Hendersonville Short Term Rental Regulations

 Last week, Judge Robert E. Lee Davies, appointed as a Special Judge, ruled that the short-term rental regulations in the city of Hendersonville were unconstitutional. The regulations are a little unusual in that they entirely preclude the use of short-term rentals in residential zoning districts.  There have not been too many cases here in Middle Tennessee dealing with these short-term rental issues (other than in municipal courts). This may be a significant case as it heads up to the Tennessee Court of Appeals.

The other interesting aspect of the case is that while the court found that the short-term rental zoning regulations met the rational basis test, it concluded that the ability to lease, or short-term basis, property to others was a fundamental constitutional right, and applied the compelling governmental interest test  concluding that the city did not demonstrate compliance with that heightened standard. I don't know of any other cases which have concluded that the right to lease property in this manner would be a fundamental constitutional right. I think it is unlikely on appeal that the Court of Appeals will agree with that proposition. In fact, since zoning laws so often impact property rights, concluding that some or all of zoning regulations have to comply with the strict scrutiny standard would lead to the invalidation of many zoning regulations across not only Tennessee but in any jurisdiction which reach that result. Just for an example, the subject property in this case is zoned residentially. That means that you can't lease it to a commercial or industrial use either. That means that the owner of the property can't use it for a commercial or industrial use. Is that a violation of any fundamental constitutional right? Both the US Supreme Court and the Tennessee Supreme Court have concluded that such regulations are entirely appropriate and meet the rational basis test.

In fact, in the leading federal case, Euclid v Ambler Realty, the US Supreme Court spent several paragraphs detailing the harmful impacts of apartments on surrounding residential properties. While the court's view in that case is certainly antiquated by modern standards, some of the concerns articulated concerning long-term rentals are certainly now reflected in the concerns regarding short-term rentals.

It seems likely that the Tennessee Court of Appeals would conclude that the rational basis test applies. For example, in Anderson v Metro Nashville, 2018 WL 527104 (Tenn. App. 2018), the court  concluded that a 3% cap on non-owner occupied short-term rentals was a monopoly but one which was justified because it "clearly b[ore] a legitimate relation to a valid end," basically the same test as the rational basis test. This does not necessarily mean that the Hendersonville short-term rental regulations would be upheld; while it is certainly unusual for a governmental regulation to be invalidated based on the rational basis test, the Court of Appeals could certainly so conclude. Having said that however, it would seem unlikely.