City of Santa Monica Announces Settlement with AIRBNB in Civil Lawsuit

The City of Santa Monica just announced a settlement with AIRBNB. AIRBNB is a website and smart phone App that permits tenants to sublease their homes as temporary vacation rentals. Demand for rentals and hotel rooms in Santa Monica is extremely strong.

A rent controlled apartment in Santa Monica might rent for as little as $1500 a month. An AIRBNB rental for that same one bedroom, would net the tenant $120 a day, or $3600 over an entire month, netting the tenant $2000 or so.

By comparison, a single hotel room at one of Santa Monica's plethora of luxury hotels is expensive. At the Proper Hotel on 7th Street and Wilshire, rooms start around $750 a night, including hotel taxes of 22%.

"There are 351 licensed home shares in Santa Monica," reports Constance Farrell, City of Santa Monica information officer. She wrote the City press release, which says in part:

“After maintaining a multi-decade prohibition against short-term rentals in residential districts, in 2015, the City eased this prohibition by authorizing a form of short-term rentals known as home-sharing, which permits City residents who obtain a City license to host visitors for compensation for a period of less than 31 days, as long as the resident and visitor are both present in the home.

“Un-hosted short-term rentals of residential housing, known as vacation rentals, remain unlawful in Santa Monica.

“This legislation, as amended in 2017 and 2019, strikes an important balance by enabling current and prospective residents to supplement income through home-sharing to meet increased rents and housing prices, while ensuring that Santa Monica's housing units, and particularly affordable units, will not be surreptitiously or openly converted into de facto hotels. “

“As amended in 2017, this legislation also imposes regulations on businesses, such as Airbnb, Inc. and HomeAway.com, that engage in booking transactions for short-term rentals of housing units for profit. The City's ordinance prohibits such businesses from providing and collecting a fee for booking services for unlicensed (and therefore unlawful) short-term rentals.”

“The settlement comes after the U.S. Court of Appeals for the Ninth Circuit upheld the City's Home-Sharing Ordinance, agreeing with the City Attorney's Office in rejecting claims by Airbnb and Homeaway.com that the Ordinance ran afoul of the Communications Decency Act of 1996 and the First Amendment. “

The entire press release reads:

Settlement with Airbnb Guarantees Compliance with Home-Sharing Ordinance

SANTA MONICA, Calif. - The City of Santa Monica and Airbnb, Inc. today signed a settlement agreement to ensure home-sharing listings on the platform are compliant with the City's Home-Sharing Ordinance. The agreement requires all listings in Santa Monica to be for home-share properties registered with the City and provides assurances against illegal listings. The terms outlined in the agreement are expected to dramatically reduce illegal home sharing and protect housing for residents.

"We now can better protect real permanent homes, especially our affordable rent-controlled apartments, from being used as de facto hotel rooms, displacing our neighbors," said Councilmember Kevin McKeown. "This hard-earned settlement is a win for affordable housing, a win for our neighborhoods, and a win for residents who welcome guests through legal home sharing."

The agreement creates a clear path for registered home shares to use the platform, prevents hosts from listing multiple properties, and includes a per booked night fee to be collected and paid by Airbnb. Details of the agreement, include:

Airbnb will require all listings to have a City license number. License numbers are provided to hosts who register to home share and acquire a business permit and license.

Airbnb will only allow each host to list one home or dwelling with no more than two listings per residence (one home may have two rooms available, for example). Airbnb will remove listings that are in violation of this requirement after January 20, 2020.

Airbnb will collect and pay the City $2 for each night booked at any listing in Santa Monica.

Airbnb will provide regular reports to the City to ensure compliance and to support City enforcement efforts.

"We have fervently defended our ordinance and are pleased to reach a settlement with Airbnb that creates a workable system that aligns with our goal of protecting the City's housing supply," said City Attorney Lane Dilg. "This agreement with Airbnb will make the City's enforcement efforts less costly and more effective; most importantly, it will preserve housing for our residents. This is a positive outcome for Santa Monica.

Legal home sharing in Santa Monica is defined as stays of less than 31 days where the host remains on site. There are currently 351 registered home-shares in the city with Airbnb accounting for a large majority of home share listings.

The settlement comes after the U.S. Court of Appeals for the Ninth Circuit upheld the City's Home-Sharing Ordinance, agreeing with the City Attorney's Office in rejecting claims by Airbnb and Homeaway.com that the Ordinance ran afoul of the Communications Decency Act of 1996 and the First Amendment.

Home-Sharing in Santa Monica

After maintaining a multi-decade prohibition against short-term rentals in residential districts, in 2015, the City eased this prohibition by authorizing a form of short-term rentals known as home-sharing, which permits City residents who obtain a City license to host visitors for compensation for a period of less than 31 days, as long as the resident and visitor are both present in the home. Un-hosted short-term rentals of residential housing, known as vacation rentals, remain unlawful in Santa Monica. This legislation, as amended in 2017 and 2019, strikes an important balance by enabling current and prospective residents to supplement income through home-sharing to meet increased rents and housing prices, while ensuring that Santa Monica's housing units, and particularly affordable units, will not be surreptitiously or openly converted into de facto hotels.  

As amended in 2017, this legislation also imposes regulations on businesses, such as Airbnb, Inc. and HomeAway.com, that engage in booking transactions for short-term rentals of housing units for profit. The City's ordinance prohibits such businesses from providing and collecting a fee for booking services for unlicensed (and therefore unlawful) short-term rentals.

The City's Home-Sharing Ordinance has been upheld in numerous published judicial decisions. Following initial adoption of the City's Home-Sharing Ordinance, Airbnb, Inc. and Homeaway.com argued that the Ordinance required online platforms to monitor the content of third-party listings on their sites and remove listings for unlicensed properties and therefore ran afoul of the Communications Decency Act and the First Amendment. These arguments were rejected by the U.S. Court of Appeals in an opinion that was published on March 13, 2019, and reaffirmed on August 16, 2019; the date by which a party could petition for U.S. Supreme Court review of this decision has now passed. On October 3, 2019, the U.S. Court of Appeals for the Ninth Circuit rejected an additional challenge to the Ordinance brought by short-term rental hosts.

For more information on the City's Home-Sharing Ordinance or to apply for a Home-Sharing License, visit www.smgov.net/homeshare.