by Jennifer Tiedemann
June 26, 2019
“Sea Dance” has been in Sue Hobbs’ family since her parents purchased it over 50 years ago, when she was just a teenager—and in 2013, she and her husband, Bill, began offering the beautiful oceanfront property, located in Pacific Grove, California, as a short-term rental. That is, until the city stepped in in 2018 and held a lottery that took away their ability to share their home with overnight guests.
A few hundred miles north, Andy Morris felt a similar sting. Andy rented several of his Seattle properties as short-term rentals through online platforms. That is, until the city restricted home-sharing to a homeowners’ primary residence plus two additional properties, leaving entrepreneurs like Andy without the livelihood they’d come to rely on.
Andy and Sue have something else in common, too. Both of them are good neighbors in their communities and are responsible property owners whose popular rentals are nuisance-free. Nevertheless, they’re being deprived of their property rights, even though they didn’t do anything wrong.
The actions that Pacific Grove and Seattle took weren’t right—and they weren’t legal. So the Goldwater Institute teamed up with Sue and Andy and took action. One year ago, the Goldwater Institute launched three lawsuits to challenge cities and towns’ concerted attack on this essential property right, and this past week, Institute lawyers were in court to defend Sue’s and Andy’s right to share their homes.
Andy Morris and his wife, Lynne, are the owners of Seattle Vacation Home, LLC, a local business that operates and has ownership interests in 12 short-term rental properties around the city. As home-sharing entrepreneurs, they love the ability to help make memories for those who stay at their properties. “Lynne and I are passionate about hospitality,” Andy says. “We love to travel, and now we love to create memorable travel experiences for others.” And their understanding of travelers’ wants and needs have helped turned this passion into a livelihood: “Our guests appreciate that with Seattle Vacation Home, they can ‘break the compromise’ between the value that home-shares offer and the consistency and service level of a hotel. With this approach, we have excelled in the market such that we can support our family through this endeavor.”
That high level of service has resulted in stellar ratings from renters. “Over the course of 3,500+ bookings, Andy and Lynne have had a complaint rate of one-tenth of one percent, and almost always for minor issues like a guest leaving a trash bin in the wrong place,” says Goldwater Institute Senior Attorney Matt Miller, who represents Andy in his lawsuit against the city of Seattle.
But responsible home-sharers like Andy found themselves in a lurch in late 2017, when Seattle passed a law that made it much more difficult to operate a home-sharing business like his. Starting in January 2019, the law said, Seattle home-sharers would be limited to a single license to operate one property as a short-term rental (two licenses for home-sharers operating before September 2017). The law hits him and Lynne especially hard, he says. “The law has been written in such a way that it is especially punitive to us. First, the law includes a marriage penalty, treating a married couple as a single entity. We are therefore limited to two licenses in total, rather than four.”
“Moreover, the law indicates that when evaluating the homeowners of a property for licensing purposes, every owner counts,” Andy continues. “Lynne and I are minority investors in nine properties where family members and friends own the majority of each home. Despite our minority stake, those owners are prohibited from holding licenses for their homes, thereby decreasing the inventory available to Seattle Vacation Home.”
Because this law could destroy the business Andy and Lynne have worked so hard to build, they’re working with the Goldwater Institute to challenge the constitutionality of the two-unit rule in Washington state court. “The city says it needs to severely restrict short-term rentals in order to address housing affordability in Seattle, but it should not be allowed to destroy a successful, upstanding business in the process,” Matt Miller says.
Hopefully, Andy won’t have a long wait to learn the future of his business: Last Friday, his case was argued before the trial judge. “The argument was about the kinds of rationales the city of Seattle can rely on when taking away someone’s property rights,” Matt explains. “Can the government invent reasons that are wholly unsupported by any evidence? Or is the property owner allowed to introduce evidence showing that the government’s purported rationales are false? For example, is there really a link between short-term rentals and housing affordability?” The government says it has the right to regulate as it pleases, without having to answer any questions about the law. Look for the court to issue a ruling soon.
For Andy’s part, all he wants is to be able to host guests through home-sharing as he used to be able to. “We hope to see an end to the arbitrary and misguided cap on the number of licenses a couple can hold,” he says. “Over the past four years, we have hosted thousands of vacationers, business travelers, visiting nurses, new grandparents, families of hospital patients, relocating professionals, and local families whose homes are not habitable. We want Seattle Vacation Home to be able to continue offering the top-notch lodging experience that our guests have come to love.”
As with Andy Morris, home-sharing has also been something of a family affair for Sue Hobbs. Sue’s Pacific Grove, California, home, “Sea Dance,” has been in her family for 58 years now. Her mother lived in the home until 2013, when it became clear that she needed an assisted living arrangement. “The cost per month for assisted living was $7,000-8,000, but my mother’s total monthly income was $1,000. My husband, Bill, and I decided to turn her home into a vacation rental to provide much needed income,” Sue explains.
Sue and Bill worked diligently and spent a good deal of money to make the repairs and restorations needed to bring Sea Dance up to vacation rental status. After Sue’s mother passed away, Sue and Bill continued to operate Sea Dance as a short-term rental. They loved the ability to give visitors a way to enjoy Pacific Grove’s picturesque coastline on a budget. “It was gratifying to read the reviews of our guests and to learn how much they enjoyed staying in the house,” she says. “With three bedrooms and two bathrooms, it was a way families could afford to stay in ocean front accommodations and enjoy seeing whales migrate and otters play.”
But then Pacific Grove made a decision that would upend Sue and Bill’s livelihood. “Pacific Grove literally raffled off its residents’ property rights using a bingo-style lottery,” says Goldwater Institute Executive Vice President Christina Sandefur, who represents Sue (as well as Pacific Grove home-sharer Irma Shirkey) in the lawsuit against the coastal town. “Winners got to keep offering their homes as short-term rentals, while losers suddenly and unfairly lost the right to rent their homes, without taking into account whether homeowners or guests had ever caused any problems.”
As with the Seattle situation, responsible homeowners bore the brunt of Pacific Grove’s new approach to home-sharing licenses, Christina says. “A process like that allows owners who have racked up numerous complaints to keep renting, while homeowners like Sue and Irma—both of whom have been renting their homes without incident for years—were stripped of theirs. Other regulations completely outlaw short-term rentals in certain areas of the city, regardless of how long the homeowner had been renting the home, or whether they or their guests had caused disturbances, or how much time and money they invested to improve and maintain the homes as rentals. These arbitrary regulations violate the constitutional rights of responsible homeowners.
The Goldwater Institute made the case for these homeowners in a Monterey, California, courtroom this past Tuesday, explaining that even the normally regulation-happy California Coastal Commission acknowledges the good home-sharing can do. “The California Coastal Act requires local governments to get Coastal Commission approval whenever they adopt a land use regulation that affects the public’s right to use or access the coast. That includes restrictions on home-sharing,” Christina says. “And the city’s taken away those rights without getting the necessary permission from the Commission, which has discouraged banning and overregulating home-sharing because it plays an important role in providing affordable access to the California coast. If homeowners want to let people stay in their homes so they can visit the beach, that’s a good thing, and state law should protect their right to make that choice.”
“Pacific Grove’s anti-home-sharing rules also violate the constitutional rights to due process of law,” she continues. “Using a random lottery to arbitrarily deprive homeowners of their right to rent their homes without giving them any sort of legal proceeding and without even alleging that they did something wrong violates their right to a fair procedure. And a blanket prohibition on home-sharing in certain areas of the city—which even the city’s own staff admitted was an unfair and unreasonable way to deal with the fear of possible nuisances—is unreasonable, and also violates due process of law. These anti-home-sharing regulations aren’t tailored to address specific problems; rather, they abruptly cut off the right of property owners to let people stay in their homes.”
The Institute received a mixed ruling from the bench. “The judge agreed with us that Pacific Grove’s actions violate the Coastal Act. Its ordinance—including the lottery—must be submitted to the Coastal Commission for approval. Absent that approval, Pacific Grove’s ban on home-sharing in California’s Coastal Zone is illegal,” Christina says. “But the judge disagreed with our due process arguments and, unfortunately, upheld the city’s power to ban home-sharing outside of that zone.” However, Goldwater plans to appeal that part of the ruling—stay tuned.
Like Andy Morris, Sue Hobbs just wants to go back to providing short-term visitors with a place to stay. “Now that Pacific Grove has taken our license away because of the lottery, it means we have to rent it on a month at a time basis. It means a loss of income for us as a retired couple, a loss of tax revenue to the city, and it means that families can’t stay there unless they have the money to rent it for a month and have the ability to take a month at a time for vacation,” she explains. “We would love to win the lawsuit so we and the others who lost their licenses could go back to providing affordable family vacation accommodations.”
Even though Seattle and Pacific Grove have taken different approaches in restricting home-sharing, both cities are effectively punishing upstanding homeowners for the “crime” of peacefully exercising their property rights. “Seattle, Pacific Grove, and other cities across the United States are unfairly cracking down on home-sharing, depriving homeowners of property rights through outright bans, cumbersome processes, and discriminatory rules,” Christina says. And, Matt adds, while the details of the Seattle and Pacific Grove lawsuits differ, “the cases are similar because they both involve the government arbitrarily taking away the property rights of responsible short-term rental operators, thereby threatening to destroy their livelihoods.”
But there is a better way—and it simply involves enforcing laws already on the books. While “nobody wants to live next door to a nuisance,” Christina says, noise and traffic ordinances already exist to keep those neighborhood problems in check. “If cities are genuinely concerned with nuisances, city officials should focus on enforcing existing nuisance rules to crack down on bad actors, not to strip everybody of their property rights.”
And yet it’s clear that neither Seattle nor Pacific Grove considered this when deciding to crack down on home-sharing. “In both places, no attempt was made to separate responsible property owners from the bad actors who actually cause nuisances,” Matt says. “Every city has the legal right to prohibit nuisances, and they could do so if they wanted to invest the time and energy. Instead, both cities have passed blanket laws that strip even the most responsible property owners of their right to share their homes, with no justification. Rather than punishing people like Andy Morris or Sue Hobbs, the government should be targeting actual nuisance properties.”
Homeowners like Andy and Sue shouldn’t lose their shot at living the American Dream because of cities and states imposing unfair home-sharing bans or restrictions. And government should never seize an individual’s property for others’ use without just compensation. Whether it’s a home or a business, owning property allows us to benefit from the fruits of our labor and is a fundamental part of what it means to be free. That right must be defended.
Jennifer Tiedemann is Deputy Director of Communications at the Goldwater Institute.