Elizabeth Weise

USATODAY

SAN FRANCISCO — Airbnb and another home-sharing site settled what could be a game-changing suit with the city of San Francisco on Monday, agreeing to automatically register all hosts with the city.

The unanswered question is whether this will substantially cut back on the number of short-term rental spaces available in the city and by extension nationally, as other cities consider following San Francisco's lead. That could threaten the business model on which the sites are founded.

San Francisco estimates that more than 50% of current Airbnb listings in the city aren't eligible to be registered and thus would need to stop hosting visitors unless they can comply. And many may not be able to.

"Through our investigatory hearings, we have found that the majority of Airbnb listings are illegal because they are renting out entire buildings or they’re not actually residences," said Aaron Peskin, a member of the city's Board of Supervisors.

The Supervisors are expected to vote to endorse the settlement, which begins a 240-day countdown to phase in the registration process. That could mean the available supply of Airbnb and other short-term rental spaces could shrink dramatically in 2018.

“I don’t think it’s a secret to anybody that there were a lot of folks who were gaming the system and violating the law – now the platforms will be responsible for the shifty operators,” said city attorney Dennis Herrera.

Airbnb says it's confident that its hosts will be able to comply with the newly streamlined registration process announced Monday.

The new system will “significantly reduce the friction” for hosts to register, said Airbnb’s chief of global policy Chris Lehane. The company is in the process of creating similar “pass-through registration” programs in Chicago, Denver and New Orleans, he said.

San Francisco, the birthplace of Airbnb, is being closely watched by other cities nationwide. Both Santa Monica and Los Angeles are considering adopting rules along the lines of San Francisco’s, said Dale Carlson, spokesperson for Sharebetter SF, a business and labor group that has lobbied against illegal home sharing.

Airbnb's home city of San Francisco enacted rules in 2016 requiring that all hosts for short-term rentals must obtain a business license and register with the city. Other rules required that hosts could only rent out their permanent residence and no one was allowed to rent out more than one unit. Renters and condo owners needed permission from their landlords or condo association.

Airbnb and HomeAway sued the city over the rules but ended their legal challenge Monday. Under the agreement, both sites will allow their hosts to register with the city through their platforms, making it easier and more efficient for them to comply.

The elephant in the room is how many listings will actually be able to comply with the rules.

There are currently 2,100 registered short-term rental hosts in San Francisco but more than 8,000 listings for San Francisco on Airbnb, according to the city's Office of Short Term Rentals.

"This is a big deal, it’s a big deterrent if other cities follow suit. But Airbnb isn’t dead, it certainly has more to its business model,” said Andra Ghent a professor of real estate and urban land economics at the University of Wisconsin-Madison.

Airbnb and HomeAway could also get dinged if their hosts don't follow the cities rules. Platforms that provide booking services and receive a fee for the booking could be subject to fines of up to $1,000 per day for each illegal booking transaction under the rules. They would be required to cancel future stays and deactivate listings after receiving notice from the city of an invalid registration.

HomeAway, an Austin, Texas-based vacation rental marketplace, said it was pleased with the agreement.

“We look forward to continuing to work with the city on reasonable regulations for vacation rentals that balance the needs of communities with our owners’ rights to rent their properties,” said Philip Minardi, the company’s director of policy communications.

“This is a turning point when it comes to enforcement,” Herrera said. “This will help prevent our precious housing stock from being illegally turned into de facto hotels."

Peter Kwan, a five-year Airbnb host, thinks the process will end up resulting in more listings.

“It may reduce the number in the short term, but in the long term the certainty and clarity may encourage people to get into short-term rentals."

Kwan, who is co-chair of the HomeSharers Democratic Club of San Francisco, says many would-be hosts have been scared away because of the political controversy around hosting in San Francisco.

"Hopefully with this agreement that will be removed, as people see there’s now a clear process with the city,” said

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