Airbnb loses fight over California city's rental law

Los Angeles

AIRBNB and Expedia Group's HomeAway failed to persuade a US court of appeals to strike down a Santa Monica law that makes the companies liable for illicit rentals in the Southern California beach city.

The ruling on Wednesday by a three-judge panel of the Ninth Circuit is a setback for the home-sharing platforms in their effort to avoid regulation by cities that blame the rapid proliferation of short-term rentals for a shortage of affordable housing and a disintegration of residential communities.

The Santa Monica ordinance holds the companies responsible for booking rentals of residences that aren't licensed by the city. The appellate panel agreed with the city that the restriction doesn't violate the US Communications Decency Act of 1996, which shields online services from liability for the content that their users post on their sites.

Airbnb and HomeAway argued that the Santa Monica ordinance makes it impossible for them to operate, particularly if other municipalities adopt similar laws, because it would require them to monitor and remove listings for unregistered residences. If they don't, users would be stuck looking at listings that they won't be able to book, according to the companies.

Santa Monica said in a statement that the unanimous ruling confirms the city's right to regulate home sharing to protect its limited housing stock for residents.

San Francisco-based Airbnb is the largest home-rental platform with more than six million listings around the world. The company is gearing up to be ready to go public by the end of the year, but is still fighting various cities in court over efforts to curtail its operation. In January, Airbnb and other home-sharing sites won a ruling granting a temporary reprieve from a New York City law that would compel them to turn over renter data, a requirement that threatens to cut their bookings in the city by half.

"Airbnb has seen setbacks like this over the years," Bloomberg Intelligence analyst Mandeep Singh said. "They will continue to work with the regulators on tax collection and other fees but it should not have much of an impact on its IPO."

Airbnb is also fighting Paris where it faces as much as 12.5 million-euro (U$19.1 million) in fines for allegedly posting illegal advertisements, and in November it sued Boston over a new ordinance that it says would limit short-term home rentals and impose unfair restrictions and financial penalties on the company. BLOOMBERG