Airbnb Sues Boston Over Restrictions on Short-Term Rentals

Airbnb is asking a federal court to keep the city of Boston from enforcing a new ordinance that would restrict the kinds of units property owners can offer for short-term rentals.

The company says the ordinance the Boston City Council approved in June violates a federal statute as well as the federal and state constitutions, and also offers what it considers a troubling precedent that other cities are likely to follow if it’s allowed to stand.

Airbnb, headquartered in San Francisco, claims its corporate free-speech rights would be violated by the city’s ordinance because it would regulate the editorial content of its web site. It also argues that the ordinance would put an undue burden on the company by forcing it to change the way it does business.

“This is a case about a city trying to conscript home-sharing platforms into enforcing regulations on the city’s behalf, in a manner that would thwart both federal and Massachusetts law,” Airbnb argues in a complaint filed Tuesday in U.S. District Court in Boston. “The City of Boston has enacted an Ordinance limiting short-term residential rentals by hosts. But it goes much further than that. The Ordinance also enlists home-sharing platforms like Airbnb into enforcing those limits under threat of draconian penalties, including $300-per-violation-per-day fines and complete banishment from doing business in Boston.”

The company notes that other cities in the United States have enacted regulations governing short-term rentals, but says those regulations aren’t like Boston’s.

“Airbnb believes that home-sharing may be lawfully regulated, and it has worked with dozens of cities to develop the tools they need to do so without violating federal or state law. Boston’s heavy-handed approach, however, crosses several clear legal lines and must be invalidated,” the company argues in court papers.

Airbnb is popular in Boston, where many hotels charge several hundred dollars a night.

The company says it currently has about 6,300 listings in Boston. “An average Boston host earns $8,600 per year from hosting on Airbnb, and many hosts say that the extra income earned from hosting has allowed them to stay in their homes,” the company says in court papers.

A spokesman for Boston Mayor Marty Walsh said Tuesday the city “cannot comment due to pending litigation.”

The Boston Globe first reported Airbnb’s lawsuit earlier Tuesday.

Walsh proposed the short-term-rentals restriction earlier this year in order to try to limit rising rents for dwellings in Boston. Walsh and Boston city councilors argue that many people are getting priced out of the city’s housing market because property owners prefer to rent to tourists and other visitors to the city for short periods of time at higher per-diem rates than they can get for long-term rentals to residents.

The ordinance aims to prohibit so-called “investor units” by restricting short-term rentals (defined as 28 days or less) to owner-occupied dwellings and units adjacent to owner-occupied dwellings. That means that a home owner could rent out his own home through Airbnb, and that the owner of up to a three-family house who lives there can rent out the other two apartments in the building through Airbnb.

Airbnb contends that Boston’s ordinance, which is scheduled to take effect January 1, 2019, violates the federal Communications Decency Act of 1996, which the company says protects online publishers from being responsible for what others write on their web sites. The company says it does not control what property owners who use the online service write about their properties, but that the city is trying to force the company to do just that.

“Airbnb is a realization of Congress’s goals. It is a classic intermediary: Airbnb operates an online platform that allows hosts and guests to find each other and arrange their own transactions for overnight accommodation. Hosts control the relevant content of their listings and publish them; hosts and guests alone, not Airbnb, decide whether and on what terms to enter into transactions. This brings Airbnb squarely within the protections of the [Communications Decency Act],” the company’s lawyers wrote in the complaint.

Airbnb’s complaint also notes that the city ordinance requires the company to turn over to the city data about property owners who list units for short-term rentals so city officials can determine if the units comply with the city ordinance. But that’s a violation of the company’s right to keep its data confidential under federal law, the company argues.

“This forced data disclosure is a tool for the City to impose penalties,” Airbnb’s complaint states.

Using Airbnb’s web site, renters and property owners make a deal quickly online based on the property owner’s description of the property (including photos), the price, the terms the owner sets, and the availability of the property for particular dates.

The company doesn’t charge dwelling owners up front for listing a property, but instead charges a fee to the landlord and to the renter at the time the transaction is completed.

The company claims Boston’s new ordinance would damage the way the company does business.

“Airbnb’s platform allows a rental transaction to be completed on the same website once the host and guest agree to it. But the Ordinance’s provisions regulating Booking Agents would require Airbnb to fundamentally change the operation and design of its website, monitor every listing prior to allowing a booking transaction, and remove or reject certain third-party advertisements prior to publication,” the company says in the complaint. “These requirements would force fundamental modifications to Airbnb’s intermediary service, introduce delays in the booking process, erode customer goodwill, and require Airbnb to expend significant financial and technical resources.”

The complaint requests an injunction to keep the city from enforcing the ordinance January 1 and a ruling declaring the ordinance invalid.

How Boston’s Short-Term Rentals Ordinance Came About

The Boston City Council approved the city’s short-term rentals ordinance June 13. Mayor Walsh signed it June 15.

It aims to eliminate short-term rentals in large buildings and in single-family and multi-family homes where the owner doesn’t live in the building. It creates a registry for property owners who want to rent their properties, so that city officials know whether their properties qualify.

In the run-up to the vote, Boston city councilors got hundreds of email messages and telephone calls from residents about short-term rentals. Some were in favor of it, but many said they were harmed by it.

Supporters of restricting short-term rentals say residents have been evicted from multi-family homes in Boston because the landlords turned their units into more profitable short-term rentals through Airbnb, and that short-term rentals have driven up house values beyond the reach of many long-term residents.

“We desperately need action to stem the flow of future units being sucked into the de facto hotel markets,” city councilor Michelle Wu said during the council meeting June 13.

But Wu, an at-large councilor who lives in Roslindale, also described a possible unintended consequence of the new ordinance – that short-term rental brokers might approach owners of two-family and three-family homes in the city neighborhoods away from downtown and offer incentives for turning their homes into short-term rentals.

Councilor Mark Ciommo, who represents Allston-Brighton, picked up on that point. He said the neighborhoods that form the core of Boston’s downtown have only 419 residential units, as opposed to almost 17,000 units in the outlying neighborhoods like his.

“Councilor Wu expressed one of my biggest fears, that there’s going to be agents out there contacting every owner occupant, trying to get them to list, they’ll do all the work. I don’t see how we get around that without having competition,” Ciommo said. “… The most affordable housing in our city is in the neighborhoods, in two- and three-families. We’re incentivizing a new business model without having any competition, any downtown availability.”

His solution was an amendment allowing up to 5 percent of units in investment-oriented residential buildings to be used for short-term rentals, on the theory that a 100-unit building downtown with five units set aside for Airbnb wouldn’t cause much harm to residents.

“Less impactful on everybody’s neighborhood, and creates some competition economically,” Ciommo said.

The amendment failed.

Earlier, an amendment from city councilor Matt O’Malley (who represents West Roxbury and Jamaica Plain, and parts of Roslindale and Roxbury) to cap at 120 a year the number of days a unit could be rented short term also failed. (The final vote was close, though – 6-7.)

Councilor Tim McCarthy, who represents Hyde Park and Roslindale, offered an amendment that would have allowed a renter who is away from home temporarily to rent out an apartment on a short-term basis, if the renter has the owner’s permission. That amendment also failed.

Councilor Kim Janey, a supporter of the ordinance, noted that short-term rentals help some of her constituents in Roxbury and the South End, even though there isn’t as much demand for them there as in some other parts of the city. She said she heard from elderly residents who use short-term rentals to help pay off a mortgage, from other residents who use the money to try to start a business, and even from residents who use the income from short-term rentals to offset the below-market-rate rent they voluntarily charge a long-term tenant.

Still, she argued that the overall effect from so-called “investor units” is bad.

“I think inaction is not an option, that we need to do something to reel this in,” Janey said. “I’m particularly grateful that we have addressed the investor units, and that we have eliminated the investor units. That was very important to me. It was also very important, though, that we would recognize, and provide some protection, to the small owner-occupants. … I’m glad that we’re moving forward in such a way that eliminates the investor units but still offers protection for the little guy.”

Councilor Ed Flynn, who represents South Boston and Chinatown (and is the son of former mayor Ray Flynn), said residents in Chinatown have been pushed out of their rental apartments by corporations who have turned their buildings into “essentially unregulated mini-hotels.”

“In the midst of our current affordable housing crisis, and concerns regarding our current housing stock, it has been my position that we should phase out investor units,” Flynn said. “… I support this ordinance and regulation of short-term rentals so we may ensure that areas like Chinatown remain a neighborhood of working-class immigrants. I want to ensure that immigrant workers and longtime residents will not be pushed out of Boston. I want to defend our communities from investor speculation and protect the fabric of our neighborhoods. Regulation of short-term rental is not anti-innovation.”

The City Council approved the short-term rentals ordinance 11-2, with councilors Frank Baker (who represents most of Dorchester and portions of South Boston and the South End) and Mark Ciommo against.

New Boston Post November 14, 2018