CA Appeals Court Finds Ordinance Limiting Transient Commercial Use of Residential Property Did Not Violate Substantive Due Process

This post was authored by Matthew Loescher, Esq.

Plaintiffs William and Susan Hobbs and Donald and Irma Shirkey brought this case asking the court to find that defendant City of Pacific Grove—by granting them one-year licenses to offer residential real properties for short-term vacation rentals —conferred a property right protected by the state and federal constitutions in the renewal of those licenses.

At the outset, the court found that due to the sale of their house, William and Susan Hobbs did not own property subject to Measure M and therefore were no longer affected by the trial court’s ruling on the motion for summary adjudication. The only other plaintiffs, Donald and Irma Shirkey, also lacked standing as to Measure M because their property was within the Coastal Zone and was not impacted by Measure M. Since no plaintiff had an “immediate, pecuniary, and substantial” interest in the trial court’s order with regard to Measure M, no plaintiff had standing to pursue an appeal with regard to Measure M.

Notwithstanding the aforementioned, the court found Ordinance No. 18-005 left the plaintiffs with several economically viable uses of their property: to live in the homes, to allow guests to use the homes without remuneration, to rent the homes for periods of at least 30 days, or to sell their homes. Thus, the intrusion into plaintiffs’ bundle of ownership rights was minimal and far outweighed by the public interest in enhancing and maintaining permanent residential areas. The court further noted that the residential character of a neighborhood is threatened when a significant number of homes are occupied not by permanent residents but by a stream of tenants staying a weekend, a week, or even 29 days. As such, limiting transient commercial use of residential property for remuneration addresses the goal of enhancing and maintaining the residential character of a neighborhood. Here, since the ordinance was rationally related to the City’s goal of enhancing and maintaining its residential character, the court found it was not so clearly arbitrary and unreasonable as to offend substantive due process.

Hobbs v City of Pacific Grove, 2022 WL 16921175 (CA App. 10/14/2022)