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Santa Monica Short-Term Rental Ordinance Withstands Legal Challenge

March 25, 2019
The Ninth Circuit Court of Appeals issued a decision last week rejecting a legal challenge brought by online hosting platforms HomeAway.com and Airbnb to Santa Monica’s short-term rental ordinance.
 
The League filed a friend-of-the-court brief in the case, authored by Christi Hogin of Best, Best and Krieger. The California State Association of Counties and the International Municipal Lawyers Association also joined in the League’s brief.
 
The ordinance at issue in the case authorizes city-licensed and registered “home-sharing” rentals – where resident(s) remain on-site with guest(s) – but prohibits all other forms of short-term rentals for 30 days or less. It also imposes certain obligations on online short-term rental hosting platforms such as HomeAway.com and Airbnb. Specifically, the ordinance requires online hosting platforms to collect and remit transient occupancy taxes and to regularly disclose listings and booking information to the city. It also prohibits them from booking properties that are not licensed and registered with the city and from collecting any fees in connection with such prohibited transactions.
 
The city adopted the ordinance following a proliferation of short-term rentals in residential zones. Such short-term rentals, the city council reported, “had negatively impacted the quality and character of its neighborhoods by ‘bringing commercial activity and removing residential housing stock from the market’ at a time when California is already suffering from severe housing shortages.”
 
HomeAway and Airbnb sued, claiming the ordinance violated various laws including the federal Communications Decency Act of 1996 and the First Amendment. 
 
Federal courts have interpreted the Communications Decency Act to immunize “publishers” of third-party content from liability arising out of that content. The purpose of the Act is “to promote the continued development of the Internet and other interactive computer services.”
 
HomeAway and Airbnb argued that Santa Monica’s ordinance was inconsistent with the Act because it effectively required them to monitor and remove third-party content “to prevent their website from becoming littered with unbookable listings.” The Ninth Circuit Court of Appeals rejected this argument, noting that the ordinance simply prohibited the online platforms from proceeding with unlicensed bookings; it did not seek to impose any liability on the platforms for the contents of the listings. “Like their brick-and-mortar counterparts,” the court held, “internet companies must also comply with any number of local regulations concerning, for example, employment, tax, or zoning.” 
 
The Ninth Circuit was also unpersuaded by HomeAway and Airbnb’s arguments that the ordinance imposed a “content-based financial burden” on their commercial speech in violation of the First Amendment. The Ninth Circuit found no “significant expressive element” associated with processing a short-term rental booking.
 
Although this ruling may be appealed, it is a positive development for cities in the area of short-term rental regulation. Cities that have questions as to how they may be impacted by this ruling should consult with their city attorney.


 
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