By Cory Scanlon

Imagine two scenarios. In the first, you live in a quiet residential community with easy access to your city’s center. Your next-door neighbor, whom you have known for years, regularly rents out his home to one or two tourists who respect the peaceful character of the neighborhood. In the second scenario, you lease a unit in an urban apartment building, and the unit next to you, whose owner you have never met, always has strangers coming and going who leave trash in the common areas and throw all-night parties. Your friends experience the same kinds of problems in their buildings, and your rent has steadily been rising over the past few years. In either scenario, your neighbor’s conduct might be considered illegal under the same short-term rental ordinance in your city simply because, in both scenarios, the property owner is conducting short-term rentals (STRs) for fewer than thirty days.

Cities throughout the country are battling the nuisances that sometimes accompany residential STRs in a number of ways. With the rise of internet-based home-sharing platforms, such as, property owners of all shapes and sizes have taken to the web to rent out their spare rooms or their whole homes to vacationers visiting their communities in order to make a little cash on the side, to keep up with the cost of living in some of the nation’s most expensive cities, or as a primary means of deriving income. The response of many cities, while attempting to address the valid concerns of their citizens, has challenged the limits of the Constitution. At what point must the state, through its municipal bodies, step in to regulate the transactions occurring between homeowners and short-term lodgers? At what point is the state’s regulation an interference with the rights of property owners? This Comment will seek to answer these questions by looking at cases from throughout the country, with a focus on the current legal battle between the City of Austin and STR advocates there.

As this Comment will show, cities have extensive authority to regulate STRs under their traditional zoning powers with a view to effective city planning, but such ordinances must avoid rising to the level of a regulatory taking or asserting flawed policy justifications. Cities can avoid the regulatory taking issue by recognizing pre-existing property rights. But STR ordinances may also be attacked if they are guided by hollow or misleading policies that do not promote the general welfare and do not clearly address the kind of behavior they seek to curtail. Part I of this Comment proposes three categories of STR use and gives a summary of how various cities in the United States have attempted to regulate the current STR phenomenon. Part II establishes how modern STR regulations may rise to the level of a regulatory taking requiring just compensation under the Fifth and Fourteenth Amendments to the Constitution by assessing the impact of a leading Texas appellate case deciding an STR dispute. In Part III, this Comment shows how STR laws describe the extent to which cities are allowed to define (1) the term “family,” (2) occupancy caps, and (3) categories of use. Part IV analyzes the merits of various police power justifications cities have used to validate STR regulation.

Download the full article (PDF) here.

Recommended Citation
Cory Scanlon, Re-zoning the Sharing Economy: Municipal Authority to Regulate Short-Term Rentals of Real Property, 70 SMU L. Rev. 563 (2017)