The Goldwater Institute has filed a friend of the court brief in support of property owners who have gone to federal court to challenge a city ordinance in Fayetteville, Ark., that unconstitutionally discriminates against out-of-state residents who want to rent their property online. Although the U.S. Constitution forbids local governments from imposing regulations on out-of-staters that don’t apply equally to locals, the Fayetteville ordinance makes it virtually impossible for people in other states to offer their Fayetteville property as short-term rentals. And as we argue in our brief, that’s not only illegal, it’s also not going to make things any better for Fayetteville residents looking for places to live.
The case is just the latest in a series of clashes between property owners who want to offer their homes on platforms like Airbnb and VRBO, and politicians who want to scapegoat these property owners for the high housing costs in their communities. The real reason for high housing costs is the failure of local officials to allow construction of new homes. But political leaders prefer to blame property owners instead—and in this case, to prevent the owners from renting out their homes as they wish, on the theory that somehow this will make housing more affordable.
To simplify a complicated ordinance, Fayetteville requires property owners to reside in a house for nine months of the year in order to rent it out for the other three months. This requirement applies to both in- and out-of-state owners—but of course that means that where an in-state owner can rent out the house he or she lives in, the out-of-state owner is required to find a tenant who’s willing to reside in the house for just nine months and then leave for the other three—which is practically impossible. In other words, the Fayetteville rule is made to look evenhanded, but in reality imposes different burdens on in-state and out-of-state owners.
That’s unconstitutional. The U.S. Supreme Court has made clear many times that local governments can’t force out-of-staters to make a contract with an in-state resident as a condition of doing business. For example, in a case called Granholm v. Heald, Michigan banned the shipment of wine from other states, but provided an exception that allowed out-of-state wineries to ship directly to a local liquor store. The U.S. Supreme Court said that violated the constitutional ban on inter-state discrimination, because it forced wineries in other states to make a deal with a Michigan company in order to run their businesses. The same rule applies here.
But there’s a bigger reason the Fayetteville ordinance makes no sense: short-term renting is a perfectly legitimate and beneficial use of property—one that not only helps property owners to maintain their homes and improve their neighborhoods, but which also benefits local economies by bringing travelers into communities where they patronize local businesses and restaurants. To blame out-of-state landowners for the high cost of housing—rather than face up to the government’s own blame for failing to permit new home construction—means cutting off these important economic opportunities for local companies and homeowners.
The Goldwater Institute has championed home-sharing for years, even drafting the nation’s first law to protect home-sharers. You can learn more about our work here and read our Arkansas brief here.
Timothy Sandefur is the Vice President for Legal Affairs at the Goldwater Institute.
