what the company's
head of global policy and public affairs, Chris Lehane, called a
"comprehensive regulatory strategy" targeted at "rooting out bad
actors."
But the new proposals stopped short of any commitments to share
information or enforce bans on short-term rental operators, which
many cities say is crucial for effective regulation.
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RISING RISKS
Critics contend that a large portion of Airbnb listings are offered
by commercial operators with multiple properties who are essentially
running illegal hotels. The company, they argue, has effectively
turned many residential neighborhoods into tourist zones.
In Los Angeles, a study by the pro-labor Los Angeles Alliance for a
New Economy found that property owners with two or more listings
generated 44 percent of all Airbnb revenue in Los Angeles.
Airbnb, in a statement, disputed that conclusion and called the
group's analysis "misleading."
In New York City, the state Attorney General found that, between
2010 and 2014, more than 300,000 Airbnb reservations violated the
law, representing about $304 million in booking revenue, with about
$40 million of that going to Airbnb.
Public officials need to prioritize the rights of full-time
residents over landlords and visitors, said Rosenthal, the New York
Assemblywoman.
"I represent New Yorkers," she said. "I don't represent tourists,
and my responsibility is not to protect their cheap deal at the
expense of New Yorkers."
(Reporting by Heather Somerville in San Fancisco and Tina Bellon in
Berlin. Additional reporting by Dan Levine.; Editing by Jonathan
Weber and Brian Thevenot)
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