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HomeAway sues San Francisco to block new 'Airbnb law'

A vacation rental site contends that newly signed ordinance violates the US Constitution and discriminates against non-permanent SF residents.

Airbnb

Vacation rental site HomeAway filed a lawsuit Monday against the city of San Francisco in an attempt to block the so-called "Airbnb law," which officially legalized short-term home rentals in the city.

The lawsuit, filed with the US District Court for Northern California, claims the recently signed ordinance violates the US Constitution's interstate commerce clause by discriminating against homeowners who are not permanent San Francisco residents. The lawsuit seeks an injunction against enacting of the law, which was signed last week by Mayor Ed Lee and goes into effect in February.

"It is shocking the Supervisors passed a law that, in our opinion, stifles opportunity in such a discriminatory manner," Carl Shepherd, co-founder of Texas-based HomeAway, said in a statement. "In its apparently single-minded goal to 'legalize Airbnb,' we claim the Supervisors ignored the benefits of responsibly regulating a well-established industry, and embraced an unconstitutional and unenforceable regulation."

San Francisco City Attorney Dennis Herrera called the lawsuit without merit and said he was confident the city would prevail.

"I intend to vigorously defend a law that offers San Francisco residents reasonable flexibility to rent their homes on an occasional basis," Herrera said in a statement. "HomeAway's challenge pushes a dubious legal theory that the US Constitution's Commerce Clause somehow prohibits local jurisdictions from making local land use decisions. San Francisco is well within its authority to ensure that scarce housing resources are used primarily for housing."

Passed by the Board of Supervisors in October, the so-called Airbnb law allows property owners and tenants to use websites to rent out their homes, apartments and rooms on a temporary basis. The law legalizes a practice that was already widespread in San Francisco but rarely prosecuted.

HomeAway contends that the law, which limits rentals to 90 days out of the calendar year, is unfair because it allows only permanent residents to offer short-term rentals. It also requires the collection of hotel taxes, a process that would prove difficult for HomeAway, whose model for connecting property owners and renters does not include involvement in its clients' financial transactions.

Even before Monday's lawsuit, the ordinance proved controversial. Before the Board of Supervisors' approval, opponents within the housing advocate community voiced concern that the legislation wasn't strict enough and said it should better protect affordable housing, residential zoning and landlords.

US Senator Dianne Feinstein -- a former San Francisco mayor -- also voiced scepticism about legalizing short-term rentals. The senator penned an opinion piece against the new San Francisco law last week saying it was "shortsighted" and could "destroy the integrity of zoning throughout San Francisco."

HomeAway counts 1,200 San Francisco listings on its site, compared with nearly 5,000 Airbnb listings identified in a recent data analysis commissioned by the San Francisco Chronicle.

Airbnb said it supported fair rules for home sharing.

"Airbnb is focused on fair rules that allow regular people to share the home in which they live," an Airbnb spokesman told CNET in a statement. "If other companies feel differently, that's up to them."

Updated 11/4 at 8 a.m. PT with Airbnb comment.