No Right to Rent? Cities barring property owners from renting out

At left, Ethan Dean, who ran into problems trying to rent his Minnesota home; at right, homes in Los Angeles. (Institute for Justice/Reuters)

Homeowners, beware.

Property rights advocates say the right to rent is being threatened at the local government level, as cities across the country push restrictions on exactly how and to whom Americans can lease out their lofts and living quarters.

The California city of Ojai earlier this year voted to make all rentals under 30 days illegal, according to a recent Watchdog.org report. Airbnb rentals have faced regulatory challenges everywhere from New York to San Francisco. And several Minnesota cities have imposed limits on renting, drawing legal challenges but no resolution in the courts.

“This is about the ancient right to be left alone,” Institute for Justice attorney Anthony Sanders told Fox News. “Regulations on rental properties are allowed, but to completely prohibit someone from renting out their property to another law-abiding citizen? There are huge constitutional problems with that.”

The institute, a national law firm, is representing Ethan Dean in his case against the city of Winona, Minn.

Dean, who completed five tours as a U.S. adviser and Army contractor with the Human Terrain System in Afghanistan and Iraq, owned a three-bedroom home near Winona State University. While he was on his fourth mission in Afghanistan between 2011 and 2012, he arranged to rent his home to students of the university.

“I started getting nasty notes from the government while I was in Iraq,” Dean told Fox News. “The notes were from the city treasurer telling me that it was illegal to rent out my home. I had no idea what they were talking about.”

He then learned officials in Winona imposed a restriction on the number of homeowners who can rent out properties in specific neighborhoods. According to Dean, Winona explained a “30 Percent Rule” -- allowing only 30 percent of homes in a neighborhood to be rentals. Dean’s block was 78 percent rental properties when the ban was enacted, but his neighbor’s permits were apparently grandfathered in.

'This is about the ancient right to be left alone'

— Institute for Justice attorney Anthony Sanders

“They told me I had to kick the kids out of my house, and if I didn’t, I’d be fined $450 a day,” Dean said. “But I let the kids stay there another six months. The emails continued to come to me in Iraq.”

Sanders said this regulation restricted Dean from even selling his home, as any time a potential homebuyer expressed interest, they quickly backed out after learning the house was not rental-certified.

Rules regarding renting property to students reach into neighborhoods and cities across the country.

Just last fall, the city of Hamden, Conn., proposed requirements for landlords to obtain certain permits in order to rent to college students.

“The government is potentially forcing people into foreclosure,” Sanders said.

The case in Winona was decided on behalf of the city in the lower courts, but during the time the case went into appeal, Dean lost his home to the bank.

Dean was on his fifth tour in Afghanistan and, unable to rent out his property, struggled with the mortgage. “I couldn’t rent it, and I couldn’t come back and live in it. I was in Afghanistan serving our country.”

Representatives with the city of Winona and their attorneys have not responded to requests for comment from Fox News.

Winona’s official court brief did, however, say the city had the authority to enact the 30 Percent Rule due to its broad police powers, claiming this rule was a reasonable way to deal with housing problems created by college-student renters.

After Dean lost again, the case eventually ended in the Minnesota Supreme Court – where, in August 2015, the court claimed the case was moot because the bank owned Dean’s home at that point. The matter is still up in the air in Minnesota, as the courts did not decide on the constitutionality of the rule.

Homeowners trying to rent out on a short-term basis for vacation purposes are running into similar issues with local governments.

P.J. and Rachel Anderson, a young couple living in Germantown, a growing neighborhood just north of downtown Nashville, Tenn., recently tried to supplement their income with Airbnb, as they were often traveling with their kids. (P.J. is a professional Christian singer-songwriter who often is on the road, and Rachel is a graphic designer who can work from virtually anywhere.)

“It upgraded their finances,” Director of Litigation at the Beacon Center of Tennessee Braden Boucek told Fox News.

But in February 2015, Nashville Metro Council voted to create a new definition for Airbnb as a “short-term rental property”. The ordinance requires operators of Airbnbs to receive a permit annually for $50, limits the rooms used for sleeping to four, limits the number of guests and imposes an array of other restrictions.

The Andersons got the permit, but their situation later changed. Rachel was offered a more permanent job in another city, and planned to keep their home in Nashville as a means of rental income. However, the law imposes a 3 percent cap on non-owner occupied permits available in their neighborhood. The few permits available for their neighborhood – just 28 of them -- have been claimed, and now the Andersons are forced to make a decision.

“The city is trying to pull up a chair to this family’s kitchen table, and they do not have that right,” Boucek said. His group is representing the Andersons, and argues the regulation is unconstitutional.

But Council Member Burkley Allen, sponsor of the measure, told Fox News it was passed due to strong community engagement.

“In these discussions, the primary concern was the effect on the neighborhoods,” Allen told Fox News. “The concern was largely about properties where the owner was not on-site to be affected by and accountable for tenant behavior.” Allen explained the only way to ensure peaceful neighborhoods was to limit the percentage of rental homes.

Cities across the country, like New York City, San Francisco, and Santa Monica, also have recently proposed or set regulations against Airbnb rentals – and Danville, Calif., has banned the service altogether.

An Airbnb representative, Nick Papas, told Fox News the company wanted to enhance their relationships with cities, and prove they can be, and are, good partners with cities.

“We understand that every city is different,” Papas told Fox News. “As we move forward, we will partner with individual cities to address their unique policy needs.”

According to Boucek, Metro Nashville wants the case to be thrown out, but the Beacon Center of Tennessee has filed a motion for injunction barring enforcement during the case.

“We’ve arrived at a point in society where we think what you do in your bedroom is no one’s business, so why is it anyone’s business what you do with your bedroom?” Boucek said.