New NYC law, San Francisco lawsuit
highlight global risks for Airbnb
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[October 22, 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.
New York Governor Andrew Cuomo on Friday signed legislation that Airbnb
says could seriously damage its business in New York City, the company's
largest U.S. market; the company immediately filed a lawsuit in federal
court seeking to overturn the 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.
Airbnb is also engaged in a pitched battle in its home of San Francisco,
where the company has also sued to block a new requirement that it
reject booking fees from property owners who have not registered with
the city.
The New York and San Francisco legal fights are 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 San Francisco
proceedings and looking to the city's law as a potential model, said
James Emery, deputy city attorney of San Francisco.
"Throughout the country, people representing cities have called me to
ask what's going on with the litigation," he said.
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Airbnb's legal argument in both the San Francisco and New York cases
rely on a 20-year-old statute designed to protect free speech online,
known as Section 230 of the Communications Decency Act. In the San
Francisco lawsuit, the company asserts that the city "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 San Francisco , 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.
New York Assemblywoman Linda Rosenthal, sponsor of the New York
legislation, was unimpressed by Airbnb’s announcement.
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"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.
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![](../images/102216pics/news_J15.jpg)
Brian Chesky, co-founder and Chief Executive of AirBnb, attends the
Reuters Global Technology Summit in San Francisco, June 2013.
REUTERS/Stephen Lam
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The law signed by Cuomo on Friday bars 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. In its court
challenge, Airbnb said the statute penalizes the company over content
posted by users, which is prohibited by federal law.
Airbnb has also 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.
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.
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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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