Federal court rules Austin’s short-term rental rules unlawful

Senior U.S. District Judge David Alan Ezra on Tuesday issued a ruling that overturns Austin’s short-term rental ordinance adopted in 2016.

The plaintiffs, Robert Anding and his wife, Roberta, filed suit against the city after attempting to register one of their properties as a short-term rental. Because they did not occupy the property as their homestead, the city denied their application.

According to the city’s website, owners of short-term rentals (STRs) are required to obtain an operating license annually. The law applies to all properties, including rooms and guest houses, that are rented for fewer than 30 consecutive days.

Austin adopted rules in 2016 that clearly were designed to limit the number of short-term rental properties in the city. The fight between the city and various rental operators and agencies started at about the same time that STRs became commonplace. In its attempt to limit the number of short-term rentals within the city, Ezra ruled, the city violated the Andings’ constitutional rights.

According to the judgment, “the imposition of a homestead requirement for individuals who owned a Type 2 property prior to the 2016 revision of the STR ordinance is unconstitutionally retroactive.” The city has the right to appeal the judge’s ruling, and that will be up to City Council to decide.

Currently, the Austin Code Department is merging with the Development Services Department, with José Roig as director.

During Tuesday’s budget meeting, Mayor Pro Tem Paige Ellis said that one of her constituents has had considerable problems with a nearby short-term rental at night. Roig explained that code officers do not work after 11 p.m., so if anyone is going to respond to a complaint made late at night, it has to be a police officer. Ellis wanted to know if there would be any changes to how the department was handling such complaints. Roig said they were aware of the problem.

“This lawsuit certainly upends the Austin ordinance,” Matt Curtis, founder of the Smart City Policy Group, told the Austin Monitor on Wednesday. Curtis previously served as an aide to Mayor Lee Leffingwell, worked for a short-term rental company and now is an expert on how cities can write rules for short-term rentals without running afoul of the law.

The judgment, he noted, “clearly says that the distinction between different kinds of homeowners is not legal,” as set out in the 2016 ordinance. “And it really encourages the city to take another bite at the local rules. It seems the city will have to address the distinction between those two different types of property owners.”

Curtis also told the Monitor that, in his opinion, the ruling could reverberate in local governments across the country and force them to reconsider their own STR rules. For more than a decade, cities have struggled with how to create such rules, he said, and issues that originally dominated the discussions – such as noise, parking and trash – have been joined by concerns over affordable housing, taxes and safety.

Curtis said the city adopted an ordinance in 2013 that had a high rate of compliance but replaced it with the even more stringent 2016 ordinance. He said a number of large cities have failed in their attempts to craft ordinances that pass constitutional muster. However, he said that Galveston, Glynn County in Georgia and North Myrtle Beach in South Carolina, “all of which have more active STR inventory at any given time than Austin,” could show Austin how to rewrite its ordinance.

A city spokesperson said in a statement, “The City is disappointed with the ruling but hopes that the owners and guests of short-term rental properties will be respectful and considerate of the neighborhoods in which they are located. The City is committed to enforcing its nuisance regulations at short-term rental properties as needed.”

Photo by Billy Hathorn made available through a Creative Commons license.

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