Reed Saxon/ap file photoSan Francisco recently signed into law regulations that covered the short-term rental business

HomeAway lawsuit alleges Airbnb law unconstitutional and discriminatory

San Francisco's drama surrounding a law legalizing short-term rentals only increased Monday when one lodging company filed a federal lawsuit to block it from going into effect, arguing it unfairly favors their industry competitor Airbnb.

HomeAway Inc.'s lawsuit is the latest attack levied at the so-called Airbnb legislation, which has also drawn criticism from tenant advocates and U.S. Sen. Dianne Feinstein who argue the law, signed into effect by Mayor Ed Lee last week, falls short in protecting San Francisco's rental housing stock and the character of neighborhoods.

HomeAway, based in Austin, Texas, and includes subsidiary VRBO, argues in the lawsuit that the legislation violates the Commerce Clause of the U.S. Constitution by imposing a residential requirement to engage in short-term rentals, and by favoring Airbnb's business model of acting as a middleman in collecting payments for the rentals as opposed to the model used by HomeAway, which acts more as a classified-listing resource.

The law is discriminatory toward owners of second homes and nonresidents by allowing only residents, defined using “arbitrary” criteria — a person must live on the premises 275 days out of year — to engage in short-term rentals when there is “no evidence at all that limiting short term rentals to San Francisco residents will preserve the City's residential rental housing stock and make affordable housing more available in the City,” the lawsuit said.

HomeAway says that the law “effectively turns over control of short-term rentals to the San Francisco-based company Airbnb.” Airbnb has an estimated 5,000 local listings compared to HomeAway's 1,200.

“It is shocking the Supervisors passed a law that, in our opinion, stifles opportunity in such a discriminatory manner,” Carl Shepherd, co-founder of HomeAway, said in a statement released Monday morning announcing the filing of the lawsuit in the U.S. District Court for the Northern District of California. “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.”

Said Airbnb spokesman Nick Papas: “Airbnb is focused on fair rules that allow regular people to share the home in which they live. If other companies feel differently, that's up to them.”

The legislation, which was introduced by Board of Supervisors President David Chiu, was passed in a 7-4 vote and signed into law by Mayor Ed Lee on Oct. 28. Chiu's legislative aide Judson True called the lawsuit “absurd.”

“It's no surprise that a company that facilitates some of the most egregious abuses of the Ellis Act and other housing laws is opposed to sensible regulations,” True said.

He added that the legislation is intended to protect San Francisco housing and ensure units are not turned into hotels.

The lawsuit came on the eve of the heated election battle for state Assembly between Chiu and Supervisor David Campos, who opposed the Airbnb legislation. Chiu has faced criticism for benefiting from hundreds of thousands of dollars contributed to bolster his run from Airbnb investors like tech investor Ron Conway, who is also the mayor's prominent backer.

City Attorney Dennis Herrera issued a statement hours after the lawsuit was filed calling it “a dubious legal theory” to suggest the 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,” Herrera said.

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