July 8, 2016

Nashville's unconstitutional efforts to limit short-term rentals

By Caleb R. Trotter Attorney

With the rise of websites like Airbnb and VRBO, short-term rentals dramatically increase the opportunities for property-owners to supplement their income and retain flexibility with their homes. Unfortunately, last year, Nashville passed two ordinances that unconstitutionally regulate and restrict the ability of property-owners to rent their property on a short-term basis. In response, the Anderson family sued and today, PLF filed a brief supporting the Andersons’ right to rent and advertise their home.

Among other things, Nashville’s new ordinances limit the number of non-owner-occupied properties used for short-term rentals to only three percent of properties within a census tract, and completely prohibit any type of advertising of short-term rentals on-site. Both of these provisions violate the Constitution.

Rachel and P.J. Anderson–a couple with two young children–frequently travel for PJ’s musical performances. As a way to earn extra income, the family began renting their home on Airbnb while they were out of town. Because they still used the home as their permanent residence, they were able to obtain an owner-occupied short-term rental permit–which Nashville does not limit. Wanting to promote their home’s availability on Airbnb, the Andersons sought to place a small, temporary sign in their yard during a popular weekend festival. In addition, to assist their guests in finding the home, the Andersons sought to put a small sticker in the window near their front door to alert guests they were in the right place. However, Rachel checked with Nashville before placing the sign and sticker and was informed that the new law prohibited them.

Later on, Rachel received a promising career opportunity that would require the family to relocate out of state temporarily. Since the Andersons love Nashville and their home, they would like to keep their home and continue having it available for them when they visit. Like most families, though, they cannot afford two mortgages. So, they attempted to convert their permit into a non-owner-occupied permit, but were informed that the number of available permits was already exceeded.

Nashville’s ban on short-term rental signs is a content-based speech restriction that cannot survive scrutiny under the First Amendment. Nashville claims that the ban is necessary for neighborhood aesthetics, but it allows similar signs that advertise long-term rentals, homes for sale, yard sales, and signs advertising home contractors. Banning one type of sign based solely on its content, while allowing other, nearly identical signs, completely undercuts any justification Nashville can make about the ban being narrowly tailored to a compelling government interest.

Nor does Nashville’s three percent cap stand up to scrutiny under the Equal Protection Clause of the Fourteenth Amendment. Even if rational basis review–a low, deferential standard of review–applies, that does not guarantee success for the government. Rational basis cases can be won by plaintiffs who show the government has acted irrationally or failed to further a legitimate purpose. In this case, Nashville’s arbitrary cap at three percent is an irrational way to prevent neighborhoods from being “overtaken” by rentals, because Nashville allows all owner-occupied short-term rentals to receive a permit, doesn’t limit the number of long-term rentals, and exempts hotels, motels, and bed-and-breakfasts from the limits. Furthermore, Nashville allowed the number of non-owner-occupied permits–which can be held in perpetuity–in the Andersons’ census tract to exceed the three percent cap.

Nashville defends its law, claiming that it is necessary to protect neighborhoods. However, the only evidence of “harms” offered by Nashville is that some children have fewer playmates and some neighbors have experienced an increase in traffic and noise. Yet there is no legitimate government interest in maintaining a certain ratio of children in a given neighborhood, and existing Nashville laws already address traffic and noise issues. What’s left then, is an overburdensome, duplicative law that goes unconstitutionally beyond any legitimate public health and safety concerns.

Nashville can certainly regulate short-term rentals to protect the public health and safety. In fact, the ordinances also include provisions covering those concerns, and are not challenged in this case. But when the government seeks to expand its reach into protected speech and impose arbitrary limits on property rights, the Constitution stands to protect the public from regulation.

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Anderson v. Metropolitan Government of Nashville and Davidson County

Two Nashville ordinances banned any form of advertising short-term rentals with signage on the property, and capped the number of non-owner-occupied short-term rentals to three percent of the properties in each census tract. Rachel and P.J. Anderson periodically rent out their home via Airbnb and sued to strike down the law as violating their First Amendment right to advertise their home and their Fourteenth Amendment right to equal protection. Nashville repealed the advertising ban and a trial court ruled that the remaining provisions were unconstitutionally vague. Nashville appealed and PLF filed an amicus brief supporting the Andersons and all Nashville property owners.

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