It should come as no surprise that governments struggle to regulate the disruptive nature of the “sharing economy.” Lately, this struggle has resulted in increasingly burdensome regulations on property owners renting their property short-term, and on the websites like Airbnb and VRBO that provide a platform to list those properties for rent. Two recent examples from New York and San Francisco highlight the unconstitutional ways in which some cities are approaching the perceived “problem” of property owners exercising their property rights and right to earn a living.
Earlier this month, the New York state Legislature passed a bill that prohibits any advertising of entire-home or apartment short-term rentals. Unable to enforce another misguided law that prohibits renting property short-term, New York apparently decided to double down and pass this blatant content-based speech restriction. But the government can’t just single out speech it doesn’t like for censorship. So long as the advertisements are truthful and not misleading, New York cannot ban them unless the law withstands strict scrutiny.
Proponents of the bill claim the law is necessary to curb a lack of housing availability and high rents in New York City. But there is no definitive data supporting the proposition that short-term rentals have a significant impact on housing availability or costs. To the contrary, low availability and high rent are the completely predictable result of New York implementing rent control and restraining increases in housing supply. Alas, trying to solve a government created problem with a speech restriction that cannot withstand scrutiny under the Constitution is not the proper way to respond.
Similarly, San Francisco stringently regulates short-term rentals and requires all short-term rental property owners to register with the San Francisco Office of Short-Term Rentals. Displeased that only around 1,650 of the estimated 9,000 properties subject to the ordinance had registered in the year-plus since the registry went into effect, San Francisco passed a new law that punishes internet companies like Airbnb and VRBO for allowing owners of unregistered properties to use their site to list the property. Despite the numerous complaints that the City’s registry is overly complicated and difficult to navigate–resulting in the low number of registrations–the City instead chose to fine the websites $1,000 for every unregistered property listing.
There are a number of legal problems with this latest ordinance, including the unconstitutional content-based speech restrictions. The ordinance singles out one type of advertisement–short-term rental listings that an advertising platform cannot verify are registered with the city–and punishes the platform for publishing it. This will likely result in significant chilling of speech, and ignores less-restrictive alternatives like fixing the registration system to make it easier for property owners to register, or focusing on bringing the actual property owners into compliance with the registration law.
Governments must stop flouting the Constitution if they insist on tightly regulating short-term rentals instead of letting existing laws and private market mechanisms operate. PLF will monitor these and similar situations for opportunities to remind regulators of their constitutional limits.