Life, Liberty, and the Pursuit of Home-Sharing

Operator:  Welcome to The Federalist Society's Practice Group Podcast. The following podcast, hosted by The Federalist Society's Environmental Law & Property Rights Practice Group, was recorded on Friday, November 2, 2018, during a live teleforum conference call held exclusively for Federalist Society members.     

 

Micah Wallen:  Welcome to The Federalist Society's teleforum conference call. This afternoon's topic is entitled Life, Liberty, and the Pursuit of Home-Sharing. My name is Micah Wallen, and I am the Assistant Director of Practice Groups at The Federalist Society.

 

      As always, please note that all expressions of opinion are those of the expert on today's call.

 

      Today we are fortunate to have with us Christina Sandefur, who is the Executive Vice President of the Goldwater Institute. After our speaker gives her remarks, we will then go to audience Q&A. Thank you for sharing with us today. Christina, the floor is yours.

 

Christina Sandefur:  Well, great. Thanks for having me, and thanks to everyone who's joining in on the call. Today I want to talk about something that I refer to as home-sharing, but you all may know it as short-term rentals, vacation rentals, sometimes you know it by the name Airbnb or Homeaway, which are platforms that we use to be able to share our homes. Whatever you think of the term, or whatever term that you use, this is something that's been around for quite a long time in the United States. For centuries, Americans have allowed people to stay overnight in their homes rather than, say, a hotel or a bed and breakfast, and often this is for short periods of time, and sometimes it's been in exchange for money, other times it's been in exchange for things like doing chores, doing the dishes.

 

      So what's changed today is not the fact that people are renting out their homes, or rooms in their homes, for short periods of time. What's changed is the way that we're communicating about that use. You all are familiar with sharing economy technology. This is using the internet, and our smartphones, and other tools to be able to connect people in ways that we've never before been able to connect. And in the case of short-term rentals, online platforms like Homeaway, or Airbnb, or VRBO have allowed homeowners and travelers to connect all across the country, or even all across the globe.

 

      And this is really important because this is helping travelers get greater access to lodging that really better fits their needs. Imagine families who wouldn't otherwise be able to afford to go on vacation because they'd have to stay in an expensive hotel. Now they can rent out a home. They can save money by cooking in that home rather than going out to expensive meals at restaurants. So it also allows people who, say, want to travel for business, and they don't want to stay in a hotel. They want to be able to stay in a home where they can get some work done quietly -- lots more options for travelers.

 

      And on the flip side, there's lots more options for homeowners. Homeowners are able to rent out a room in their home, or perhaps their entire house, to help pay their mortgages or other bills. And it also gives people an incentive to purchase homes that would otherwise sit vacant or would be dilapidated and fix them up and restore them because, keep in mind, there aren't necessarily the same incentives for homeowners or for long-term rentals. But knowing that people are using short-term rentals for vacations or as alternatives to hotels, homeowners have a greater incentive to make sure that the buildings and the properties that they're offering to their clients are really exceptional, are well-maintained, are in good condition, and really offer something to those visitors. If not, of course, they're going to lose clients, and then they're not going to be able to rent out their homes.

 

      So there are a lot of benefits on both sides of the equation to home-sharing. And again, this is something that people have been doing for centuries. Unfortunately, though, cities are really rushing to crack down on home-sharing. And although these regulations have been ongoing for some years, really in the last couple of years, we've seen cities across the country either outwardly banning home-sharing or imposing very severe regulations that are just leveled toward short-term rentals and not long-term rentals or other residential uses of property. This, of course, deprives homeowners of their property rights, but it also reaches other rights as well. Cities are imposing astronomical fines, cumbersome processes, and even rules that discriminate just against short-term rentals.

 

      The problem with this approach, again, as I've alluded to before, is that the sharing economy here isn't really selling new things, it's just providing new ways for people to offer their homes as short-term rentals, and really reducing transaction costs. In fact, platforms oftentimes have their own ways for people to be able to complain if there's a problem on either the homeowner's side or the renter's side. And so, if anything, they're connecting people better than ever before. They're reducing transactions costs, and they're keeping nuisances down. But yet, governments are stepping up to crack down on home-sharing.

 

      And my argument is that government shouldn't apply new regulations to long-standing practices. The right to rent your home to an overnight guest is a fundamental property right. It's a right that people have been exercising for a long time. And just because parties are using new and innovative ways of communicating doesn't mean that government needs to impose new regulations. We already have regulations on the books, nuisance regulations like noise, traffic, and trash that can deal with any externalities that come as a result of home-sharing.

 

      Our Founding Fathers considered property rights to be a fundamental human right. And it really shouldn't be any less protected just because somebody's sharing their home for a short term. After all, home-sharing doesn't really change the nature of the property. The right to own property is really an extension of our right to own ourselves. If we own ourselves, then we should also own our property and be able to use that as we see fit, so long as we're not harming somebody. And offering property for rent rather than living in that home ourselves doesn't change the justification for the protection of that right as a fundamental property right.

 

      It's also important to note that money does not change that right. If you're allowed to let somebody sleep on your couch, say you have a friend spend the night, or a relative that's visiting; if somebody can use your couch or guest room for free, then they should be allowed to do that in exchange for money. If a family is occupying a home for residential purposes, for ten whole years, or just a year, or a month, or even just a few days, like a long weekend, it's still a residential use. The amount of time that somebody spends in a home and whether or not money is associated with that transaction, that doesn't change the fact that it's a residential use and a protected property right. So in other words, there's nothing magic about home-sharing, and adding money to the equation doesn't change the use.

 

      Unfortunately, though, under regulatory takings laws, courts usually allow government to take away rights from property owners, including the right to rent out their home, so long as government doesn't actually take title to the land through something like eminent domain. So courts oftentimes will tell homeowners that even if they've been renting their homes for a long time without any incidents, even if they purchase the property for the primary purpose of engaging in short-term rentals, those homeowners won't be compensated if cities pass laws that prohibit short-term rentals.

 

      For example, the Supreme Court of Oregon refused to give homeowners compensation for an ordinance that banned all short-term rentals, or what they considered short-term rentals were rentals for under 14 days. And there were a number of homeowners who had been renting their homes for a long time in that area, short-term, and they argued that that was a taking of their property right, and they were going to now be deprived of income that they had relied on. But the court said that this wasn't a compensable regulatory taking because the homeowners could still rent long-term, or the homeowners could live in the homes themselves. And so, therefore, the city didn't take away the homeowner's -- all of the homeowner's economically viable uses for the land, and the homeowners got nothing in return.

 

      Now, of course, some of these homeowners might have had other homes. They didn't want to live in the home themselves. And these homeowners had been renting for years. They had the expectation to rent for years. And long-term rentals in the area just weren't as profitable because it was a tourist area. Nevertheless, the Supreme Court of Oregon said those homeowners were entitled to nothing. Unfortunately, outside of a couple of states, states like Arizona and Florida that actually have much stronger protections for regulatory takings, this is typically what homeowners face when they want to offer their homes as short-term rentals, and cities suddenly change the rules in the middle of the game and no longer allow them to rent their homes.

 

      But it gets even worse. We're all used to property rights for, unfortunately, being treated as second class rights, and courts refusing to compensate property owners for regulatory takings. But across the board bans on home-sharing that aren't aimed at mitigating nuisances are really, really difficult to enforce. They're expensive to enforce, and why is that? Well, precisely because they're not aimed at mitigating nuisances. They are instead just complete bans on short-term rentals, and it's really tough to tell whether or not somebody's living full time in a home, whether or not a friend is just visiting but not actually paying money to visit, or whether a guest is staying short-term instead of long-term. Those are difficult things to determine, which, of course, supports the argument that cities shouldn't pursue these one-size-fits-all bans to begin with if nobody's causing problems.

 

      But because they're difficult to determine, and because these laws are difficult to enforce, cities are resulting to drastic measures, most of which have really nothing to do with targeting actual nuisances or problems. And so although these home-sharing restrictions are aimed at the use of property, and although courts are generally okay with cities restricting the use of property, what these regulations actually do is deprive Americans of other constitutional rights, rights that courts are usually more protective of.

 

      So for example, privacy rights. If you think about it, enforcing bans or restrictions on home-sharing is going to inevitably restrict somebody's privacy rights, or come into conflict with somebody's privacy rights, because if no nuisance is occurring, then determining whether somebody in a home is a homeowner, or a guest, or a guest for money, is going to require a government official to inquire into or even invade a person's private home. This is not a hotel. This is not a place of business. This is somebody's private home.

 

      So for example, two years ago, the City of Chicago passed this extremely cumbersome and confusing 58-page ordinance dealing with home-sharing. And it required many, many things. It said that if you wanted to use your home as a short-term rental, you had to read through that 58 pages, you had to understand it, which, frankly, being an attorney myself, I could barely understand it, but all homeowners had to do that. They had to read it, understand it, and sign that they understood, and they wouldn't violate any of the rules outlined in that 58-page ordinance. Otherwise, they would lose their license or their right to rent their home short-term.

 

      Among the many, many restrictions in that ordinance are some that really infringe on people's privacy rights. Homeowners that are licensed under the Chicago ordinance, in order to be able to offer their homes as short-term rentals, have to open their homes to city inspectors, quote, "at any time and in any manner," end quote. So that means without a warrant, without even a reason, and as often or whenever city officials wish. And this is one of the worst anti-privacy rules that I have ever seen with regard to somebody's home. Under this rule, city inspectors can literally come into a home if no nuisance is occurring, they don't have to tell the homeowner or the person present why they're there, and they can inspect the home even if no guests are actually present in the home at the time. So even if I'm registered as a short-term rental but I happen to be staying in my home at the time, the city officials can show up, and I've essentially consented to them doing so, the city would say, because I'm renting out my home, or at least I've made my home available as a short-term rental.

 

      Also under this ordinance, homeowners were required to collect all of their guest's sensitive personal information. These are things like their names, their home addresses, their signatures, the dates they visited, et cetera, and keep that information on file for three whole years, during which time, again, city officials can demand that information at any time, without a warrant or without a reason. There are no security requirements for how this information is kept, and, again, this is a situation where, at any time, there doesn't have to be a nuisance or any other problem, the city can come in and demand that information, and the homeowner has to give that, turn over that information, or they'll lose their right to rent. And they can be subject to thousands of dollars in fines for not doing so.

 

      At the Goldwater Institute, we challenged this ordinance on behalf of Chicago homeowners, not only because the Fourth Amendment to the United States Constitution protects Americans against unreasonable searches and seizures, but also because the Illinois State Constitution explicitly protects the right of privacy in terms that go arguably beyond what the United States Constitution's Fourth Amendment protects. And if the city forces homeowners to waive these critical privacy rights just in exchange for permission to allow overnight guests in their homes, then that violates, as we've argued, both the U.S. but also the state constitution.

 

      And of course, the Supreme Court actually been quite good on this issue in recent years. It said that a search of private homes is presumptively unreasonable and unconstitutional if it's done without a warrant because, again, there's something different about somebody's private home versus a business that's always open to the public. The City of Los Angeles v. Patel case that came out a couple of years ago was really on point. There, the Supreme Court struck down an ordinance in Los Angeles that forced hotel operators to turn over guest registries to the police. And these registries contained many of the same pieces of information that were required to be kept by homeowners renting out their homes as short-term rentals in Chicago.

 

      The Supreme Court in that case said the city can't do that without a warrant or some sort of prior judicial approval, or some kind of good reason because there's an extreme risk of harassment of the hotel operators and their guests, and there are no standards that guide when the city can ask for that type of information, which increases the chances that city officials will exercise that power, again, to harass or intimidate hotel owners.

 

      So if that protection exists for hotel operators, which, again, are traditionally seen as being more public entities, they should certainly exist for private homeowners and their private guests. And that's something that we argued because of the Patel case, and we were actually successful in getting a warrant requirement added to the guest information provision in that Chicago ordinance. Unfortunately, that's only one piece of the challenge, and the rest of the case is ongoing. But it'll be interesting to see how cities deal with these issues in light of that initial victory, and in light of the Patel case.

 

      Now, further south in Miami Beach, Florida, where, as many of you probably know, short-term tourism is the city's lifeblood and has been ever since the city's inception, officials have outlawed home-sharing in much of the city. But they haven't just outlawed home-sharing, they've actually imposed fines of up to $100,000 per violation, $100,000 per violation, which could be one night, on home-sharers who are renting outside of the very small zone that they've carved out where rentals are allowed.

 

      Now, this is interesting because later on this month, the Supreme Court is actually set to hear arguments in a case called Timbs v. Indiana, and that case will decide whether the Eighth Amendment's excessive fines clause is incorporated against the states under the Fourteenth Amendment. It's kind of surprising that this question is yet to be resolved because local governments have really come to view ordinary fines as a way of increasing their revenue. They're using fines more and more to get more revenue for the city, and that incentivizes these local governments to impose these types of crushing penalties on conduct that really isn't harming anybody, like these home-sharing fines.

 

      Again, Florida's -- Miami Beach's ordinance is not aimed at people who are causing nuisances. It's across the board, applied to anybody who's found to be renting out their home for a short period of time. But, fortunately, state constitutions also address this excessive fines issue, and at the Goldwater Institute, we're challenging Miami Beach's law under the Florida Constitution which also protects people from excessive fines. And the test there is that excessive fines are prohibited if they're, quote, "grossly disproportional," end quote, to the person's action. Well, if you think about a fines structure that ranges from $20,000 to $100,000 per violation, and many of these homeowners have been renting responsibly for years, these fines are making up a large percentage of the home's actual worth. So if $100,000 in fines for doing nothing more than allowing people to stay in your home overnight, again, without causing any sort of nuisance or being accused of causing a nuisance, if that's not excessive, it's hard to say what is.

 

      That challenge is ongoing. That case was just filed a couple of months ago. And although that lawsuit is pending, the city wasn't content to just await the result of that lawsuit. In the meantime, it actually went a step further, and it's now not only threatening people with these excessive fines, but actually threatening homeowners with jail time for short-term rentals. And again, our argument is that the government shouldn't be able to criminalize harmless behavior and ruin someone's life just because that person's engaged in a peaceful use of the property, even if that use is prohibited in the city. Again, none of these punishments are nuisance-based at all.

 

      Things really aren’t doing much better on the West Coast, unfortunately. You would think that growing tech hub Seattle would actually embrace the sharing economy. A lot of technology companies are moving to Seattle, and a lot of people, of course, that are interested in working for those companies are attracted to Seattle and are moving there. Sometimes, people who are interested in resettling somewhere long term will actually rent out a short-term rental while they get to know the neighborhood and decide where it is that they want to live, and make sure that the job works out the way that they want. You would think that Seattle would embrace these changes, but instead, they're also cracking down on home-sharing, even though home-sharing has actually not only been lawful in Seattle up until now, but has actually been regulated very reasonably, and there's actually a pretty good tax framework in place so that people who are renting out their homes are remitting that revenue to the local government.

 

      Now, the City of Seattle hasn't completely outlawed home-sharing, but what it's done is it's imposed a set of restrictions that make it really difficult for someone to operate a home-sharing business. And this is harmful to local entrepreneurs, again, many of them who have been operating for years without any problems in the city. So this is a little bit different than somebody who just rents out a room in their home, or rents out, maybe, their primary residence. These rules are aimed against people who own multiple properties and want to rent those properties out. Under these new regulations which are set to go into effect next year, a person's only allowed to rent out their primary residence plus two additional properties. So if an individual or business owns more than three properties in Seattle, then they're going to be prohibited from using any of those additional properties for short-term rentals.

 

      Now, again, there really shouldn't be anything different between renting out your primary residence and renting out a secondary residence or an additional residence. Property rights are property rights, and, as I've said before, they shouldn't change just because money is exchanging hands, or somebody is living for a short period of time rather than a long period of time in that property. And again, people have built businesses around the demand for short-term rentals in the Seattle area.

 

      We're challenging these restrictions under, again, under the Washington State Constitution, under its due process clause. Unlike the federal courts, Washington state courts actually evaluate land use restrictions by looking at a number of factors. First, they look at whether the regulation has a legitimate public purpose, and of course, that's just like the federal rational basis test. But they also look at two additional factors. They look at whether the regulation uses means that are reasonably necessary to achieve the government purpose, and whether the regulation is unduly oppressive on the landowner.

 

      Now, the City of Seattle claims that the restrictions it's putting into place are needed because there are problems with affordable housing. They want to increase the supply of affordable housing. This is an argument that we often hear cities use as an excuse to crack down on home-sharing, but at best, this is guesswork on the part of the city. None of these cities are actually doing studies to determine the impact, if any, that home-sharing has on affordable housing. And why does the City of Seattle think that the limit should be three homes? Why not just one, or why not four? And why should a primary residence even come into play here? Of course, people can rent out their primary residences without even being home at the time. It doesn't mean that people will just be renting out one or two rooms in the home.

 

      And of course, it's often cities themselves that make it difficult to construct new housing or to add on to housing by imposing burdensome regulations, delays, and costs whenever a developer is seeking permission to build. In fact, there was a report done by the National Association of Homebuilders that found that nearly 30 percent -- there was a nearly 30 percent increase in the cost of complying with regulations in just a five-year period. So cities themselves are making it extremely difficult for people to find affordable housing, and that's especially true on the West Coast when demand is already high.

 

      So home-sharing is actually oftentimes used to help homeowners deal with those rising house costs. A lot of times, people are unable to keep their homes, and would be unable to keep their homes and pay their mortgages or other bills if it weren't for their ability to rent out their homes. Same thing goes for people who start home-sharing businesses. And interestingly enough, in Washington, Seattle actually hasn't shown a link at all between housing affordability and home-sharing. In fact, The Seattle Times recently reported that the city has a new glut of housing, and it's actually driving rents down.

 

      So the fact that a city can do absolutely no empirical research, claim that there's an affordable housing problem, claim that home-sharing is causing that problem, and therefore, draw arbitrary lines on how people can rent their homes, even if they've invested in businesses for doing so, and again, with no link to actual nuisance problems, really should not pass the Washington courts' due process test. Cities really shouldn't be able to punish people who've made home-sharing their livelihood without any evidence that these businesses are causing harm.

 

      Our client in this case actually has nine properties that he rents as short-term rentals, and he's had over 2500 bookings. And in that entire time, he's had rave reviews and only had the police called once. Interestingly enough, he himself called the police, and it was because he had some trouble with a guest, and the situation was dealt with. So again, when these restrictions are not nuisance-based, they cause a lot of unnecessary problems and punish responsible homeowners for the bad actions, or the potential bad actions, of just a few.

 

      Further down the coast in California, there are additional -- cities are putting additional restrictions on home-sharing, again, typically in tourist areas where there's a lot of demand for people to stay in homes. Sometimes hotels aren't able to even accommodate that demand. The City of Pacific Grove is a small coastal city in Monterrey County in the northern part of California. Home-sharing is really popular. It's been popular for a long time. And the types of people that are going to rent homes in Pacific Grove are not people who are looking to party on the weekends. It's usually people, families or retired folks, who would just like a home for a long weekend, or perhaps even a week, just to be able to relax in the quiet community by the water. And there really haven't been many instances of problems with those rentals.

 

      Nevertheless, the city decided to arbitrarily put a 15 percent cap on the number of properties that can be rented in particular areas of Pacific Grove, and they decided not to grandfather in people who have been renting without problems. And instead, they subjected everybody who wanted to keep their licenses to rent to a public raffle, literally raffling off residents' property rights through a lottery. So the winners get to keep conducting short-term rentals while every other homeowner loses the ability to use their homes. And a lot of these people use these homes to generate income that helps them and their families. And because the lottery was completely random, owners who actually had racked up complaints, whether it was because of them or their guests, they would be allowed to keep their permits, but responsible homeowners who had never had problems would be stripped of theirs.

 

      So we're arguing that this is an arbitrary depravation of homeowners' vested rights. Homeowners who got their licenses to rent were promised that they would be able to keep renewing those licenses unless they actually cause nuisances. There are specific nuisances that are outlined in the city ordinance, and if owners or their guests cause those problems, then they rightly lose their right to rent. But otherwise, they were supposed to be entitled to keep renting unless and until they caused a problem, and this arbitrary licensing -- permitting scheme just deprives homeowners of their ability to keep renting.

 

      There's also another interesting angle here. The city is violating state law. There's an agency called the California Costal Commission, and it regulates development in the state's coastal zone. It claims that it does so for the purposes of protecting the coastline and maximizing public access to the coastline, and conserving resources. Now, many people on this call probably know the Coastal Commission isn't always friendly toward property rights, but interestingly enough, in this area, it recognizes that home-sharing plays an important role in providing affordable access to the California coast. It provides travelers with alternatives to pricey hotels, and that, of course, reduces the need for new development and big, fancy hotels and public facilities. And it also allows people, homeowners, to keep their properties as they get more and more expensive, and pay their bills.

 

      Local governments are supposed to get permission from the California Coastal Commission before they make zoning changes in the coastal area. And the Coastal Commission has been very public in the fact that it opposes bans on home-sharing, and it's told cities that if they need to regulate home-sharing, they should adopt reasonable regulations that are tailored to address a specific problem. Pacific Grove did not get permission from the Coastal Commission before it took away these property rights, before it held its lottery, and it didn't tie its 15 percent cap or the lottery, again, to any kind of nuisance or any other problem, it just went ahead and set that and held that lottery. And so we're in court challenging these restrictions on behalf of homeowners who could lose their ability to pay their mortgages and other bills if they aren't allowed to keep renting.

 

      So there are copious more examples of how anti-home-sharing rules are depriving homeowners of all sorts of constitutional rights, again, beyond just traditional property rights. The Supreme Court has said that government can't do that. They can't condition your right to exercise a right, here, a fundamental property right, your right to decide who stays in your home, they can't condition that upon giving up other rights. So people who seek permits, licenses, or government benefits, even, the government can't impose unconstitutional conditions on those people. And that's exactly what's happening. These anti home-sharing rules, I would argue, are unconstitutional conditions. They're forcing property owners to give up their property rights in exchange for being allowed to share their homes with overnight guests. Or worse yet, they're completely depriving people of these property rights altogether without any compensation for that taking.

 

      The common denominator here, the excuse that these cities give, oftentimes, for these new regulations, is that home-sharing is something new, and therefore, it's in need of regulation because there are no previous regulations on the book that contemplated home-sharing. They're ignoring the fact that home-sharing has been around for centuries. And of course, they're ignoring the fact that sort-term rentals don't require new regulations. In most cases, traditional nuisance regulations work just fine to address any problems that are caused by renters.

 

      And in fact, it's interesting because the data often shows that short-term rentals are less likely to cause problems than long-term rentals. And it kind of makes sense if you think about it. If somebody is renting a home long-term, there's less incentive on behalf of the owner to make that property look really nice because you're not attracting people who are on vacation. You're just attracting people who are going to use that as their home long term. But, of course, there's also less incentive on the part of the guest to keep the home up because they don't own that home, they're just renting.

 

      And so there's this interesting cross dynamic of incentives that result oftentimes in more problems with longer-term rentals than sort-term rentals. On the other hand, short-term rentals, if people are going in and out for short periods of time, in between those families or those guests, somebody's coming in to clean, somebody's coming in to make repairs, somebody's coming in to make sure and check that the home is up to standards. And neighbors are more likely to call the police or the city when there are nuisances caused by short-term renters rather than long-term renters or homeowners because they don't have a pre-existing relationship with those guests, and they'll probably never see them again.

 

      And of course, it's much more -- it's much easier for cities or police to respond to actual nuisances. If there's a noise problem, if there's a party that's going too late, if people are parking where they're not supposed to be parking and clogging up the streets, if people are throwing trash and debris out into the streets, or they're putting trash out on the wrong days -- all of these things are very clear violations of pre-existing city nuisance laws, and they can be dealt with directly by the cities. It's much, much harder to enforce blanket bans against short-term rentals, and it actually incentivizes neighbors to spy on each other and to tattle on each other. And that not only takes away property rights and a host of other rights, but it really doesn't bode for a very good community where people respect each other's rights.

 

      Now, to be clear, nobody wants to live next door to a nuisance, and sometimes, short-term rentals and guests at short-term rentals do cause problems. But again, cities and counties should not unfairly penalize responsible homeowners in order to eliminate the possible problem of a few bad actors. They should focus on enforcing reasonable nuisance rules. And if they're tailoring the regulations that they impose to actual nuisances, they're much less likely to violate people's property or other rights, as I've outlined earlier. The answer is to use these existing laws to crack down on bad actors. Unfortunately, a number of cities don't have much of an incentive to do so, and again, they're -- until some of these court cases start to come down and these decisions come down stopping them from doing so, they have every incentive to use these regulations in order to collect excessive fines and money from people who are violating their rules.

 

      And so at the Goldwater Institute, we've actually proposed a law called the Home-Sharing Act. It's passed in Arizona, Tennessee, Indiana, and a couple of other states. It's a statewide law that says that cities cannot arbitrarily discriminate against people for renting short term rather than long term or living in their homes. So cities can't draw an arbitrary line and say if you rent under 30 days, you're an outlaw and a criminal, but if you rent over days, then it's perfectly fine behavior.

 

      Instead, what they should do is focus on nuisance restrictions. And they can put regulations into place to make sure that home-sharing doesn't contribute to nuisances in the city, but again, they have to be focused on some actual problem. And if cities have other problems that they want to address, like the so-called affordable housing problem that is often times caused by the city regulations themselves, there needs to be some kind of evidence that the regulations they're putting into place are actually addressing those problems.

 

      Arizona's had this law on the books for a couple of years. It's actually worked out quite well. A recent city attorney for one of the tourist cities here in Arizona, although he and his city oppose the law because they didn't want power being taken away from the city, they've actually admitted that they've seen very few problems since the law's been on the books. And it really does encourage cities to focus their limited resources on fighting actual nuisances and problems rather than taking away people's property rights, especially in times when the economy might necessitate people to find ways of earning extra money in order to be able to keep their homes.

 

      So with that, I will end there and open it up for questions.

 

Micah Wallen:  Wonderful. Thank you so much, Christina, for those opening remarks. We will now go to audience Q&A. And we have a question already lined up, so without further ado, we will move to our first question.

 

Caller 1:  Christina, first, thank you for a wonderful presentation, and for all the work that you and the Goldwater Institute do on this issue. I am a kind of long-term -- what I used to call vacation renter and have worked across several of the platforms. And just for a little bit of context, I would provide insight into the fact that VRBO and Airbnb -- at least VRBO used to be a very open platform where a homeowner paid a subscription, and then the homeowner had opportunity to discuss with a prospective renter what the terms were, what the rules were, and to really develop a relationship with that renter before a contract was concluded.

 

      However, recent changes, and this is the last two, three years, all of these platforms that are more worldwide have moved to a basis where it is a matter of concluding the contract, the price, everything is set before the homeowner is given any contact information for that renter. So fortunately, some alternatives are springing up around, at least the United States, where, like in Florida panhandle where I have two homes, they are -- ECBYO is an option that is gaining a lot of momentum where people again are back to that traditional platform where, as a homeowner, you do have the opportunity to develop that strong relationship with a renter, which I think provides for a much better quality kind of stay in that residential community once the guest arrives.

 

      But I have recently -- and that's just kind of some background -- but I've recently become aware that the City of Destin in Florida has decided that via a task force or series of recommendations, that they will ask their city attorney for a draft ordinance. And they are looking at the likelihood of limiting occupancy numbers as well as parking, listing the homeowner's phone number on sign outside the home as well as the management company. And so by regulation, what Florida state law, when they say that zoning cannot be used to ban short-term rentals, this looks like a way to accomplish by regulation, at least, a series of restrictions on it.

 

      And so doing some research, I'm sure that you're aware of the -- there's a court case in Florida that's at the state that came out of the state Court of Appeals, and then there's a recent Texas Supreme Court opinion unanimous decision. Both of these were based on kind of a residential purpose test. And so I'm wondering how familiar you are with this and the question that if frequency is used to begin to define this test, therefore back to the number of nights, or the number of times per year, or whatever might be applied, would this undermine the idea that courts are beginning to look at the fact that if this is a residential purpose, that this kind of exercise of your property rights will be allowed?

 

Christina Sandefur:  Thank you for those remarks. You've raised a number of really good issues that I'm glad you raised because I'd love to touch on them briefly. First of all, you mentioned how some of the platforms are getting away from allowing homeowners and travelers to be able to develop relationships before they enter into a contract. To the extent that those are choices that platforms are just making on their own, I'm glad to hear that there are other alternatives that are opening up to deal with that.

 

      But there's actually an interesting reason why some platforms, especially some of the bigger platforms, might be moving toward -- or away from the ability of people to create those relationships. As you might be aware, there have been a number of recent laws and even some lawsuits leveled against some of the bigger platforms alleging discrimination. So there's a separate issue here that we don't -- probably don't have time to get into dealing with the Communications Decency Act and whether or not platforms can actually be held liable -- third party platforms can be held liable for transactions that occur on their platforms. But in addition to that, there have been some laws and some lawsuits that have argued that, well, groups like Airbnb or VRBO, they're facilitating discrimination if they allow homeowners to reject a homeowner -- or to reject a guest, rather, for a reason that might not be appropriate, say, that guest's gender, or their race, or something like that.

 

      Of course, the flip side of laws like that that might be well intentioned are that it makes platforms that want to reduce their liability squeamish about allowing homeowners and guests to exchange too much information up front, lest they be accused of facilitating discrimination because at some point, a homeowner might decide when they learn about the guest that they don't want to open their home to that guest. And of course, that can have very negative unintended consequences, as you've alluded to.

 

      One of the great things about these platforms is that it allows people to connect so that if a homeowner thinks that a guest might not be a good guest, maybe they're looking to rent the home to bring a whole bunch of other people and have a party, and the homeowner doesn't want that in their home, they can reject guests that have bad histories of that, or that have poor ratings, or whatever. And that is good for the homeowner and the neighborhood overall, and of course, vice versa is true. So some of these laws that cities and states and the federal government are putting into place that are supposed to fight discrimination are actually having some bad consequences and are not allowing people to form those types of relationships that I would argue reduce the likelihood of nuisance or any problems.

 

      You also mentioned cities trying to get around some of these state bans -- these state laws that prohibit cities from outlawing home-sharing by regulating. And it's true that some of these cities that don't actually prohibit home-sharing might actually have what I would ague are de facto bans in place by regulating the practice so much that it makes it difficult for people to actually share their homes. Chicago's a good example. All those anti-privacy provisions that I mentioned make it very unlikely that people will even want to rent their homes.

 

      The law that we designed in Arizona, and unfortunately, it's not as strong in Florida, but there's some interest in strengthening it, would actually not only stop cities from prohibiting home-sharing, but also stops them from regulating home-sharing in a discriminatory manner unless there's a really, really good health or safety reason for doing so. And if not, they have to treat all residential properties the same. So short-term, long-term rental, and owner-occupied homes all have to have the same nuisance regulations because, again, if at the end of the day, you're trying to stop nuisance, it shouldn't matter how long somebody's occupying that property.

 

      And that kind of segues into your last point about the residential purpose test. I think this is going to be a very important time for people who are interested in protecting home-sharing to watch what these courts are doing. A lot of cities are arguing in defense of the regulations and bans that they're passing that home-sharing is not a residential use and that therefore, they are allowed to outlaw home-sharing in residential zones because home-sharing is actually commercial use. I have written a pretty extensive article that discusses some of this in depth, and I will put that link up later for listeners to be able to look at.

 

      But this is why it's so important and why I tried to make the point earlier in the call to reiterate that home-sharing is, in fact, a residential use. There is absolutely nothing about short-term rentals that changes the underlying nature of that use from residential to commercial. Simply because somebody is staying in a home and paying money to rent that home, that does not change -- the exchange of money does not change that use from residential to commercial. And of course, that's got to be true. People sit in their home and sell things on eBay, for example, or they do people's taxes in their homes. That doesn't change that underlying use from residential to commercial because the person is using that home, typically, just to live and just like they would in any other way if they were in any other residential use.

 

      A short-term renter versus a long-term renter versus an owner-occupied, again, it's still just a family or a couple of guests using that home to live in, and the duration of time also shouldn't change it from a residential to a commercial use. There are factors in zoning law that make things commercial versus residential -- parking lots, the number of people that are going to be in the building, the number of people going in and out, whether it's open to the public or not. The noise rules are different in commercial areas than they are in residential areas. So those are all things that affect whether something is residential versus commercial. But the use, whether somebody's staying for a night or for a year, and whether they're paying money or not, certainly should not change that from a residential to a commercial use. And there have been some very good court decisions on this. Hopefully, we'll start to see more, but that could be a real turning point, I think, in home-sharing law.

 

Micah Wallen:  Wonderful. Let's go to our next question.

 

Evan Bolick:  Hi. This is Evan Bolick from the Rose Law Group in Scottsdale, Arizona. First, Christina, you're very erudite and very eloquent, so I thank you for your time. You know, I wanted to hit a little bit more at that difference between commercial and residential use because I really don't see if you're using your home full time for this sort of thing, and I know that there are dedicated rooms and even dedicated houses to these home-sharing activities, and you're making a profit and making an income, I'm not sure how you differentiate that from a traditional residential use and, say, a hotel which also dedicates rooms full time. Under your argument, how do we also then state that hotels are a commercial activity that should be subject to regulation, but these homes aren't?

 

      And then a second question is I've certainly come across a number of these in my work situations where people are opposing home-sharing activities, but it's not from the city or the state, it's from HOAs. So is that a front that Goldwater's looking at? Do you have any opinion on HOA regulations of this sort of activity? I'd just be interested to hear your thoughts on that.

 

Christina Sandefur:  Thank you, Mr. Bolick, for those questions, and thanks for the opportunity to further clarify on the residential and commercial use. So the point about the residential use is that using a home as a short-term rental doesn't transform that house into a hotel. What matters for zoning purposes is really how the home is being used. So many zoning codes will talk about whether a residence operate like a single-family unit. So it's not the financial relationships, or the sleeping arrangements, or the length of occupancy that we're looking for, but what the characteristic is of how those people are operating within the home.

 

      So that's why we distinguish between even bed and breakfasts, for example, and short-term rentals. Bed and breakfasts typically act more like hotels, although maybe they won't be completely like hotels. That might be an area where rooms are divided up. You have a totally different party, or family, or group renting the different rooms, and you have sometimes individual bathrooms that are private that are only for certain renters versus the others. When you're chopping up a home and having a bunch of people stay in different parts of it, that's typically not like a residential, a typical residential family, single-family unit arrangement.

 

      And again, single-family doesn't actually need to mean blood relatives, but the idea is people living in a home and using that home as a single unit. That tends to be more -- less residential and more like a commercial or quasi-commercial use, which is why cities have different restrictions for bed and breakfasts. But again, so long as home-sharing, so long as the people in a home-sharing arrangement are just occupying the home the same way that they'd be occupying it if they were staying there for a month or a year, that is, people coming, using a common kitchen area, common restroom facilities, not -- different parties not dividing the home up amongst different parties that don't have any relation to each other, and again, I'm not talking about blood relationship here, then there's no reason why home-sharing should be any different from a long-term rental or owner occupied.

 

      And as far as hotels go, there are different things that make hotels even more like a commercial use than a residential use. The places where hotels are situated, of course, are places that allow for commercial parking lots, there are different noise restrictions, they are oftentimes larger, they oftentimes are completely divided up into individual rooms, all with their own restroom facilities, there are services that the hotels offer to those individual renters, and they are open to the public. So that becomes a totally different situation from, again, a home that is not open to the public, that is not open to multiple parties, but that is just being used as a single-family residence.

 

      I think it's pretty -- it's fairly easy to draw the lines here, but you do have a point that there are some limitations even to zoning, and of course, there are some gray areas. And I think when those gray areas come up, we ought to enforce those laws, or we ought to err on the side of enforcing those laws to protect freedom, and to protect property rights and people's liberties, so long as those people aren't causing actual disturbances that cause noise, and trash, and traffic, and other problems like that.

 

      I also wanted to touch briefly on your question about homeowners' associations. You asked whether the Goldwater Institute is looking into limiting homeowners' associations from cracking down on short-term rentals, and the answer is no. Homeowners' associations, admittedly, I live in one myself, can be quite annoying and problematic at times, but homeowners' associations are different because they're not government. They're private relationships, they're private contracts, and when people move into a homeowners' association, they're agreeing to abide by the rules of that association. And they have votes and ways to deal with that. Any kind of private contract, CC&R, HOA, things like that, those are different. And while we might not like the decisions that are made in those associations, those are things that we assent to because they're private contractual relationships.

 

      Government, on the other hand, government is different because government has to respect people's constitutional rights, including their property rights. And so while HOAs are free to restrict the way that people can use their homes and rent their homes, government is not free to do that because government has to abide by the Constitution, which protects people's property rights. And if you think about it, we don't really want to empower government to decide who is and isn't desirable in a particular neighborhood. We've seen consequences of that when government is able to have the power and keep certain people out of a neighborhood. And that is not a proper role of government, and that's something that we want government to be able to do.

 

Micah Wallen:  I have a question of my own, Christina. It seems like you're -- it makes sense to have the regulation, if any, to be nuisance-based, but are you advocating for the same nuisance-based regulations that apply to regular homeowners, or are you advocating for something between, let's say, like the bed and breakfast level of nuisance regulations and for private homeowners?

 

Christina Sandefur:  It's a good question. Typically, unless there's some good reason to deviate from this, typically, nuisance restrictions in a residential area should be the same across the board. And that may not be intuitive, but it becomes so if you think, if you think about this analogy. So say that we've got a freeway, and the speed limit on that freeway is 60 miles per hour. Now, we might say, "Well, somebody driving a soccer mom car is probably more likely to abide by that 60 mile an hour speed limit, but somebody in a red Maserati, well, we think that that person is going to be more likely to violate the speed limit and go 70 or 80 miles per hour."

 

      So if that's the case, we wouldn't set separate speed limits for the soccer mom car and the Maserati. We wouldn't say, "Well, the speed limit is 60 miles per hour for the SUV, but it's going to be 50 miles per hour for the Maserati." That doesn't make any sense. If we want people -- if we think that the safe speed limit is 60 miles per hour, we should apply that 60 mile per hour speed limit across the board. We might want to enforce that speed limit or pay a little bit more attention to the Maserati. There are some problems, again, with that as well, but we enforce the speed limit across the board, regardless of who the person is. It doesn't make sense to set a separate speed limit for a car because they might be more or less likely to violate that law.

 

      And the same goes for home-sharing. If we have a certain noise level that we think is appropriate in a residential area, there's no reason to apply a more restrictive noise ordinance, say, for somebody who's got a short-term rental rather than a long-term rental or an owner-occupied property. And in fact, that's what one of the things that the City of Chicago is doing in its 58-page ordinance I mentioned earlier. It actually imposes a separate noise standard on short-term rentals than it does on anybody else. It says that if noises exceed the average conversational level in a short-term rental, then you can lose your license to rent. It doesn't say what an average conversational level is. That's just up to the government to decide.

 

      And it doesn't say that guests have to be causing that problem. If I offer my home as a short-term rental, but I happen to be staying in the home that weekend, and I make too much noise -- I mean, presumably, a baby crying could exceed the average conversational level -- then I could lose my license to rent, even though guests weren't causing the problem. And even though that wouldn't violate the noise ordinance for the rest of the neighborhood, if my neighbor isn't offering her home as a short-term rental, then she'd be under a different noise standard than I am. And that makes no sense. So typically, I'm advocating for within a particular residential zone, applying those ordinances across the board.

 

      Now, there are things that cities can do if they want to keep a better eye on short-term rentals. So for example, some cities in Arizona have decided to require people who are offering their homes as short-term rentals to keep an emergency contact information on file with the city. So that way, if there is a problem with the home, and police are dispatched, and they go to deal with it, they can also get ahold of the owner. There may be a reason to do that; there may not be a reason to do that. But again, those are the types of things that can help cities enforce those nuisance regulations without imposing different nuisance standards on people simply because they're short-term renting.

 

Micah Wallen:  And I had one more question. I was wondering how much this sort of war over the regulations on Airbnb -- they obviously come on the heels of the fights of Uber and Lyft years ago where it was kind of a war between the taxi unions and the ride-sharing companies. But it seems like in this instance that people who live next to these Airbnbs have complaints about it, and that the hotel industry might be wanting to kind of elbow Airbnb out. How much of this fight is similar to those Uber and taxi fights where it's really driven by large interest groups rather than citizens actually complaining about the use of these apps?

 

Christina Sandefur:  Yeah, that's a good point. In my experience in the litigation that we've been engaged in, there actually hasn't been a whole lot of citizen complaints on the books in a lot of these cities. So in other words, there isn't a lot of evidence that these short-term rentals are even causing problems. Again, sometimes they do, and those need to be dealt with, but there really aren't a ton of citizen complaints in a lot of these areas. But there is a lot of evidence to show that these ordinances are often the product of special interests like the hotel industry in trying to make it difficult for people to compete with them through sort-term rentals. Reason has actually done a really good job in outlining this. There are a couple of articles that you can find that show the strong ties between the hotel industry and particular politicians who have advocated for these restrictions on home-sharing. And the hotel association, some of the national hotel associations, have actually put together plans to thwart short-term rentals that have since become public where they outline how they want to outlaw their competition.

 

      This is just another danger, I think, in giving cities the power to be able to discriminate against particular homeowners or particular home uses because they may be well intentioned, and a lot of times I think they are, but it also opens up the possibility that particular city council people will succumb to special interests that want them to use the power of government to outlaw the competition. And that's entirely inappropriate. And so that's why these state laws that ask cities to demonstrate some sort of health or safety objective or to focus on nuisances, kind of takes away that potential for abuse because there, then, cities are just sticking more to their purpose, their proper purpose, which is focusing on quiet, clean, and safe neighborhoods.

 

      And it makes them less susceptible to being captured by these powerful special interests, which, frankly, is much easier to do on the local level. And I think that's why so many cities are regulating or outlawing these practices, and why it's important for states to come in and protect these rights because it's much, much easier for special interests to capture particular cities or even groups of NIMBYs to capture particular cities. It only takes a couple people, and it doesn't take much money to be able to do that. And then homeowners have to play whack-a-mole trying to come up with the costs of hiring a lawyer and going to court for a long period of time in order to fight these types of rules. So that's why I think it's very important for states to step in and make sure that these regulations are uniform, and that they're fair, and to protect property rights.

 

Micah Wallen:  Thank you. And we just had one more question come through.

 

Caller 3:  Christina, I jumped back into the queue. I had asked the first question, but I think a really important distinction against or in light of the hotel model comparison is the fact that after decades of helping to organize homeowners in some of these communities, I can say that in my experience, most are second homeowners that have bought a home in a community, often resort, and they could not have afforded to purchase and maintain that home without the help of some rental income off that, but they are not making a profit. And the second home would be sitting vacant if they were able to manage the financial burden. The home would be vacant in between their visits. So your points about the fact that sort-term renters do bring in a lot of upkeep, maintenance, and attention to the property, I think, should be made or could be made in light of the fact that so many of these are second homes that homeowners would own anyway in a resort community. And this is just a way, one, to share that home, but two, to be able to afford it.

 

Christina Sandefur:  That's a great point. And in Arizona where I'm located, or in Florida where you are, we're very familiar with snowbirds that spend some of their time in our state, and then they spend the warmer months in other states. And it's a great point that there isn't necessarily the desire to rent out homes in the meantime unless they're done on a short-term basis, and that a lot of these properties would probably remain vacant or would not -- or might be rented by longer-term renters who then wouldn't keep up the properties as much. There is a weird prejudice that has no basis in principle or in the law against people who have second homes rather than primary residences for rental. And again, so long as these rentals are being used residentially, as long as they're not violating nuisance restrictions, there should be absolutely no reason why we should discriminate against somebody who is using a home as a primary versus a secondary residence.

 

      In fact, I had mentioned the restrictions in Pacific Grove, California. One of our clients lives in the area, but she purchased a second home so that her children and her grandchildren can come and visit her from out of state, and they can stay there instead of staying in a hotel. They're close by, and again, they can save money and be able to cook in the home, and that sort of thing. But of course, her children and grandchildren aren't going to be there year-round, and in the interim, she wants to be able to rent out that home to other visitors who would like to use their home. If she's not able to do that, the home's either going to stay vacant, or she's going to have to get rid of the home because she won't have enough money to be able to pay for the mortgage.

 

      So it's an excellent point. And again, I think it's important to think about all of these aspects because at the end of the day, what cities should really be focusing on is making sure that communities are quiet, safe, clean, focusing on nuisance restrictions, and not these blanket one-size-fits-all, or one-size-fits-none, restrictions that punish people for simply exercising property rights that they've been exercising ever since this country's inception.

 

Micah Wallen:  Wonderful. Well, thank you, Christina. On behalf of The Federalist Society, I want to thank our expert for the benefit of her valuable time and expertise today. We welcome listener feedback by email at [email protected]. Thank you all for joining us. We are adjourned.

 

Operator:  Thank you for listening. We hope you enjoyed this practice group podcast. For materials related to this podcast and other Federalist Society multimedia, please visit The Federalist Society's website at fedsoc.org/multimedia.