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?

City of Columbia considers short-term rental restrictions

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Several news sources are reporting that the City of Columbia, South Carolina, is considering imposing restrictions on short-term rentals such as those promoted by the online site Airbnb.

WLTX News 19 quoted City Councilman Howard Duvall last week: “To me, a non-owner-occupied residence that’s being rented out for less than 30 days is a hotel, and it needs to be in a commercial area.” Duvall told WLTX that he believes short-term rentals have a bad impact on neighborhoods because renters often come in for a few days for an event and they party, with loud music, in the middle of a residential area.

In a story on July 4, the Post and Courier reported that about 600 rentals are offered in Columbia neighborhoods, and some neighborhood representatives have complained of disruptions.

This report includes a statement that Duvall along with Councilmen Sam Davis and Will Brennan have drafted an ordinance for the Council to consider on July 20. Multiple opportunities for public input are planned.

Both stories report resistance to the idea. WLTX quoted the owner of a real estate business who said short-term rentals have become a part of life and a part of travel because millions of people like it and expect it when they come to a city.

The Post and Courier quoted Columbia Chamber of Commerce CEO Carl Blackstone who said some regulations of short-term rentals could be welcome, but an outright ban is a nonstarter in a time when we are trying to open back up from a pandemic. Blackstone said we need to be opening our arms and welcoming visitors anyway we can.

Other cities have imposed restrictions on short-term rentals. Duvall mentioned Asheville, Raleigh, Myrtle Beach, Greenville, Charleston, Beaufort and Summerville in his discussions with the Post and Courier.

In Charleston, he said, short-term rentals can only be operated as a part of the owner’s primary residence, with a maximum of four guests. Myrtle Beach doesn’t allow short-term rentals in some residential areas. Some cities have restricted special events and large gatherings.

What do you think? Should short-term residential rentals be routine in our neighborhoods or should we impose restrictions?