PASADENA, Calif. (CN) – A Ninth Circuit panel on Thursday affirmed dismissal of a lawsuit claiming a beach city’s ordinance banning short-term rentals unlawfully disrupts the flow of interstate commerce.
Santa Monica, California, officials have said the ordinance – which bans rentals of less than 30 days without an owner present – will help preserve its supply of affordable housing by charging hotel taxes to home-sharers and fining companies that create false online home-sharing profiles.
Arlene Rosenblatt, a retired Santa Monica teacher, rented her home on Airbnb for $350 a night before the ordinance. She sued the city, claiming the ordinance violates the U.S. Constitution’s dormant Commerce Clause.
Rosenblatt accused the city of passing the ordinance as a scheme to attract visitors to its high-end hotels, which she claimed were struggling with high vacancy rates.
After a federal judge dismissed the Commerce Clause claims, attorneys for Rosenblatt and Airbnb appealed. They told a Ninth Circuit panel at a 2018 hearing that the ordinance disrupts the companies’ “innovative business model” and that Congress, not individual states, should regulate home-sharing.
Jordan Esensten, representing Rosenblatt, told the panel the ordinance disrupts interstate commerce by regulating rental bookings that may occur entirely out-of-state. Esensten also said the regulations favor local hotels and punish residents who want to rent out spare rooms for extra income.
But U.S. Circuit Judge Jacqueline Nguyen disagreed, writing in the panel’s 24-page opinion Thursday that the ordinance applies evenly to out-of-state visitors and California residents who may want to rent a room or home in Santa Monica.
“Rosenblatt fails to plausibly allege that Santa Monica’s ordinance directly or indirectly discriminated against or burdened interstate commerce,” Nguyen wrote in the opinion, noting U.S. Supreme Court precedent requires plaintiffs bringing Commerce Clause claims to prove that out-of-state residents carry a financial burden that local residents do not.
Attorneys for Rosenblatt and Airbnb did not immediately respond to a request for comment.
On her interstate commerce claims, the panel found Rosenblatt failed to show how the ordinance placed unfair burdens on out-of-state property owners compared to those who are in-state.
“Santa Monica’s ordinance does not prohibit out-of-state property owners from home sharing in their out-of-state homes, nor does it prohibit them from allowing home-sharing in their Santa Monica properties,” Nguyen, a Barack Obama appointee, wrote. “While non-resident property owners cannot personally serve as the primary resident whose presence is required during the home share, that is because they are not similarly situated to the Santa Monica residents who can.”
In court papers, the city said it passed the ordinance – with California larger housing shortage in the backdrop – because platforms like Airbnb and Homeaway “contributed to the proliferation of illegal short-term vacation rentals.”
Santa Monica City Attorney Lane Dilg applauded the ruling.
“We are pleased that the Ninth Circuit has now twice upheld the city’s home-sharing ordinance – first in the face of a challenge brought by online platforms Airbnb and Homeaway.com and now in rejecting Ms. Rosenblatt’s claims,” Dilg said in an email. “The ordinance is a lawful exercise of local government power and a key tool in our multipronged strategy to produce and preserve affordable housing in Santa Monica.”
Senior U.S. Circuit Judge Mary M. Schroeder, a Jimmy Carter appointee, and U.S. District Judge Michael H. Simon, sitting by designation from the District of Oregon and an Obama appointee, joined in the opinion.