In the Sharing Economy, Is All Real Estate Still Local?

The City of Portland has an Airbnb problem. Its citizens want to use Airbnb to earn income on real estate investments, but the City has valid concerns about safety, tax collection, non-discrimination, and Airbnb's impact on the availability of affordable housing. To address this, Portland followed San Francisco's lead and adopted an ordinance allowing for short-term rentals, but only if the rental unit is registered with the city and meets other regulatory requirements, such as the owner carrying liability insurance. Airbnb has taken some steps to encourage compliance but, also like San Francisco, Portland has struggled with enforcement.

To address the enforcement problem, San Francisco enacted additional ordinances, including making it a misdemeanor to collect a fee for booking services (such as posting on Airbnb) for an unregistered unit. The city quickly issued over $1.1 million in fines. This prompted Airbnb to sue San Francisco and a few other cities with similar ordinances, alleging that the local ordinances were preempted by Section 230 of the Federal Communications Decency Act (CDA), which protects "interactive computer services" from liability for the content of its users' posts.

Originally conceived by Oregon's then-Congressman Ron Wyden and California Congressman Chris Cox and enacted in 1995, the CDA sought to spur the growth of the internet by protecting ISPs from libel claims, similar to protections granted newspaper and magazine publishers. Without Section 230 protections there would be no blogs, Amazon, eBay, Yelp, Facebook or Twitter as we know it, because without it, companies would have to monitor every single post for unlawful content. But in 1995, no one would have predicted the direct impact internet-based companies like Airbnb or Uber would have on local concerns like housing and transportation, the regulation of which has historically been the purview of local governments.

Airbnb's argument was that under Section 230 of the CDA, it could not be held liable for the content of posts, including the advertisement of units for rent by those who failed to register with the city, and any local regulations that imposed liability were preempted. San Francisco responded that Section 230 of the CDA was inapplicable because its ordinance didn't require Airbnb to monitor the content of posts, and didn't impose liability for that content; it just prohibited Airbnb from collecting a fee unless the users were registered with the city.

San Francisco won at the trial court level, blocking the preliminary injunction that Airbnb sought, and to the surprise of many, Airbnb chose to mostly concede to the city's demands rather than pursue an appeal. So the question of whether internet exceptionalism trumps local land use regulation will have to wait for another day. But the lesson is evident: as the line between online presence and traditional bricks and mortar continues to blur, it becomes ever more important for real estate and land use professionals to understand technology and the growth of the sharing economy.