Vacation Rental Firm HomeAway Sues San Francisco Over “Airbnb Law”

A vacation-home rental website has sued San Francisco, claiming a new law making it legal for residents to rent out their homes online for short periods unfairly gives rivals such as Airbnb an advantage.

The lawsuit filed Monday by HomeAway says the law stymies competition and discriminates against both vacation hosts by requiring them to be city residents and vacation-website companies by mandating they collect the city's 14 percent hotel taxes, The San Francisco Chronicle reported.

San Francisco-based Airbnb started paying taxes after the Board of Supervisors passed the law in October, the newspaper reported. Mayor Ed Lee signed the legislation last week.

But HomeAway works as a classified-listing service while Airbnb acts as a middleman. The company says it isn't able to collect the hotel tax or know when homes are rented, according to the Chronicle.

Austin, Texas-based HomeAway is seeking an injunction to stop the city from enforcing the law before it goes into effect on Feb. 1, 2015.

Short-term rentals are illegal in San Francisco, but the city only loosely enforces the law.

City Attorney Dennis Herrera said he will fight the suit.

"I intend to vigorously defend a law that offers San Francisco residents reasonable flexibility to rent their homes on an occasional basis,'' he said in the statement. "San Francisco is well within its authority to ensure that scarce housing resources are used primarily for housing.''

HomeAway co-founder Carl Shepherd said in a statement that the law "stifles opportunity'' for other vacation-rental companies.

"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,'' Shepherd said.