Airbnb and another short-term rental company, HomeAway, brought the lawsuit against San Francisco in June over a decision by the city’s Board of Supervisors to fine the companies $1,000 a day for every unregistered host on its service.
The board imposed the fines after it realized that hosts had not been complying with a cumbersome process passed in 2014 that asked them to register in person at a city office overseeing short-term rentals. Airbnb was so influential in the creation of the original rule that it was often referred to as the Airbnb law. Airbnb responded to the fines by suing the city.
David Campos, a former member of the San Francisco Board of Supervisors, said at a news conference announcing the settlement, “Three years ago, we said the law being passed, which was written by Airbnb, won’t work because there was no skin in the game in terms of enforcement.”
Under the settlement between the city and the companies, Airbnb and other services like HomeAway will collect data from people who rent their homes out for less than a month on their sites. San Francisco will use that information to vet and register hosts.
Companies like Airbnb will have to regularly provide the city with the data it needs to enforce local laws. The companies will also cancel reservations and deactivate listings if the city notifies them of an invalid registration.
The city also preserved its ability to hold companies like Airbnb accountable by fining them $1,000 per violation if they do not take down illegal listings.
“There are 2,100 registered hosts and about 8,000 listed. We don’t have exact numbers, but it’s not a secret that there are a lot of folks gaming the system and violating the law,” Dennis J. Herrera, the San Francisco city attorney, said.
Airbnb said the deal with San Francisco was the latest step in its plan to work with local governments on short-term rental legislation and tax collection. The company has come to similar agreements in New Orleans and Chicago.
“We want to work with cities as partners,” said Chris Lehane, the head of public policy at Airbnb. “We are appreciative of the work with the San Francisco city attorney’s office.” Mr. Lehane said the new system would likely be put into effect by 2018.
Mr. Lehane declined to say how settling outstanding legislation would affect the company’s ability to go public. He said complying with laws and working with local governments would allow Airbnb to “build the foundation” and make sure it was “getting the basics right.”
The settlement is contingent on the approval of the San Francisco Board of Supervisors, some of whom spoke favorably of the deal at a news conference hosted by Mr. Herrera.
Airbnb also said last week that it would allow the California Department of Fair Employment and Housing to conduct fair-housing tests on hosts in California. Under the agreement, state agents can pose as potential travelers to see whether a host complies with antidiscrimination and fair-housing laws.
“This is all part of a broader shift towards Airbnb taking on more regulatory responsibility,” Mr. Sundararajan said. “It’s also first steps, over time, toward governments trusting Airbnb to assume more responsibility for regulating their hosts.”