Sam Ribakoff

(CN) — San Diego ordinances regulating short-term rentals are not discriminatory, a federal judge ruled on Tuesday, mostly ending a monthslong legal fight between the city and a pro-vacation rental nonprofit over the rules.

U.S. District Judge M. James Lorenz, a Clinton appointee, also found the rules do not violate the Fair Housing Act or the U.S. Constitution after the nonprofit argued they limited the ability of low-income, Black and Hispanic people with large families to access beaches. Lorenz dismissed much of the case and remanded the rest of it back to California state court.

The lawsuit stems from a city ordinance passed in San Diego in 2021 to create a tiered licensing system to regulate short-term rental units. San Diego later also enacted a second ordinance clarifying those rules.

Short-term rental units — often colloquially called "Airbnbs" after one of the biggest companies in the industry — are properties that people rent out for less than a month a time, often for vacations or remote work opportunities. San Diego adopted the new rules in an effort to preserve the city's already strained housing supply.

Under the tiered licensing rules of the ordinance, tiers one and two are available to people who turn at least part of their primary residence into a short-term rental. The city offers an unlimited number of such licenses.

Tiers three and four, on the other hand, are available to property owners who want to rent out a property where they don't live. They're given out by lottery if the number of applications exceeds the number of licenses, and people cannot have more than one.

Tier four licenses are required for Mission Beach, a popular vacation destination near the heart of San Diego, whereas owners can apply for tier three licenses elsewhere.

Enter the Short Term Rental Alliance of San Diego, which last November sued the city in federal court over the rules.

The lawsuit raised a number of legal claims, but one of the group's core arguments focused on alleged racial discrimination. Short-term rentals are "peculiarly suitable for large group gathering and accommodations," the group argued, and regulating them would "disproportionately affect large groups."

Because "Hispanic households are larger than those of many other demographic groups," the ordinances disproportionately affected that community, the nonprofit argued. It also argued that the new rules decreased "the accessibility of beaches and the coast to low-income persons," which the group said harmed both Black and Hispanic people.

The group raised other claims too, including arguing that the rules violated the Fair Housing Act and the 5th and 14th Amendments, including for allegedly unconstitutionally limiting the ability of homeowners do what they wished with their properties and allegedly "taking" properties "without compensation." The group also argued California was undermining its own "public policy goals designed to preserve accessibility to coastal areas for low income groups."

These arguments may have been novel, but they were not particularly convincing to Judge Lorenz.

In his order, Lorenz noted that at least at one point, around 16,000 rental units across the city were being used as short-term rentals, preventing them from being rented or sold as permanent residences. This fact was part of San Diego's "stated purpose" for the rules, Lorenz wrote.

Because short-term rentals that are occupied do not remove a unit from the housing stock, it made sense for San Diego to regulate them differently. And besides, all of this was a "proper exercise" of the city's authority, Lorenz wrote.

“Preservation of housing stock is a proper exercise of the City’s police power in regulating land use,” the judge wrote in his opinion.

The city also alleged that rental units with non-permanent residents were more likely to cause negative impacts to the surrounding community, including noise, trash, and parking problems. Preserving the character of a neighborhood and quality of life are legitimate goals of government regulation, and the nonprofit's arguments on this front were "unsupported by law," he wrote.

Lorenz was also skeptical of claims that the ordinance violated the constitutional rights by depriving property owners of their rights. The rules, he noted, applied "to hosts rather than owners."

As for claims that the rules discriminated against low-income, Black and Hispanic people, those too fell apart under scrutiny from the judge. In its own filings, the city of San Diego claimed the nonprofit was misrepresenting its mission after the group allegedly changed its bylaws days before filing suit to add in language about advocating on behalf of guests and tenants.

Regardless of what Lorenz thought of these arguments, he was skeptical that the Short Term Rental Alliance of San Diego was the right group to bring these claims. The organization — a group primarily focused on rentals and property rights — lacked standing to allege discrimination against Hispanic and Black people, he ruled.

Neither the city of San Diego nor the Short Term Rental Alliance of San Diego returned requests for comment by press time.