Transient Rental Ban Does Not Violate Fair Housing Act

The Court was required to address a number of issues in deciding the Town's motion to dismiss, including standing, ripeness, and abstention. But the most interesting aspect of the decision came in its treatment of the merits, where it determined at a threshold level that plaintiffs could not state a claim under the Fair Housing Act since the vacation rentals were not “dwellings” within the meaning of the Act in the first place.

The underlying objective of the action was seemingly to remove the regulatory impediment to plaintiffs' business — a judicial remedy for what should probably more appropriately be an appeal to the legislative body. Although plaintiffs' commercial interest — i.e., renting out what are self-described as “luxury” vacation homes — seems to have little to do with the laudable goals of the Fair Housing Act, this incongruity was not cited by the Court as a basis for its dismissal.

The FHA makes it illegal to discriminate in the sale or rental, or otherwise make unavailable or deny a dwelling to a buyer or renter because of race, color, religion, sex, familial status, handicap, or national origin. 42 U.S.C. §3604(f).

The FHA defines a “dwelling” as:

Any building, structure, or portion thereof which is occupied as, or designed or intended for occupancy as, a residence by one or more families, and any vacant land which is offered for sale or lease for the construction or location thereon of any such building, structure, or portion thereof.

42 U.S.C.§3602(b).

Although the FHA expressly defines “dwelling,” that definition employs the term “residence,” which is not defined by the Act. Nevertheless, courts have had occasion to define the contours of the types of properties to which the FHA applies. In determining what constitutes a “dwelling” under the FHA, courts have found that “lodgings for transient guests” do not qualify and thus the FHA does not apply to same. As set forth in Germain v. M&T Bank Corp., 111 F. Supp. 3d 506 (S.D.N.Y. 2015), “[m]ost courts that have considered the scope of the term [residence] have relied on the definition used in United States v. Hughes Memorial Home, 396 F. Supp. 554 (W.D.Va. 1975), which is a 'temporary or permanent dwelling place, abode or habitation to which one intends to return as distinguished from the place of temporary sojourn or transient visit.” Transient uses, more like hospitality accommodations — motels, inns, hotels — are not residences which qualify as dwellings under the FHA.

Here, the subject properties are single-family homes in a residential zone and are thus “residences” within the broad conventional sense of that term. However, the District Court held that the determination of whether a building is dwelling or residence within the meaning of the FHA “does not turn on fixed classification of the building” but rather is analyzed in terms of the actual use and function of the property contemplated or intended by the particular plaintiff alleging discrimination. Thus, while the buildings at issue are, by physical description, residential houses, the admittedly intended use was as rental properties for tourists and vacationers.

Applying these standards, the court held that the rental properties at issue in the action were not dwellings within the meaning of the FHA, and thus that the Complaint failed to state a claim under the Act. The court noted that “the admitted use for the subject properties [is] to provide lodging for transient guests in a manner similar to that of hotels and motels, which do not qualify as dwellings under the FHA.”

In addition to this threshold deficiency, the court found that the Complaint failed, in any case, to state a disparate impact claim under the FHA as it was devoid of factual allegations to support the conclusory assertion that the ordinance “makes it all but impossible for the vast majority of families with children to rent a residential house in Riverhead.”

Finally, the court held that the Riverhead ordinance is not impermissibly vague, either on its face or as applied to the plaintiffs. As the court recognized, the ordinance is clear as to what is prohibited — rentals of properties for 29 days of less. Indeed, it is presumably because the plaintiffs acutely understood that the provision clearly proscribed the exact activity in which they wished to engage, renting properties for shorter durations, that it brought the action.

It is likely that the courts will be called on again to address issues arising out of this fluidly evolving marketplace. Indeed, New York's Airbnb law, referenced at the outset of this article, is presently under attack in an action pending in the Southern District of New York (see, Helms Realty Corp. v. City of New York, et al., 17-cv-4662). However, in the absence of facts or circumstances markedly different from those presented in the Riverhead action, it does not appear that the Fair Housing Act (FHA), the principal tool relied upon by the plaintiffs, is a viable vehicle for challenging laws that restrict short-term rental of real property.

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Timothy Hill is an Associate at Sinnreich, Kosakoff & Messina, LLP. The firm represented the defendants in the Riverhead case.