A U.S. District Court judge ruled in the city of Santa Monica’s favor this week, writing websites HomeAway and Airbnb did not demonstrate they are likely to prevail on claims Santa Monica’s short-term rental ordinance violates the Coastal Act, the Communications Decency Act or the First Amendment.

“In the midst of a statewide housing crisis, (the) decision affirms that the City of Santa Monica can take reasonable steps to protect residential units from conversion into de facto hotels, while also allowing individuals to share their homes with guests for compensation in authorized circumstances,” said City Attorney Lane Dilg. “We applaud this important ruling.”

Santa Monica mandates property owners who want to open their homes to vacationers must be present during their stay and register with the city.

In the ruling, Judge Otis Wright denied a preliminary injunction to halt the enforcement of the ordinance while the case is still active. HomeAway and Airbnb have two weeks to appeal the decision and the Court is scheduled to hear arguments for the City’s motion to dismiss the lawsuit March 26. A spokesperson for Airbnb says the company will continue to fight the ordinance.

“Over the last two years Airbnb has sought to work with the City of Santa Monica on a solution that ensures middle-class families who want to visit the coast can find an affordable place to stay,” Charlie Urbancic said. “We strongly believe (the) ruling is wrong and inconsistent with the law, and we will be exploring all options moving forward.”

Santa Monica’s ordinance says sites like Airbnb should only complete booking transactions for properties listed on the City’s public registry. A recent city report estimated there were 950 apartments and homes listed on Airbnb during the peak tourism season, while only 187 home-shares are actually registered. Despite the threat of fines, Airbnb and hosts have collected over $31 million from legal and illegal rentals since the ordinance, according to the report. The City Attorney’s Office declined to comment on what the recent ruling means for current enforcement measures.

Attorneys for the vacation rental websites argue Santa Monica’s ordinance is preempted by the Coastal Act, which regulates access to California beaches. The City’s Land Use Plan does not address vacation rentals at all. The City argues short-term rentals have been banned for years, and, while restrictive, the short-term rental ordinance actually liberalized city policy by allowing home sharing.

“The Court finds this to be a close issue that would benefit from further evidence and briefing,” Wright said in his ruling. “Neither party presents evidence regarding the history of the City’s enforcement (or lack thereof) in relation to the so-called longstanding ban on vacation rentals.”

As to the Communications Decency Act, the court pointed to a recent decision in Airbnb v. San Francisco, where a judge ruled cities can enforce an ordinance that holds sites accountable for booking services for unregistered units.

“The City’s Ordinance does not penalize Plaintiff’s publishing activities; rather, it seeks to keep them from facilitating business transactions on their sites that violate the law,” Wright said.

Wright said the ordinance restricts conduct, not speech, and is thus not in violation of the First Amendment.

San Francisco settled with Airbnb and HomeAway last May, with the websites allowing only registered hosts by January of this year. The day the requirement kicked in, the number of Airbnbs in San Francisco fell by 55 percent, according to tracking by Host Compliance, a company that monitors vacation rentals.

AirBnb remains the cheapest way to stay in Santa Monica, with an average nightly rental rate of $163. When guest houses are removed from the equation, the average nightly rent is $92.

Kate Cagle

Senior reporter for the Santa Monica Daily Press