Constitutionality of short-term rental restrictions in question

A judge in Tennessee recently ruled that a local restriction on short term rentals unconstitutional.
Judge Robert E. Lee Davies of Sumner County concluded that the ordinance in question “does not promote the public interest as a whole. … Instead, it promotes some private owners’ interest over other private owners’ interest.”

Further, the ordinance acts as an “unconstitutional infringement upon a property owner’s fundamental right to own, lease, and dispose of property in a lawful manner because it destroys the homeowner’s right to lease his property on a short-term basis,” the judge said.
City officials maintain that there is a clear public interest in restricting short-term rentals, and an appeal is pending.
Meanwhile, courts in New Jersey and New York have ruled to the contrary, and similar lawsuits are popping up around the country as property owners, and the home-sharing sites that support them, look to maintain their rental business in the face of local opposition.
In 2021, a U.S. District Court in New Jersey upheld a Jersey City ordinance that restricts the use of residential properties as short-term rentals.

Several Airbnb operators brought the suit, challenging the ordinance’s constitutionality. In Nekrilov v. Jersey City, the plaintiffs alleged that the ordinance amounted to a “regulatory taking” in which government action denied all economically productive use of a property without just cause or compensation.

In 2015, Jersey City legalized short-term rentals. That changed in 2019 when a new ordinance limited non-owner-occupied properties to no more than 60 rental nights per year. Furthermore, leasing tenants were completely prohibited from offering short-term rentals as a sublease.
The plaintiffs argued they had purchased and developed the properties under the previous law and that the new ordinance rendered their properties’ economic prospects worthless.

The court dismissed the case, finding that a) the ordinance served the public interest and b) that it did not completely wipe away the economic use of the properties. The plaintiffs have filed an appeal.

A state appeals court in New York came to a similar conclusion in 2020, in Wallace v. Town of Grand Island. That court found that the plaintiff had not proven his property “was not capable of producing a reasonable return on his investment or that it was not adaptable to other suitable private use.”

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