Friday, October 4, 2019
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Ninth Circuit:
Santa Monica’s Restriction on Short-Term Rentals Does Not Violate Dormant Commerce Clause
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeals yesterday rejected a challenge under the dormant Commerce Clause to a Santa Monica ordinance that bars rentals of 30 days or less unless the primary resident remains in the home.
Circuit Judge Jacqueline H. Nguyen wrote for a three-judge panel in affirming the dismissal, without leave to amend, by District Court Judge Otis D. Wright II of the Central District of California, of a putative class action seeking to overturn the ordinance.
The action was brought by Santa Monica resident Arlene Rosenblatt, 83, a retired school teacher. Utilizing the services of AirBnB, she and her husband had been renting their apartment near the beach, while visiting their children in New York or Seattle, for $350 a night. The couple, whose only other income is their Social Security benefits, insist they need that extra income.
Criminal Penalties
But such rentals were barred under an ordinance enacted on May 12, 2015. A violator is subject to possible jailing for six months and a fine up to $500.
In enacting the legislation, the City Council declared that “vacation rentals...are detrimental to the community’s welfare and are prohibited by local law, because occupants of such vacation rentals, when not hosted, do not have any connections to the Santa Monica community and to the residential neighborhoods in which they are visiting” and that “the presence of such visitors within the City’s residential neighborhoods can sometimes disrupt the quietude and residential character of the neighborhoods.”
Nguyen observed:
“This case involves the perennial clash between a city’s exercise of traditional police powers in regulating land use and the rights of property owners to use their property as they see fit,” Nguyen wrote. “But this familiar problem has a not-so-familiar backdrop: online marketplaces—such as Airbnb and HomeAway—where travelers can rent privately-owned residential properties as vacation rentals.”
Contention Rejected
In rebuffing the contention underlying the action, Nguyen said that “Rosenblatt fails to plausibly allege that Santa Monica’s ordinance” violates the dormant Commerce Clause by “directly or indirectly discriminated against or burdened interstate commerce.”
Rosenblatt contended that the ordinance directly regulates interstate commerce because 95 percent of the Santa Monica vacation rentals are to persons from out of state. The jurist disagreed, explaining:
“Here, Santa Monica’s ordinance does not directly regulate interstate commerce by prohibiting vacation rentals for Santa Monica homes. At most, Rosenblatt alleges that the ordinance has an interstate effect because it ‘makes travel lodging in Santa Monica less accessible, available, and affordable.’ The ordinance penalizes only conduct in Santa Monica, regardless of whether the visitors are in-state or out-of- state. Accordingly, we conclude that the complaint does not sufficiently allege that the vacation-rental ban itself is a direct regulation of interstate commerce.”
Other Contentions
Nguyen rejected various other arguments put forth by Rosenblatt.
She said it discriminates against the financial interests of visitors from other states, and favors local interests, by forcing the visitors into hotels that are higher-priced than accommodations in private homes and generate income for the city through the occupancy tax. Nguyen said the ordinance “applies equally to renters and property-owners from outside California, California residents outside of Santa Monica, and Santa Monica residents themselves.”
Rosenblatt maintained that the ordinance prevents persons from out of state to have access to Santa Monica’s residential areas. The circuit judge responded:
“[I]it does not discriminate against persons outside of Santa Monica, who stand on equal footing with Santa Monica residents in their ability to purchase Santa Monica property and reside there.”
Rosenblatt pointed out that the ordinance renders it illegal to “undertake, maintain, authorize, aid, facilitate or advertise any vacation rental activity” relating to Santa Monica residences. Given that booking of units and payment could take place out of state, she argued, interstate commerce is implicated.
Nguyen responded:
“Because every out-of-state booking and payment that the ordinance regulates necessarily concerns property within Santa Monica, we cannot characterize these transactions as activities that are separate and entirely out-of-state.”
The city acknowledged that the ordinance implicates interstate commerce through incidental effects. That, however, is not sufficient to render Rosenblatt’s action viable, Nguyen said, setting forth:
“Rosenblatt’s complaint fails to sufficiently allege that the ordinance’s effect on interstate commerce clearly outweighs the ordinance’s local benefits.”
The case is Rosenblatt v. City of Santa Monica, 2019 S.O.S. 17-55879.
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