J. Patrick Sutton Cases & Issues Blog

Ways In Which Texas Cities Trounce Property Owners' Constitutional Rights

Some anecdotes from real life:

  • The City of Austin issues a bed-and-breakfast license. Neighbors repeatedly call in the property for "renting for short terms." Meanwhile, the B&B is up and running and has bookings extending into the future. The City of Austin, on a Friday, revokes the B&B license, asserting it issued it "in error." On Saturday, Austin Code Enforcement officers descend on the B&B and commence issuing citations for "renting for short terms without a short-term rental license."

  • The City of Grapevine allows STR's for years and collects local short-term occupancy taxes from property owners who rent out their homes for short terms. The City tells owners there are no regulations in place for STR's. Many property owners invest in properties in reliance on their right to rent for short terms. A search reveals no ordinances which regulate STR's. Abruptly, the City of Grapevine announces that it is barring STR's effective in 45 days.

What's wrong with this picture?
The trampling upon and disregard for the constitutional rights of citizens is what is wrong. Generally speaking, a government cannot take a vested right from a citizen, and when a local government rezones, which it certainly can as we all know, persons who have acted in reliance on prior zoning have a right to recoup their investment with an exemption period. Alternatively, they can simply be grandfathered so that they are not harmed by the rezoning — cities can and should take the long view that abrupt changes require time for transition. In addition, Texas law offers additional protections where an owner has obtained a vested right through investment and development. The latter is an issue where a city requires a permit for something, like STR's, but refuses a permit unfairly to someone who had previously been renting for short-terms. Sometimes, cities pass ordinances that have no rational basis at all and merely reflect opinion or prejudice. Those are unconstitutional because they violate due process in a substantive way. I think STR bans pass this test in most instances. Finally, Texas already regulates renting at the state level, and it also generates revenue from STR's through the state hotel occupancy tax. A lesser authority such as a city should not be able to ban an activity which the state regulates already and which the state is trying to generate revenue from!

I perceive that cities, in a rush to satisfy a certain demographic or constituency or else the hotel industry, are rashly penning ordinances without care for the rights of property owners. I think there's a good chance these poorly-written ordinances will not survive constitutional scrutiny, or else are preempted by Texas law. I represent an owner bringing a constitutional challenge to the City of Austin STR ordinance in a case now on appeal. I hope to bring other such challenges across the state in the coming months. I also hope that people of goodwill will come together and draft model ordinances and state laws on STRs. The interwebs is not going away anytime soon (barring armageddon or whatever), and STRs are a fact of life. Will we stick our heads in the sand and pretend that the world is not changing, or will we join hands to transition to the next thing?
J. Patrick Sutton Cases & Issues Blog