By: Matt Unutzer

Sky-high rents are a defining feature of modern urban life. Among the many forces blamed for rising housing costs, one issue has drawn sustained regulatory attention: the conversion of long-term housing into short-term rentals (STRs) listed on platforms such as Airbnb and VRBO. Critics argue that when apartments and homes are diverted into the short-term market, overall housing supply shrinks, placing upward pressure on rents and home prices. In response, cities across the country have spent the last decade experimenting with new regulatory frameworks aimed at curbing the perceived housing impacts of STR proliferation. The following sections examine how Washington D.C., Santa Monica, and New York City regulate short-term rentals, and, in doing so, illustrate the boundaries of regulating online platforms.

Washington D.C.’s Host-Liability Model

Most cities regulating short-term rentals utilize a common approach: placing compliance obligations on individual property owners and enforcing violations through traditional municipal oversight. Washington D.C. exemplifies this default model.

Washington, D.C.’s short-term rental law requires hosts to register with the city and obtain a short-term rental license before offering a unit for rent. Hosts are generally limited to operating a single short-term rental associated with their primary residence. Operating without a license or offering an unregistered unit may result in civil penalties or license suspension.

Enforcement authority rests with the city’s Department of Consumer and Regulatory Affairs, which investigates violations through complaints, audits, and reviews of booking activity. The city bears responsibility for identifying noncompliant listings and linking them to individual hosts; for these activities, penalties are imposed directly on hosts who violate the law.

This regulatory model imposes limited duties on booking platforms. Platforms are not required to independently verify license status before allowing a listing to appear; further, these booking services may only be fined for processing a booking when the city has already identified the underlying listing as non-compliant and sent the platform notice. Platforms are required to submit periodic reports to the city identifying short-term rental transactions and associated host identity information to aid the city in identifying unlicensed STRs.

This host-based enforcement model places significant administrative demands on the city’s enforcement entity, requiring the city to identify noncompliant listings, trace them to individual operators, and pursue penalties. Furthermore, because unlawful listings may remain active until discovered, this approach does not guarantee the reduction in short-term rental activity that the regulatory framework seeks to achieve.

Santa Monica’s Platform-Liability Model

In response to the administrative burdens and enforcement limitations associated with a traditional host-based enforcement model, some cities have adopted regulatory frameworks that shift liability for unlicensed STR bookings upstream to the platforms themselves. Santa Monica represents one of the clearest examples of this model.

Santa Monica’s short-term rental ordinance requires hosts to obtain a city-issued license before offering a short-term rental and provides for a municipal registry of all licensed STR hosts. The ordinance makes it unlawful for a booking platform to complete a short-term rental transaction for any host that does not appear on the City’s registry, attaching civil fines for each such transaction.

In contrast to a host-based enforcement model, this regulatory framework has proved successful in realizing desired STR reductions. However, the imposition of fines on the platforms themselves poses the question of how far municipalities may go in regulating the online platforms which operate in their communities.

That question was addressed in HomeAway.com, Inc. v. City of Santa Monica, where short-term rental platforms Airbnb and HomeAway.com challenged the ordinance claiming immunity for fines under Section 230(c)(1) of the Communications Decency Act. Section 230(c)(1) provides online platform immunity for the content it hosts if posted by third parties. In so doing, it draws a line between platforms themselves and the third-party “publisher or speaker” of the content. In the platforms’ view, Santa Monica’s ordinance effectively established platform liability for the third-party listing content hosted on the platform.

The Ninth Circuit rejected this argument, holding that the ordinance did not impose liability for publishing or failing to remove third-party content, but instead regulated the platforms’ own commercial conduct by imposing fees when the platforms completed booking transactions for short-term rentals of unregistered properties.

While the courts have upheld Santa Monica’s use of platform liability as a lawful enforcement mechanism, the platform-liability model does not substantially reduce the administrative burden borne by the city. Enforcement still requires the city to identify individual non-compliant transactions and pursue penalties against the platforms that facilitated them.

New York City’s Affirmative Duty to Verify Model

The most aggressive iteration of STR regulation laws is found in New York City’s Local Law 18. Local Law 18, enacted on January 9th, 2022, establishes an automated STR registration verification system. First, an STR host is required to register with the city, which assigns them an STR registration number. Second, the ordinance provides for an electronic verification portal where platforms must submit a prospective host’s STR registration number and receive a confirmation code prior to processing a booking with that host. The ordinance also includes a mandatory reporting requirement directing STR platforms to submit an inventory of all STR transactions completed each month and certify that they received a confirmation code from the city’s verification portal prior to each booking.

This innovative regulatory framework automates compliance, ensuring the desired reduction in STRs is realized while minimizing the administrative burden of enforcement. However, this verification-based model has not yet been directly evaluated under Section 230. Curiously, Airbnb has not chosen to challenge the law under Section 230 and instead has largely complied with the regulatory regime, focusing its efforts on lobbying instead. Perhaps the platform has “read the tea leaves” of past lawsuits, such as the aforementioned Santa Monica suit, and determined that when liability is tied to a commercial transaction, platforms cannot claim section 230 immunity.

There are, however, material differences between the two frameworks. In Santa Monica, liability attaches when a platform completes a booking for a host who is not registered in the City’s STR registry. In New York City, by contrast, liability attaches because the platform failed to perform a mandated verification step prior to the booking, regardless of the host’s registration status. It remains an open question whether this structural shift––which ties liability to a platform’s screening process rather than underlying host noncompliance––moves closer to treating platforms as “publishers” in a manner that implicates Section 230’s platform-liability protections.

Conclusion

The ultimate impact of short-term rentals on local housing supply remains unsettled. What is clear, however, is that cities across the country are responding to growing concerns about the effects of STR platforms like Airbnb on housing supply. The result is an ongoing, nationwide case study on how local governments can regulate both short-term rentals and the online platforms that facilitate them. As municipalities continue to experiment with regulatory regimes, the legal boundaries emerging from these efforts may influence the future of platform regulation far beyond the housing context.

#ShortTermRentals #HousingPolicy #PlatformRegulation