Despite a flurry of lawsuits in recent years challenging municipal restrictions on short-term rentals, the Texas Supreme Court has yet to weigh in on the legality of the bans. But a new lawsuit brought by rental owners in Dallas — which argues in part that the recently-passed “Death Star Act” preempts the local bans — may offer the high court an opportunity to provide guidance.
The Dallas Short-Term Rental Alliance, represented by Michael Hurst, David Coale and Michele Naudin of Lynn Pinker Hurst & Schwegmann, sued Dallas earlier this month alleging the city’s ban on most short-term rentals violates the state constitution “and other state laws against government overreach.” The lawsuit specifically points to HB 2127, known as the Death Star Act, which preempts municipal ordinances “on matters occupied by a provision of the property code” and alleges Dallas’ ban violates the law that went into effect Sept. 1.
Litigation over whether the Death Star Act itself is unconstitutional is currently ongoing in Austin and Houston.
“Legally, the city’s zoning ordinance swats a fly with a sledgehammer,” Coale said. “It imposes a drastic ban that is totally out of proportion to any harm identified by city staff. In so doing, the city has violated fundamental rights of [short-term rental] owners protected by the Texas Constitution of 1876.”
The case, which is seeking an injunction that would halt enforcement of the ordinance, has been assigned to Dallas County District Judge Monica Purdy.
“A temporary injunction is required to prevent an ongoing violation of law that causes probable, imminent, and irreparable injury to the plaintiffs,” the alliance argues. “As shown above, that injury includes irreparable loss of legitimate business opportunities, based on significant investments made in reliance on well-established law.”
A hearing has not yet been set on the motion for temporary injunction.
Arlington, Austin, Fort Worth, Grapevine and New Braunfels are among the Texas municipalities that have drawn lawsuits after implementing restrictions on short-term rentals.
In June, when the Texas Supreme Court denied a petition for review in a lawsuit challenging Grapevine’s ban, Justice Evan Young authored a concurring opinion — joined by Justice Jimmy Blacklock — offering some hope that the court may soon take up a case to offer a final answer on the constitutionality of short-term rental restrictions.
“Bound up in this appeal are complex anterior questions of administrative exhaustion and enforcement. … This case, therefore, starts out as a less-than-ideal vehicle for resolving the constitutional issues that are presented,” he wrote. “Given the seeming prevalence of short-term rental bans, and of the opposition against them, I am confident that other cases — unburdened by potentially dispositive collateral questions — will lead to a better vehicle for this court to address the bans’ constitutionality.”
Both parties in the Grapevine appeal had urged the court to take the case, arguing it deserved the Texas Supreme Court’s attention in part because the issue is “prevalent and important.”
“I believe them,” Justice Young wrote. “If that premise is right, then plenty of cases will come. If they do not, then today’s perceived importance and urgency will have turned out to be illusory. Either way, our State will be better served by a measure of patience from this court, as frustrating as it may be to us and, even more, to the parties to this case.”
Here, The Lawbook takes a look at three similar lawsuits and how they have fared.
Austin
On Aug. 1, Senior U.S. District Judge David Ezra ruled on competing motions for summary judgment and struck down the city of Austin’s ban on short-term rentals.
Judge Ezra entered final judgment dismissing the case Sept. 27, and a notice of appeal had not been filed in the case as of Tuesday.
Roberta and Robert Anding filed suit in October 2022, challenging as unconstitutional a short-term rental ordinance that went into effect in 2016 and required owners to reside on the property in order to obtain a short-term rental license. The Andings, who live in Houston, argued the rule unconstitutionally prevented them from renting their Austin property.
The Andings are represented by David M. Gottfried, Tara Gillespie and Meghan Alexander of Gottfried Alexander Law Firm and J. Patrick Sutton of Austin.
Austin is represented by Brandon M. Livengood, Elissa Hogan, Kelly Davis and Meghan L. Riley of the city’s legal department.
The case number is 1:22-cv-01039
Grapevine
Owners of short-term rental properties sued Grapevine after the city in September 2018 adopted an ordinance banning short-term rentals within city limits. The homeowners allege the city’s ban constitutes a “taking” of their property by the government and also violates the “due course of law” clause in the state constitution.
A trial court and the Second Court of Appeals allowed the suit to proceed. Despite those wins, the homeowners still urged the Texas Supreme Court to hear the case to provide statewide guidance on the constitutionality of the bans.
The Texas Supreme Court’s denial of the petition for review filed by Grapevine cleared the way for a trial to take place on the issue in Tarrant County.
Grapevine is represented by Joe Greenhill and David E. Keltner of Kelly Hart & Hallman and Matthew C.G. Boyle and Matthew L. Butler of Boyle and Lowry.
The homeowners are represented by J. Patrick Sutton of Austin.
The case number is 22-0044.
New Braunfels
In June the Fifth Circuit issued a 2-1 ruling reviving a lawsuit brought by a group of residents against New Braunfels challenging as unconstitutional the city’s ban on short-term rentals of certain residential properties.
“The district court ordered dismissal by approving a few conclusory paragraphs in a magistrate judge’s recommendation,” the court held. “This court’s relevant case law, however, indicates that some factual development may often occur in these cases, and that summary judgment may often follow. We make no prediction on the future course of this case, but based on the complaint’s well-pled allegations, plaintiffs are entitled to engage in discovery in an attempt to surmount the currently high bar for challenging local zoning ordinances under the Constitution.”
U.S. Magistrate Judge Jeffrey C. Manske had issued a report in July 2021 recommending the lawsuit be dismissed.
In a footnote, the court wrote that Judge Catharina Haynes dissented from the majority and would have sided with U.S. District Judge Alan Albright’s September 2022 decision to toss the case.
The ruling in this case came just days after the Dallas City Council voted to enact a similar short-term rental ban in areas with single-family zoning.
Judges Edith H. Jones and Edith Brown Clement also sat on the panel.
New Braunfels is represented by Greg Alan Waldrop and Ryan D.V. Greene of Terrill & Waldrop.
The plaintiffs are represented by J. Patrick Sutton of Austin and Chance Weldon, Robert E. Henneke and Christian G. Townsend of the Texas Public Policy Foundation.
The case number is 22-50908.