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4. Judge strikes down part of Austin short-term rental law

Maureen Salahshoor Denver, CO

September 29, 2023

A federal judge has struck down part of a short-term rental (STR) law in Austin, Texas, that bans unhosted STRs in residential areas. The ruling by Senior U.S. District Judge David Alan Ezra addressed a lawsuit filed by STR owners Robert and Roberta Anding.

In 2014, the Andings bought a property next to Lake Austin, intending to operate it as a short-term rental. Austin then passed a new STR law in 2016. The ordinance differentiated between Type 1 short-term rentals, where owners live on-site and claim the property as their primary residence, and Type 2 rentals, which are not occupied by the owners. After the ordinance was passed, the city stopped issuing new Type 2 licenses and was set to phase out all Type 2 rentals by April 1, 2022.

In 2019, the state Third Court of Appeals ruled that two elements of the ordinance were unconstitutional: The requirement that hosts only rent out their primary residences, and rules about how guests can use vacation rentals. 

After the 2019 ruling, the city changed the law to continue to allow Type 2 STRs, but limited them to commercial areas of the city. Only Type 1 licenses have been allowed in residential areas since then.

Now, Type 2 licenses must be allowed in the same areas as Type 1 licenses, according to the city.

According to the 2019 ruling, the Andings should have been eligible to apply for an STR license, but Austin never approved their application because the property wasn’t their primary residence. In the latest ruling, the judge stated that STR hosts who owned their property before the 2016 ordinance went into effect are eligible for a Type 2 license. 

The city is working on updating the online application process for Type 2 licenses in residential zones.  

Read on to learn more.