Southern Hospitality Up for Debate?

April 16, 2019
by Heather Curry and Christina Sandefur

Home-sharing plays an important role in supporting Louisville’s vibrant tourist economy, including the city’s biggest event for visitors: the Kentucky Derby. Rentals on Airbnb alone brought in $3.5 million during the 2017 Kentucky Derby, as well as hundreds of thousands of dollars in tax revenue. Home-sharing residents are able to share their local knowledge and create tailored experiences for guests who are interested in learning about the city’s culture and history. Homeowners are able to use the additional income to help pay bills and mortgages, and the local economy benefits, too.

So why does the Louisville City Council want to restrict the ability of law-abiding homeowners to open their homes to overnight guests? Today, the Planning and Zoning Committee is considering a host of new regulations, including density limitations, onerous permitting processes, and outright prohibitions—none of which are aimed at bad actors or tied to actual nuisances.

The density limitation would require 600 feet between the property lines of short-term rentals; again, without any regard to whether an owner or guest has caused any problems. This action would arbitrarily and unfairly restrict the property rights of some residents, and may subject the city to legal liability. In California, the Goldwater Institute is defending responsible homeowners against the city of Pacific Grove’s rental caps and density limitations, which also bear no nexus to nuisances. Costly and time-consuming litigation is inevitable when homeowners are treated unequally under the law by way of such limitations. Instead, cities should recognize that law-abiding homeowners deserve to be treated equally regardless of the location of their property.

Finally, limiting one’s right to share only a primary residence is not only unfair and unnecessary—it may also violate the U.S. Constitution. After all, prohibiting a Louisville homeowner—or a person from another city or state who owns a home in Louisville—from renting out that home, simply because it is not his primary residence, is unconstitutional. By letting Louisville residents offer homes for rent, but forbidding non-residents who own property in Louisville from doing the same thing, the ordinance treats in-state and out-of-state persons differently, impermissibly benefitting the former and burdening the latter. 

For the remaining homeowners who are allowed to rent their homes, the process is daunting—and in some cases, insurmountable. To get a permit, homeowners must complete multiple forms, pay fees, and schedule public hearings that can take upwards of 72 days to complete! Of course, this high burden is hardest on those for whom home-sharing is an essential source of income. The Planning Commission Staff Report recommends that civil and criminal complaints be substantiated before an enforcement action can be taken against a short-term rental. So, then, should prospective home-sharers also be given the benefit of the doubt when seeking a permit to engage in lawful activity. An expedited process that allows homeowners to rent their homes while completing a simplified application would be fairer and more just.

Cities and towns are right to restrict nuisances, noise, and crime, and Louisville has already demonstrated its ability to respond to the concerns that can arise with home-sharing. Rather than punishing responsible homeowners, stifling property rights, and discouraging entrepreneurship, the city should utilize existing nuisance, parking, and noise ordinances to manage any limited issues that may come up.

Heather Curry is the Director of Strategic Engagement and Christina Sandefur is the Executive Vice President at the Goldwater Institute.