Last Thursday, the 9th Circuit Court of Appeals dismissed a class action suit brought against the City of Santa Monica that challenged the City’s short-term rental ordinance on the basis of the dormant Commerce Clause. Rosenblatt v. City of Santa Monica.

The City’s ordinance prohibits property rentals of 30 days or less but has an exception for rentals where a primary resident remains on the property. A resident and homeowner in Santa Monica who rents out her house on Airbnb filed a lawsuit against the City claiming that the ordinance directly and indirectly regulated and burdened interstate commerce in violation of the dormant Commerce Clause. She also argued that the real purpose for the ordinance was to increase demand for the City’s luxury hotels that pay a 14% hotel tax to the City after the City experienced sharp declines in hotel tax revenues.
In upholding the dismissal of the case, the Court found that the complaint failed to allege a Commerce Clause violation because the ordinance does not favor in-state over out-of-state interests. The Court noted that the ordinance applies equally to persons nationwide and to Santa Monica residents who rent a home from another resident. Moreover, the Court also found that the home-sharing exception had no obvious advantage for Santa Monica residents over out-of-state homeowners. At most, the Court found that the ordinance resulted in “less accessible, available, and affordable” travel lodging in Santa Monica. However, this was not enough to meet the high burden of a dormant Commerce Clause claim, and there was a strong enough governmental interest in “preserving the City’s available housing stock and the character and charm which result, in part, from cultural, ethnic, and economic diversity of its resident population.”
Post Authored by Rain Montero & Julie Tappendorf