News

Short-Term Rental Ordinances

by | Nov 7, 2022 | Business Litigation Update

Conflicts Between the Courts / No One-Size-Fits-All Judicial View.

Short Term Rentals (STRs) have exploded in popularity, with services such as Airbnb and VRBO leading the way. We have all likely used an STR for our personal or business travel accommodations, and many people have jumped in to try to rent their properties for a profit. There are also reports of private equity groups buying properties for the exclusive purpose of renting them via STR platforms.

As the popularity of STRs has skyrocketed, neighbors and HOAs have pushed back. They complain that, when there are too many properties being rented out on a short-term basis in a neighborhood, it can lead to issues with trash, noise, parking, parties, etc. This has led some cities and municipalities to attempt to regulate who can own and operate an STR within their jurisdiction.

New Orleans was one city to attempt to address this issue by limiting short-term rental licenses to owners who occupy the property as their primary residence, essentially limiting the right to market a property in New Orleans as an STR to only residents of the city. However, this summer, the federal Fifth Circuit Court of Appeals – which covers Texas, Louisiana, and Mississippi – struck down the New Orleans ordinance’s residency requirement as unconstitutional.

In contrast, another federal court of appeals, the Third Circuit Court of Appeals – which covers Pennsylvania, New Jersey, and Delaware – recently upheld an STR ordinance enacted by Jersey City, NJ. However, the Jersey City ordinance – unlike New Orleans’ – limited the number of days a property owner could rent a non-owner occupied property to 60 days per year, as opposed to an outright ban as was enacted by New Orleans.

These two conflicting rulings are a stark reminder that there is no one-size-fits-all judicial view concerning STR ordinances. As a result, the long-term legality of a particular jurisdiction’s STR regulations and the corresponding ability of property owners to offer their properties as STRs largely depends, at this point, on the jurisdiction where the property is located and the type of restrictions imposed on STRs by a municipality’s ordinance. For now, uncertainty reigns. Ultimately, the issues will likely be decided by the U.S. Supreme Court at some point in the future.

Given the current conflicting rulings by the Fifth Circuit and the Third Circuit, it is important for STR businesses and users, as well as property owners trying to rent their property via STR platforms, to stay informed about their particular jurisdiction’s rules and regulations, knowing that the situation could change in the near term.