The judge's ruling tossing out HomeAway's suit against the City of San Francisco's short-term rental law may not be the end of the story. HomeAway could still be liable for collecting occupancy tax under the city's pre-existing ordinance.
A U.S. District Court judge threw out HomeAway’s lawsuit against the City of San Francisco’s new short-term rental law, although HomeAway has until February 26 to file an amended complaint.
Under existing San Francisco law, short-term rentals of fewer than 30 days are barred. The new law, which is slated to go into effect on February 1, creates an exception and permits permanent residents who occupy their primary residence for at least 275 days during the calendar year to offer short-term rentals.
Judge Joseph Spero, sitting in U.S. District Court for the Northern District of California, on January 27 granted the City of San Francisco’s motion to dismiss HomeAway’s complaint challenging the short-term rental law, and denied HomeAway request for a preliminary injunction to block the law’s implementation.
The judge’s ruling [embedded in full below] states that both HomeAway and the city now “agree that the [new] Ordinance imposes no new tax collection obligations” on HomeAway and other hosting platforms, although the pre-existing ordinance may impose the requirement that HomeAway collect transient occupancy tax on rentals.
As a section of the ruling states, “HomeAway’s Complaint Challenges the Wrong Ordinance.”
Since HomeAway states it primarily collects listings revenue from vacation rental owners — at least prior to implementing a commission model last year — and does not receive rent from tenants, HomeAway is not an “operator” and would not be required to collect the occupancy tax, the judge found.
The judge also found that HomeAway doesn’t have the standing to challenge the law since it does not own properties in San Francisco.
The City alleged that the new short-term rental law merely incorporates existing law and does not “extend the existing obligation to hosting platforms that are not already subject to it.”
HomeAway also argued that the new law’s provision that short-term rentals be limited to primary residents who own property in San Francisco hinders interstate commerce, but the City alleged that HomeAway lacked standing to make such an argument since it doesn’t own rental properties in the city, and the court agreed with the city.
Yesterday’s ruling may not be the end of the conflict because it is unclear whether HomeAway and other hosting platforms would be subject to collecting occupancy taxes for vacation rentals under San Francisco’s pre-existing law.
Carl Shepherd, HomeAway’s chief strategy and development officer, reacted to the ruling:
“We are pleased the district court ruled that HomeAway’s unique business model gives homeowners the freedom to control their own property, and clarifies that the “hosting platform” portion of the ordinance doesn’t impose any new tax collection obligations on HomeAway.
“To the extent that the City of San Francisco still intends to enforce the residency restriction in the short-term rental law, we believe such restrictions are unacceptable and shortsighted. In HomeAway’s 10-year history, we have seen fair and enforceable regulation benefit whole communities and San Francisco’s regulation is neither reasonable nor beneficial.
“While the district court’s comments at the hearing indicate that San Francisco’s short-term rental law is potentially discriminatory against non-residents and therefore unconstitutional; it also found that homeowners, rather than HomeAway, would need to sue to challenge the residency restriction. Therefore, it is now up to individual, non-resident property owners to fight for their right to rent. HomeAway remains committed to aid those with a home in San Francisco by providing resources to help them fight against the restrictions in this unconstitutional law.”
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Photo credit: A HomeAway vacation rental at Golden Gate Park in San Francisco. HomeAway