Another Southeast Tennessee municipality is making war on the Internet, trying to raise a Beijing wall to keep out wealth that flows into town via short-term vacation rentals.
Not that East Ridge turns its back on in-rushing dollars. Its Exit 1 development promises riches to area developers and local people who work for these national brands, and city government is happy with tax revenue gains.
But the city’s planned seizure of Airbnb bans some people from participating in a growing area of local economy — and it regulates and taxes others who want to earn money and provide a service.
A proposed ordinance tells East Ridgers they cannot use their private property for private gain and for personal profit, but that they must become subject to “reasonably tailored regulations to protect the integrity of the city’s neighborhoods.”
The rule requires people to be subject to inspection, The bill talks about the “right of property owners to use their property in all lawful ways,” but breathes administrative flame and brimstone.
It ordains prosecutions and penalties upon non-compliant locals. Gazing beyond the horizon, it snarls against individuals, groups and families staying overnight in East Ridge as visitors from out of town — aliens who “may or may not honor neighborhood mores or exhibit neighborly consideration to the same extent as permanent residents.”
Bill is a prop for zoning
The ordinance defends a legacy municipal claim upon the market: Zoning.
Zoning. A socialization of city life. An homogenization of growth and appearances. A security blanket for incumbent property owners’ valuations. A rejection of the surprise, conflict, rough interaction, contradiction and hurly-burly humanity implied in city life (vs. the quiet solitude in the countryside). Zoning stifles growth, prevents diversity, raises property prices and discourages multiple centers within a city.
Homeowners and taxpayers who live in areas zoned R-1, RT-1 and RZ-1 are barred. The bill delegates to neighborhood associations the authority to set their own rules for short-term vacation rentals.
Arbitrary and capricious rule
The East Ridge ordinance carelessly treads upon the rights of private people as noted in the U.S. Supreme Court’s most-cited case, Hale v. Henkel, 201 U.S. 43 (1906), that says corporations are limited in their rights, while those of individuals are numberless, including the liberty to be free from search and seizure of papers without warrant. ‡ Rental property owned by a corporation, REIT or investor (called “entity” in the bill) might be subject to regulation. But East Ridge illegally targets “persons” who have private economic dealings and are acting in personal capacity.
There’s more. The ordinance appears to make the same constitutional mistake as the ordinance of Chattanooga. It creates an arbitrary and capricious distinction among like legal parties, homeowners among whom there are no legal differences, some being allowed to rent, others being denied. The rental district lines run down the middle of streets, dividing neighbors — one who can use Airbnb, the one across the street who is prohibited.
Kenny Custer, city director of community services who drafted the ordinance with the aid of city attorney Mark Litchford, wisely includes a severability clause allowing the whole to stand if courts strike down a part.
Zoning has not been successfully challenged, though it is constitutionally suspect. It arguably is an abuse of state-delegated police powers to cities, which ostensibly regulate use of private property under a health-welfare-safety mantra, though these claims are rarely implicated in its social engineering by bow-tied elites.
In the socialization of private property, a homeowner’s free use of his house and lot is subject to approval of strangers. In the bill, “adjacent property owner[s]” are given 30 days “to respond” to a city letter about a neighbor’s plan to capitalize on his stagnant real estate.
The ordinance pretends that participants in HomeAway, FlipKey, VRBO, VayStays, Airbnb and others do not have enough self-interest to make their dwellings safe and secure. But the bill’s list of necessaries (smoke alarms) is mercifully short.
Toothless — yay
The bill also misunderstands the Tennessee constitution’s $50 fine rule. This limit on municipal authority may sound unimportant. But the $50 fine rule, unique among American state constitutions, limits municipal corporations’ power to impose fines. East Ridge cannot punish a scofflaw, but can fine an alleged violator $50 for an offense.
Two major Tennessee supreme court cases (City of Chattanooga v. Davis, 2001, City of Chattanooga v. Myers, 1990) make clear that the general assembly forbids cities from punitive action. They cannot punish, just collect debts and fines as a business cost “in the nature of liquidated damages.”
The East Ridge bill statement that “each day that the violation continues shall be a separate offense” is meant to breathe threat. If a homeowner is seven days out of compliance, let’s say, East Ridge could collect $350 for that period of illegality. From one city court case, the thinking goes, the city can bypass the $50 rule and bankrupt the Airbnb operation with a stack of daily fines.
However, the legal doctrine of res judicata (already decided) forbids such tough action. It requires that for a second or third $50 fine to be collected or more beyond that, the city must have filed a second and third separate action. Filing a separate civil case for each day of noncompliance is impractical.
The constitutional constraint is here to stay, and safeguards the liberty of homeowners in East Ridge. So the worst fine anyone could face is $50 from ignoring the bill’s licensing scheme, no matter how many days or months he defy East Ridge’s inspector.
Reassuring to homeowner: Henkel’s ‘no duty to the state’
‡ From Hale v. Henkel, a vast scope of liberty preserved to private individuals: “[W]e are of the opinion that there is a clear distinction in this particular between an individual and a corporation, and that the latter has no right to refuse to submit its books and papers for an examination at the suit of the State. The individual may stand upon his constitutional rights as a citizen. He is entitled to carry on his private business in his own way. His power to contract is unlimited. He owes no duty to the State or to his neighbors to divulge his business, or to open his doors to an investigation, so far as it may tend to criminate him. He owes no such duty to the State, since he receives nothing therefrom beyond the protection of his life and property. His rights are such as existed by the law of the land long antecedent to the organization of the State, and can only be taken from him by due process of law, and in accordance with the Constitution. Among his rights are a refusal to incriminate himself and the immunity of himself and his property from arrest or seizure except under a warrant of the law. He owes nothing to the public so long as he does not trespass upon their rights.
“Upon the other hand, the corporation is a creature of the State. It is presumed to be incorporated for the benefit of the public. It receives certain special privileges and franchises, and holds them subject to the laws of the State and the limitations of its charter. Its powers are limited by law. It can make no contract not authorized by its charter. Its rights to act as a corporation are only preserved to it so long as it obeys the laws of its creation” [Italics added].
_ David Tulis / 92.7 NoogaRadio
