Fifth Circuit addresses short-term rental challenge

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This blog has previously discussed challenges by various cities, including cities in South Carolina, to short-term rentals in residential areas.

Vrbo and Airbnb are two go-to websites to find interesting short-term rentals in vacation locations. Sometimes a cabin or house seems much more appropriate and fun than a hotel room for a family get-away. Having a kitchen and room for dining is often a plus.

Arguments against such rentals often focus on noise and parking problems in otherwise quiet residential subdivisions.

Rules vary greatly in the cabins and houses we’ve rented, but a common theme seems to be that parties are not allowed. I’ve also seen limits on the number of cars that can be accommodated and, of course, the number of people permitted. Pets may or may not be allowed.

The Fifth Circuit Court of Appeals recently addressed such a challenge in Hignell-Stark v. City of New Orleans, 46 F. 4th 317 (August 22, 2022). Thanks to Professor Dale Whitman of the University of Missouri at Kansas City Law School via the Dirt Listserv for information on this case.

An ordinance in the City of New Orleans required an owner to be a resident of the city to obtain a license to become a landlord allowing short-term rentals. When the plaintiffs challenged this ordinance using a “takings” theory, the Fifth Circuit held that theory to be inapplicable because permission to make short-term rentals of a residential unit is not a property interest. It is instead, according to the Court, a privilege.

The plaintiffs also argued that the ordinance was an undue burden on interstate commerce, and the Court agreed, stating that an ordinance that discriminates against interstate commerce is per se invalid unless there are no available alternative methods for enforcing the city’s legitimate policy goals. The ordinance in question was a blanket prohibition against out-of-state property owners’ participation in the short-term rental market. The Court pointed out that the ordinance doesn’t just make it more difficult for non-residents to compete in the market for short-term rentals in residential neighborhoods; it forbids them from participating altogether.

The Court pointed to alternative methods for achieving the city’s legitimate goals of preventing nuisances, promoting affordable housing, and protecting neighborhoods’ residential character. More aggressive enforcement of nuisance laws, increased penalties for nuisance violations, increased taxes on short-term rentals, requiring an operator remain on the property during night hours, and capping the number of short-term rentals licenses in particular zoning district might be alternatives.

The ordinance was held unconstitutional and void because the city’s objectives could be addressed in other ways that did not burden interstate commerce.

What do you think? Would you be comfortable with short-term rentals in your neighborhood?

Brad Pitt foundation sued for faulty post-Katrina construction

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Charitable intent to replace Ninth Ward housing results in extensive legal battles

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South Carolinians are no strangers to the extensive destruction caused by hurricanes and floods. Our friends in Conway, Nichols and surrounding areas are in the process of cleaning up from the most recent disaster that hit our state in October. And we look on with empathy as our friends in other parts of the world face similar disasters. I lived in Panama City, Florida during my middle and high school years, and the destruction my friends there are facing at this very moment as a result of Hurricane Michael is unimaginable.

It does not go unnoticed when a celebrity attempts to make a difference in the face of natural disasters. The Make it Right Foundation is a non-profit founded by actor Brad Pitt in 2007 to build environmental friendly homes in New Orleans’ Ninth Ward following the destruction caused by Hurricane Katrina.

The homes were intended to be storm-safe, certifiably green, energy efficient and affordable. The original goal was to build 150 homes in the area hit hardest by Katrina. The homes were available at prices around $150,000 to residents who received resettlement financing, government grants and donations from the foundation. Brad Pitt was apparently proud of the construction, calling the area an oasis of color and solar panels.

More than ten years and $26 million later, construction has stopped 40 houses shy of the goal because of alleged faulty construction including leaky roofs, faulty HVAC systems, sagging porches and rotting and mildewing wood. Residents have reported headaches and illnesses. A New Orleans attorney has brought a class action lawsuit against the foundation, alleging that the construction is substandard and the homes are deteriorating at a rapid pace.

Related claims have been filed by the foundation against the makers of an experimental wood product called TimberSIL which didn’t fare well in the hot and humid south Louisiana environment as well as architects who may be responsible for failure to property waterproof the structures. Insufficiently sloping roofs may be partially to blame.

The original suit was brought in Orleans Parish Civil District Court but has been removed recently to the United States District Court for the Eastern District of Louisiana.

Despite the good intentions of Brad Pitt and his foundation, it appears the lawsuits related to these Ninth Ward homes may linger for years.