TX Appeals Court Declares Unconstitutional Portions of Austin City Ordinance Relating to Short Term Rentals

This post was authored by Zoe Ferguson ’20, University of Georgia School of Law

In 2016, the City of Austin adopted a new ordinance amending its regulations on short-term rentals. In one section, the City created new classes of short-term rentals, distinguishing between single-family residences that are “owner-occupied or [are] associated with an owner-occupied principal residential unit” (Type 1) and those that are not (Type 2). Austin, Tex., Code §§ 25-2-788(A), 25-2-789(A). (A third category, Type 3, includes residences that are “part of a multi-family residential use,” id. § 25-2-790(A).) The ordinance ordered an immediate stop to the issuance of Type 2 operating licenses and required all such rentals to be terminated by April 1, 2022.

 

In another section, the ordinance banned broad swaths of assembly on any short-term rental property. This provision prohibited any assembly, indoors or outdoors, after 10 p.m.; any outdoor assembly of more than six adults at any time; and use of the property by more than six unrelated adults or ten related adults at any time.

 

Property-owning Austinites, including named plaintiff Ahmad Zaatari, promptly sued the City, claiming violations of the Texas Constitution. The State of Texas intervened, arguing the ban on Type 2 operating licenses was unconstitutional as an uncompensated taking and a retroactive law. The property owners and State moved for summary judgment, providing evidence for their motions, but the district court denied them, instead granting the City’s no-evidence motion for summary judgment. The State and property owners appealed.

 

The property owners had standing to bring constitutional claims on behalf of their tenants, and the court held in their favor, reversing the grant of summary judgment and remanding to the district court while upholding the rest of the ordinance. In Zaatari v. City of Austin, 2019 WL 6336186, the court held that the ban on Type 2 licenses was unconstitutionally retroactive and the assembly restrictions violated Texans’ right to peaceable assembly.

 

First, the court decided that the ban on Type 2 rentals was unconstitutionally retroactive because it served minimal public interest, if any, and significantly impaired Austinites’ fundamental property rights. The court stated that “nothing in the record” implied the ban would “resolve or prevent” the City’s concerns– in fact, the City had never issued any relevant citations before enacting the ordinance. Nor did the ban did not advance any zoning interests, since short-term rentals are just as residential in nature as owner-occupied homes. The ban would result in a loss of income for property owners who rely on short-term leasing, which even the City admitted is an “established practice” and “historically. . . allowable use.”

 

The City’s restrictions on assembly, without regard for the peacefulness of or purpose for an assembly, also violated Texans’ constitutional rights. Interestingly, the court noted that the restrictions violate both rental owners’ and tenants’ right to assembly, stating Texans have a fundamental right “to physically congregate, in a peaceable manner, for their shared welfare or benefit,” a right that is especially strong on private property.

 

This holding helps fill a gap in Texas jurisprudence about the state constitution’s assembly clause. Examining the text on its own, the court held that Texans have a right to assembly of any kind, political or not, since the plain text creates two distinct rights of assembly and petition. The court also held that the assembly restrictions infringed not only on Austinites’ state-guaranteed right to due course of law, but also on their First Amendment right to assemble on private property.

 

Zaatari v. City of Austin, 2019 WL 6336186 (TX App. 11/27/2019)