California Coastal Cities Can Ban Short-Term Rentals

Full text of decision:  Johnston v. City of Hermosa Beach, Cal: Court of Appeal, 2nd Appellate Dist., 5th Div. 2018 

California City Can Ban Short-Term Rentals
(“Calif. Appeals Court Says City Can Ban Short-Term Rentals,” Law360 – Real Estate, January 18, 2018)

A California appeals court denied last week an appeal by homeowners in Hermosa Beach challenging a city ban on short-term rentals (less than 30 days).  According to the homeowners, the city ban violated, among other things, the California Coastal Act, which regulates “coastal programs.”  The court disagreed, stating that the Act (and the Commission charged with enforcing the Act) is primarily concerned with issuing coastal development permits, not city-enacted zoning rules.  At the lower court level, the homeowners had asserted (and lost) claims that the ordinance violated their First Amendment rights (commercial speech) and real property rights.

 

Excerpts:

The City of Hermosa Beach (the City) enacted an ordinance expressly prohibiting short term vacation rentals (STVR’s) in areas zoned for residential housing. Because some residential areas are located in the “coastal zone,” plaintiffs contend the California Coastal Act of 1976[1] (Coastal Act) preempts the ordinance. Plaintiffs challenge the trial court’s denial of the request for a preliminary injunction.


 

3. “Family” means “two or more persons living together in a dwelling unit, sharing common cooking facilities, and possessing the character of a relatively permanent single bona fide housekeeping unit in a domestic bond of social, economic and psychological commitment to each other, as distinguished from a group occupying a boarding house, club, dormitory, fraternity, hotel, lodging house, motel, rehabilitation center, rest home or sorority.”

 


 

The pros and cons of permitting STVR’s in residential zones were debated in the City government for a number of years before passage of the Ordinance. Before enactment of the Ordinance, STVR’s were not expressly permitted in areas zoned as residential. Residential zoning is the most restrictive, and uses not expressly permitted are prohibited.

Plaintiffs argued the ordinance was unconstitutional because it (1) violated the Coastal Act; (2) banned commercial speech (i.e., advertising residences for STVR use); and (3) deprived them of a vested right to use their properties for nonconforming commercial purposes in a residential zone and generate income.

The trial court engaged in a two-part analysis and denied the request for a preliminary injunction. It issued an amended written order on October 17, 2016. The trial court first determined plaintiffs did not establish a probability of prevailing on the merits of any of their theories, specifically finding:

1. The Ordinance does not violate the Coastal Act and does not constitute a “development” as that word is used in the Coastal Act, which would require a coastal development permit (CDP).

2. Plaintiffs’ constitutional right to free speech was not implicated because “the First Amendment does not protect commercial speech advertising illegal activity,” citing Central Hudson Gas & Elec. Corp. v. Public Service Commission of New York (1980) 447 U.S. 557, 562-564.)

3. Plaintiffs had no constitutionally protected vested rights because the pre-Ordinance use of their properties as STVR’s was not legal or permitted.

 

C. Issues on Appeal

In this court, plaintiffs have not pursued the free speech or vested rights claims. (Ewing v. City of Carmel-By-The-Sea (1991) 234 Cal.App.3d 1579.) Rather than reprise their trial court argument that the Ordinance violates the Coastal Act, they recast it and assert the Coastal Act preempts the Ordinance. We disagree.

1. The Coastal Act Does Not Preempt the Ordinance

 

As discussed earlier in this opinion, plaintiffs also argue various “actions of the Coastal Commission make clear that the ban on STVR’s within the Coastal Zone is an unconstitutional violation of the Coastal Act.” They rely primarily on documents—a number of which were Coastal Commission staff reports—this court has declined to judicially notice. Moreover, the Coastal Commission did not seek leave to intervene in the trial court, nor did it seek to submit an amicus brief in this court.