January 21, 2020
By Christina Sandefur
Good news is hard to come by for California property owners. But recently,
there’s been reason to be hopeful. Just last week, a California
trial court ruled that Del Mar, a tourist city famous for its beautiful
beaches and world-renowned horse-racing track, couldn’t ban short-term rentals because
city officials failed to follow proper procedure. This decision comes on the
heels of similar rulings against the coastal
cities of Santa Barbara and Pacific Grove, both of whom attempted to pass anti-home-sharing rules
without getting approval from the California Coastal
Commission.
A bit of background on the Del Mar situation: In May 2017, the city decided
to ban all short-term rentals—that is, all rentals of fewer than seven days—in residential
zones. But rather than doing this by actually voting to pass a new ordinance against
home-sharing, the city announced that, although short-term rentals are “part of
the fabric of Del Mar” and have lawfully operated there since before the city was
incorporated, it now interpreted its longstanding zoning regulations as having
prohibited home-sharing all along.
For many, this didn’t pass the laugh test. After all, Del Mar residents
have been renting out their homes overnight to visitors for longer than the city’s
40-year-old code has been in existence. And the city even temporarily grandfathered short-term rentals that had been
operating before April 2016, allowing them to continue operating unrestricted
until November 2019. That seems like an odd thing to do if home-sharing has always
been illegal.
Why wouldn’t the city just pass a new ordinance to outlaw short-term
rentals? When cities create or restrict land uses, their actions are subject to
the California Environmental Quality Act (CEQA), which requires state and local
agencies to analyze and mitigate the effects of regulations that could have a significant
environmental impact. Changes to zoning and land-use regulations are subject to
CEQA. But the City Council ignored that requirement.
A group of homeowners sued, arguing that city officials can’t take away
their right to peacefully rent their homes without going through the proper
processes. So the city argued that it could skip the environmental review
because it wasn’t passing a new regulation, but just restating
existing law. The court saw through that, holding that the city’s ban was
really new, and that outlawing home-sharing could have serious environmental
impacts, as more hotels would have to be built to accommodate visitors to the
coast. Therefore, the city must conduct a study to determine how its
anti-home-sharing ordinance would affect the environment—and how more targeted
regulations (that don’t ban all short-term rentals) might mitigate that impact.
This isn’t the first time cities have tried to skirt the rules in
outlawing home-sharing. Homeowners have been peacefully renting their homes to
tourists in historic Jerome, Arizona, for decades. Town officials even gave
them explicit permission to do so—before suddenly changing their minds in 2015 and
telling homeowners they would be charged with a crime if they continued using their homes
as short-term rentals. There, too, city leaders didn’t bother adopting a new
ordinance, but claimed it was “reinterpreting” an old ordinance. The reason?
Because Arizona law requires the government to pay property owners when new regulations
eliminate their right to use land. So by claiming that short-term rentals had
actually been forbidden all along, Jerome politicians were hoping to pretend no
new restriction had been adopted. (Jerome abandoned its scheme after homeowners sued and the state
legislature stepped in.)
These procedural rules might seem like small things, but they’re
important checks on local power. Local power is, after all, often wielded
against private property owners, who are frequently deprived of the protections
of our checks and balances system. Requiring cities to consider how their
regulations will affect homeowners, visitors, and the public at large is a step
forward in protecting people from unnecessary and often oppressive regulations.
Until cities learn to target bad actors and nuisances rather than punishing the
innocent by enacting across-the-board bans on home-sharing, they can continue
to expect more lawsuits from frustrated homeowners—and more courts admonishing
them to follow the law.
Christina
Sandefur is the Executive Vice President at the Goldwater Institute.
