This situation raises a question, which I don't know if it has been adequately thought through. The host was concerned about "what neighbors/community" would think. Well on the one hand that may just be an excuse for discriminatory behavior/comments.
But on the other hand, consider something a little different, in the context of another culture...suppose a gay couple wanted to book in a listing in a country where a host could actually get into a dangerous situation with their community, if it became known that they allowed an openly gay couple to stay in their home. From our very tolerant and open minded Western First World armchair, we may pooh-pooh such a situation, but it's real for some hosts in some countries. They can face a dilemma.
This is one reason why IMHO non-discrimination policies should not apply to in-home hosts and/or in nations/places where such policies are not already standard practice. In the USA, non-discrimination laws are already standard practice and fit with our business climate. But not so in all nations.