The United States Constitution gives Congress the power to regulate commerce between the states.[1] For more than 150 years, the United States Supreme Court has recognized that grant of power to contain a silent, negative implication known as the “Dormant Commerce Clause.” The United States Supreme Court has referred to the Dormant Commerce Clause as one of “these great silences of the Constitution.”[2]
Under the Dormant Commerce Clause, if a state or local law has either the purpose or effect of favoring in-state interests over out-of-state interests, it will almost always be invalidated. The central rationale of the rule is to prohibit laws where the “object is local economic protectionism.”[3] Courts take the Dormant Commerce Clause seriously. “Any disparity” in treatment between out-of-staters and locals violates the Dormant Commerce Clause, no matter how slight.[4]
Recently, courts have had to grapple with how local measures regulating short-term rental regulations fit into Dormant Commerce Clause decisions when laws seem to treat local residents and out-of-towners differently.
One example occurred in New Orleans, Louisiana. New Orleans passed a law that said a person could only obtain a short-term rental permit if the property was the owner’s “primary residence.”[5] The United States Court of Appeals for the Fifth Circuit invalidated the law. The court reasoned that the residency requirement discriminated against out-of-state property owners by making it impossible for them to obtain short-term rental permits.
The United States Court of Appeals for the Ninth Circuit came to a different conclusion when analyzing a short-term rental regulation in Santa Monica, California.[6] Santa Monica banned all short-term rentals unless one of the property’s “primary residents” remained on the property throughout the visitor’s stay. The Ninth Circuit reasoned that this law did not violate the Dormant Commerce Clause because an out-of-state property owner was still free to list their home as a short-term rental. They just needed a permanent resident (such as a long-term tenant) to remain on the property throughout the duration of the stay.
As mountain towns throughout Western Colorado continue regulating the relatively novel short-term rental industry, courts will need to consider what sort of laws do and do not violate the Dormant Commerce Clause. While the Fifth and Ninth Circuits have offered helpful guideposts, many questions have yet to be answered.
Garfield & Hecht, P.C.’s litigators and municipal attorneys have extensive experience helping homeowners navigate short-term rental regulations. For more information on these topics please contact one of our attorneys below.
[1] U.S. Const. art. I, § 8, cl. 3
[2] E.g., CTS Corp. v. Dynamics Corp. of America, 481 U.S. 69 (1987).
[3] C&A Carbone, Inc. v. Clarkstown, 511 U.S. 383, 390 (1994).
[4] Children’s Hosp. and Med. Ctr. V. Bonta, 118 Cal. Rptr.2d 629 (Cal. App. 2002)
[5] Hignell-Stark v. City of New Orleans, 46 F.4th 317 (5th Cir. 2022).
[6] Rosenblatt v. City of Santa Monica, 940 F.3d 439 (9th Cir. 2019)
In our Aspen office please contact Chris Bryan (cbyran@garfieldhecht.com, 970-920-5808) or Dave Lenyo (dlenyo@garfieldhecht.com, 970-920-5813).
In our Carbondale office please contact Andrea Bryan (abryan@garfieldhecht.com, 970-925-2642).
In our Glenwood Springs or Rifle office please contact David McConaughy (dmcconaughy@garfieldhecht.com , 970-920-5801) or Mary Elizabeth Geiger (megeiger@garfieldhecht.com, 970-920-5816).
