San Francisco Mayor Ed Lee says the new ordinance will bring the "sharing economy" out of the shadows, whilst helping the city generate tax revenue.

"This is the first effort in the history of this space-sharing movement that we've been able to regulate," said Lee. "And it will also help us make sure that going forward we collect some good revenue for the city as well."

San Francisco Board of Supervisors President David Chiu, who authored the legislation, says it was written to make sure people renting out rooms in their home through sites like Airbnb, which is based in San Francisco, abide by existing city laws and regulations.

"Anyone who wants to engage in this will need to register with the city," said Chiu. "We'll need to know who you are and there will be many requirements around that registration. You'll need to get liability insurance, you'll have to pay your taxes, you'll have to abide by all sorts of health and safety rules, as well as rent control rules."

Adapting to change

San Francisco is now one of several popular tourist destinations around the world who have recently, either passed laws regulating home sharing networks, or who are now studying the issue. Portland, Oregon passed a law earlier this year that allows people to register with the city as a short-term home sharer.

In 2013, Amsterdam became the first city in the world to create a "private holiday rental" category for the part of its city code that deals with short-term lodging. The ordinance allows someone to rent out space for up to two months per year in a home they also occupy.

Meanwhile, the Catalonia regional government in Spain has announced it is considering new rules for home-sharing, in response to rising tensions in Barcelona between Internet-based home-sharing businesses and traditional hotels. London and Victoria in British Columbia, Canada are also developing policies to update their home stay laws.

Airbnb said in a statement: "Home sharing is here to stay, and policymakers are looking at old rules - some of which were drafted before the internet even existed - and enacting some commonsense regulations for home sharing."

Michelle Grant is Travel and Tourism Research Manager at Euromonitor, a global economics consultancy. She says local laws regulating home shares can both benefit and detract from the business models of companies like Airbnb.

"On the one hand, many more people may sign up to be hosts now they know it's legal," says Grant. "And a lengthy legislative battle has finally ended, which I'm sure is beneficial to the company."

However, Grant says, casual hosts "may be put off because you have the new bureaucratic requirements. Hosts must sign up with the city registry, pay a 50-dollar fee and take out liability insurance. On top of that Airbnb is going to collect a 14-percent occupancy tax from them."

Boon to home sharers

But Peter Kwan, who heads the group Home Sharers of San Francisco, says home-sharing is nothing new. What is new, he says, is the technology that now links travelers with people who want to rent them space in their homes.

"People have been having boarders in their homes ever since people started living in homes," says Kwan. "With technology comes a lot of social change and a lot of the laws on the books that deal with hotels need updating."

Kwan says Airbnb and other Internet-based room booking sites help take the uncertainty out of the process. He agrees with Euromonitor's Michelle Grant that having cities regulate them provides an extra layer of safety and legitimacy.

"Airbnb is very useful to people who may find it intimidating to take out advertisements and to keep track of the rental income and expenditures and booking dates and to help screen the people they're renting rooms to," said Kwan.

Supervisor David Chiu says the law will help the city cut down on underground rentals. He says many underground home sharers attempt to skirt tax laws and city building codes. Under the law, the city Planning Department must notify property owner and homeowner associations if a tenant or homeowner has applied to the city for a short-term rental permit. The law also requires primary residents to live in the home for at least nine months out of the year.

But critics of the legislation, like US Senator and former San Francisco Mayor Dianne Feinstein, say it threatens to commercialize residential neighbourhoods.

Board of Supervisors member John Avalos says the new ordinance could mean that long-term rental housing, which is in short supply in San Francisco, could lose out to more lucrative short-term holiday stays.

Income boost

Avalos supported a failed Board of Supervisors' amendment to the law that would have limited the amount of time that residents could rent out space in their homes to 90 days per year.

Backers of the law say 90 days would have been much too short a time to be of financial benefit to those renting out space in their homes. Many of the supporters say the extra income they get from sharing their homes helps them make ends meet in this notoriously expensive city.

"The income makes a huge difference in my retired standard of living," said Nancy Neiderhauser, a San Francisco pensioner who uses Airbnb to arrange short-term stays in her home. "It has been a life saver this year with medical expenses. It secures my ability to remain in my home and in San Francisco because I am spared depleting my savings so quickly."

Many people say tourists also get a unique opportunity to explore parts of the city that are outside of the usual tourist areas, which has the side benefit of bringing extra customers to local businesses.

Unpaid taxes?

Critics of the law also say it should have required Airbnb to pay $25 million in unpaid hotel taxes, which accumulated prior to the law going into effect.

"That $25 million could have gone to needed things like purchasing desperately needed ambulances," said Tom Temprano with the Harvey Milk Democratic Club. "We could pay our public school teachers; we could pay our nurses; we could build 50 units of affordable housing; we could also train 200 new police officers."

But David Chiu says there is nothing in the ordinance that precludes the city from going after unpaid taxes. He says the city will also now be able to collect millions in tax revenue.

Meanwhile, opponents in San Francisco have gathered enough signatures for a ballot initiative that they hope would strengthen laws against holiday rentals in neighborhoods zoned for residential use, and make the registry of Airbnb hosts public. They have until November 23 to submit their initiative.