Short-term residential rental platforms VRBO and HomeAway are in violation of San Francisco's residential hotel conversion ordinance and unfair competition law, alleges a lawsuit filed Monday by the Housing Rights Committee of San Francisco and two city tenants.
Among other charges, the class-action lawsuit alleges that Austin, TX-based VRBO and its holding company HomeAway are converting residential units into tourist hotels, have removed rent-controlled apartments, caused rents to rise, and “significantly contributed to the housing shortage in San Francisco.” The complaint also alleges that the companies violate the unfair competition law by failing to follow the proper steps to run a business and pose a public nuisance by operating in residential-zoned locations and disrupting longtime tenants.
The nonprofit housing committee and tenants Sansanee Saejear and Thomas Wong have filed the lawsuit through Hooshmand Law Group, the same firm that previously sued short-term rental competitor Airbnb, and said they intend to follow suit against similar online services.
“This has to stop,” said Mark Hooshmand, a partner at the firm, of short-term rental activity. “The continued, dramatic removal of units for people to live in San Francisco has to stop.”
The legal action comes a day after The City's Short-Term Residential Rental Ordinance legalizing home rentals for periods of less than 30 days went into effect. Hooshmand said the new legislation allowing property owners or tenants to rent space short-term if they meet specific criteria will not rectify the various allegations against VRBO and HomeAway.
The new legislation, according to the committee's Executive Director Sara Shortt, does not include a strong enforcement mechanism and “actually gives us all the more resolve to put the brakes – in this case through litigation – because the new rules are not going to adequately protect tenants from displacement due to the short-term rentals industry.”
The Hooshmand Law Group in September sued Airbnb, a popular San Francisco-based company, regarding the legality of its short-term rentals, and plans to add broader causes of action to that case. The firm, which first sued the Sheldon Hotel for suspected violations of the rental ordinance, seeks to take legal action against other companies that actively participate in short-term rentals or facilitate them.
The lawsuit filed Monday cites a complaint that HomeAway filed against San Francisco in November, claiming that it is unconstitutional to restrict San Francisco residents who do not live in The City full-time from engaging in short-term rentals and that the ordinance is tailored to fit Airbnb's business model. A federal judge last Wednesday dismissed that lawsuit while allowing HomeAway customers to sue.
“As such,” the Hooshmand complaint states, “defendants are informed of the current and proposed ordinances surrounding short term rentals and the impropriety of the short-term rentals but they continue to offer these short-term rentals and to conduct business in San Francisco.”
Carl Sheperd, HomeAway's co-founder and chief strategy officer, said his company's legal counsel, attorney Michael Simons, advised against commenting on the lawsuit by Hooshmand's firm. HomeAway currently lists 1,230 properties in San Francisco and the inventory on VRBO is similar, according to the company.
Supervisor David Campos, who voted against the ordinance legalizing short-term rentals, said lawsuits like those filed by Hooshmand are “inevitable because the law is creating some real problems and I think that people have no recourse other than to file a legal claim.”