Airbnb wins a battle in San Francisco but is still facing a war

Airbnb won a crucial battle this week in San Francisco, defeating a hotly contested measure that would have imposed new restrictions on its rapidly growing business helping travelers book rooms or whole homes for short stays.

But the seven-year-old online powerhouse, valued at $25 billion, still faces a larger, coast-to-coast war over proposals to more tightly regulate its operations through a patchwork of local laws.

The explosion of Airbnb and similar websites has prompted a fierce backlash in many communities — especially those with steep rents and tourist allure. City officials have struggled to balance the services' booming popularity with concerns that residential neighborhoods are being disrupted and sorely needed housing is being lost to vacation rentals.

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Governments have tried to impose new restrictions on how often owners may rent their properties. Critics say such laws have been thwarted, in part, by lack of access to information on the rental activity — data that Airbnb and other companies have been reluctant to share.

The San Francisco ballot measure was especially notable because housing activists, hotel worker unions and other critics sought to hold the companies responsible and impose criminal and financial penalties if the firms listed rentals that failed to comply with proposed restrictions.

Airbnb contributed more than $8.5 million to defeat the measure, Proposition F, heavily outspending its backers in the hotel workers' union and the hotel industry. It sought to counter accusations it was worsening the overheated San Francisco housing market, arguing the service offers an economic lifeline to middle class homeowners trying to stay afloat.

At a Wednesday press conference, a top Airbnb executive said the company plans to build on its success in the Bay Area, where it relied on a "people-to-people voting bloc" of hosts, guests and supporters that mobilized to knock on hundreds of thousands of doors in the run-up to Tuesday's election. In a sign that the company is girding for more battles, Airbnb global policy head Chris Lehane said that the company will help develop "homesharing guilds" in 100 new cities around the world.

"We're going to build on the momentum coming out of San Francisco," Lehane told reporters Wednesday.

Critics say they aren't giving up either. Holding the Web-based short-term lodging companies responsible "goes to the heart of their business model – which is to list anything and everything, regardless of whether it's legal, regardless of whether it's registered," said Dale Carlson, cofounder of ShareBetter SF, which championed the Yes on F campaign. "We'll go back to the ballot again."

He predicted similar political campaigns will spread well beyond San Francisco. "Airbnb isn't going to be looking at spending $10 million if it has to fend off these ballot measures in eight, nine, 10 cities at a time," he said.

Had Proposition F passed, it would have required platforms like Airbnb to regularly report to the city on how often units were rented. It also would have limited the number of days a unit could be offered to travelers annually, and allowed neighbors to sue violators.

Airbnb said the measure would have done nothing to lessen the housing crisis in San Francisco, where the median rent for a one-bedroom apartment has hit $4,000 a month. It says most cities haven't tried to impose requirements and penalties on listing websites, which they said would be problematic because rental platforms collect different kinds of data from hosts.

Daniel Rockey, an attorney who represents other sharing economy companies, maintains the penalties in Proposition F would have violated a federal law that protects Internet firms. And the Internet Assn., which advocates for companies such as Airbnb and Facebook, said it would be unreasonable to require companies to keep up with a patchwork of regulations that could come from a proliferation of local laws affecting the short-term rental industry.

"It would set up the company to fail — and expose them to significant legal liability," said Robert Callahan, California executive director of the group.

But some analysts think more such local measures are sure to follow. "This is just one small, public taste of what Airbnb faces," said Sam Hamadeh, chief executive of PrivCo, a New York firm that does research on privately held companies. If more cities pursue laws targeting the online platforms, it could prove "financially ruinous" for the companies, he said.

"Instead of employing an army of software engineers, they could end up having to employ an army of attorneys worldwide," Hamadeh said.

Some cities have already sought to hold the listing websites accountable for illegal rentals. Santa Monica contends its new law allows it to cite online platforms for advertising any rentals banned under city regulations. Those rules bar owners from renting out their homes if they aren't there.

Citations have been issued starting at $75 each, but that may be too low to serve as an effective deterrent, said Salvador Valles, Santa Monica's assistant director for planning and community development. He said city staff may ask the City Council to increase the penalties next year.

"We could always turn to criminal prosecution," Valles added. "But we'd prefer not to do that."

Portland, Ore., has handed down more than $1 million in fines to several websites and filed a $2.5-million lawsuit against HomeAway.com, accusing it of violating city rules on such rentals. And in Washington, D.C., the local hotel workers union is backing a new proposal that would make it illegal for Airbnb and other websites to list rentals that do not prominently display a business license number.

As Los Angeles weighs additional regulations, critics argue that the online companies—not just hosts—must face consequences for listing illegal rentals. If not, "none of this is going to work," said Judith Goldman, one of the cofounders of Keep Neighborhoods First, an L.A. group concerned about what it sees as the commercialization of short-term rentals by investors and corporations.

In San Francisco, the city previously tried to control short-term rentals by requiring hosts to register. But only a small fraction have done so. Anand Singh, president of the hotel workers union Unite Here Local 2, argued that illegal rentals will continue unless the websites are held responsible.

"If Airbnb wanted to, they could make sure their platform was in compliance with the existing law," said Singh, who argues such rentals unfairly undercut hotel jobs. "They've chosen not to do that."

Lehane, the Airbnb official, said the company has been educating hosts and working with San Francisco officials to make the host registration process more efficient. "We, as a company, want to work with the city and other cities to be partners with them," he told reporters Wednesday.

Lehane described Airbnb as a firm that is here to stay, part of "the inexorable march of history."

"You're at the front end of what I think is a broader evolution in capitalism," he said.

Follow @LATimesEmily and @DavidZahniser for breaking news from Los Angeles City Hall.

emily.alpert@latimes.com

david.zahniser@latimes.com

Times staff writer Tracey Lien contributed to this report.

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