September 6, 2016

The Beacon Center of Tennessee filed a lawsuit on behalf of the P.J. and Rachel Anderson family, taking on Nashville’s harsh home-sharing rental restrictions.

Airbnb is a popular and growing part of the new sharing economy, allowing people to earn extra money by renting out their homes for temporary use by others. This business model provides new competition to hotels, though, so governments face industry pressure to fine and regulate the home-sharing industry out of existence. Despite this, legal hurdles are being cleared. The Beacon Center of Tennessee filed a lawsuit on behalf of the P.J and Rachel Anderson family in Nashville that was prohibited from using signage to advertise the availability of its home on Airbnb during a weekend festival in the area. The Pacific Legal Foundation also filed an amicus brief in the case.

“In a nice development, this week, the Metro Council unanimously voted to repeal the unconstitutional sign ban,” the Pacific Legal Foundation reported. “The Andersons, and everyone else in Nashville, are now free to place signs and advertise their home’s short-term rental availability just like other property owners can advertise that their home is for sale or for rent long-term. While there are other unconstitutional aspects of Nashville’s short-term rental ordinances that remain, those issues will be addressed in the pending lawsuit. Congratulations to the Andersons, other Nashville property owners, and the Beacon Center for this victory.”

The Beacon Center’s lawsuit also overturned “the ridiculous ordinance that gave police the ability to seize the records of property owners without a warrant,” and is still fighting against the 3 percent cap on short-term rental properties.

“It’s such a disgrace that our local government is actively attacking the rights of some Nashvillians to benefit others,” wrote Hannah Cox, the Beacon Center’s outreach coordinator. “This is why we at the Beacon Center are fighting tirelessly to combat this gross misuse of power and restore the rights of our fellow Nashvillians. If the government is not protecting your property rights, then you are the property.”

The Beacon Center prepared a list of reform proposals that “will protect the property rights and economic liberty of Nashville homeowners while preserving the character of our city’s neighborhoods and protecting consumers,” including repealing the “distinction between owner-occupied and non-owner occupied residences,” eliminating permit caps, simplifying the permit application process, and more.

A recent Independent Institute commentary in Newsday by economist Benjamin Powell explains how similar statutes in San Francisco, New York, and many other cities damage the economy by preventing the mobilization of “dead capital” by people who own idle resources that can be used by others.

“Ordinances like San Francisco’s restrictions on short-term rentals unnecessarily limit our ability to mobilize dead capital,” Powell writes. “Why should a vacation home sit idle when someone desires to use it while the owner is out of town? Why should a primary residence sit empty if its owner goes out of town more than 90 days when there are willing renters? … Municipal restrictions of short-term rentals are just one more misguided government disruption of housing markets. They leave valuable capital idle when it otherwise could serve consumers. Ironically, they help make housing less affordable by limiting an alternative income stream that can help owners better afford their homes.”

An earlier commentary in U.S. News & World Report by Goldwater Institute legal scholars Christina and Timothy Sandefur highlights the draconian measures that exist in many states to prevent home-sharing rentals, including $1,000 fines in New York for “people who allow guests to spend the night in their apartments,” and fines of $10,000 per night in Kauai County, Hawaii, for those who allow people to stay in their homes.

“Take Glenn Odegard, a homeowner in the small tourist town of Jerome, Arizona,” the Sandefurs write. “In 2012, Glenn bought an abandoned Victorian that had been vacant for 60 years after a landslide filled it with rocks and mud. He lovingly restored the 118-year-old house to its original condition. His plan all along was to rent out the home to visitors to recoup the money he spent buying and improving the home. The town even gave him a business permit. But Glenn's reward for his hard work was to be deemed a criminal. Town officials changed their minds and declared ‘vacation rentals’ illegal, threatening Glenn with fines and even jail time.”

In his monograph Uber-Positive: Why Americans Love the Sharing Economy, Manhattan Institute for Policy Research fellow Jared Meyer explains that it’s both destructive and pointless to fight against the disruptive new technology that makes the sharing economy possible.

“New technology cannot simply be wished away,” Meyer writes. “Rather, established firms need to face a choice: they can either embrace innovation or they can follow the taxi companies’ lead and dig in their heels as they are pulled toward irrelevance or bankruptcy. Innovation arises through individuals taking risks — trial and error, success and failure. People must be free to experiment and put their unique knowledge to use. Every time politicians and regulators call an Uber or plan a vacation with Airbnb, it should remind them how the economy actually grows.”

A policy study from R Street Institute Executive Director Andrew Moylan surveys the short-term rental regulations in cities throughout the United States, ranking them by their tailored legal frameworks, legal restrictions, tax-collection obligations, licensing requirements, and hostile enforcement. In the study’s overall scoring, the top “Roomscore” of 97, an A+ grade, was shared by both Galveston, Texas, and Savannah, Ga. The worst cities all “either have laws on the books that largely ban short-term rentals or construe their existing laws in ways that make STR impossible, in practical terms,” including Atlanta, Ga.; Denver, Colo.; Fort Worth, Texas; Fresno, Calif.; Jacksonville, Fla.; Kansas City, Mo.; Los Angeles, Calif.; New Orleans, La.; Oklahoma City, Okla.; and Santa Barbara, Calif.

“As traditional hotels ramp up their lobbying efforts to oppose the growth of short-term-rental services, it will be incumbent upon legislators to focus not on rules that protect dominant market players, but instead on addressing basic public-policy interests, like efficient tax collection and simple licensure,” Moylan concluded. “With simple rules in place, regulators can protect the public interest and ensure that competition happens in the open marketplace, not in the back rooms of city councils or state legislatures.”