Out-of-staters challenge Hood River’s short-term rental policy in the 9th Circuit

U.S. District Court Judge Adrienne Nelson dismissed the case, Panabaker et al. v. City of Hood River, last April, but the plaintiffs appealed and both parties presented oral arguments to a three-judge panel of the 9th U.S. Circuit Court of Appeals two weeks ago. At issue was Ordinance 2026, passed a decade ago and later amended, which requires that a home intended for short-term rentals be either occupied by the title holder as a primary residence or by a local tenant under a 12-month lease at minimum.

“A Hood River resident can rent a home to short-term guests simply by submitting ministerial paperwork, but the out-of-state owner of a materially identical Hood River property cannot do the same,” said attorney Christopher Michel. “That separate and unequal system is pragmatic discrimination.”

Out-of-state owners must not only find a tenant, he continued, but one with three separate means of identification who’s willing to vacate the property at varied times, depending on how the rental is configured. The tenant must also live on site for one year before short-term rental eligibility kicks in.

Ultimately, Hood River is violating the Constitution’s “Dormant Commerce Clause” that prohibits state or local laws favoring in-state interests over out-of-state interests, the suit argues, but Senior Circuit Judge Susan P. Graber repeatedly pointed to a third class of homeowners.

“A Hood River resident with a second home is in the same position as your clients who live elsewhere and have a second home. Why isn’t that the appropriate comparison?” Graber asked Michel.

Matthew E. Malmsheimer, the city’s attorney, also highlighted Rosenblatt v. City of Santa Monica. Hood River modeled its amended ordinance after Santa Monica’s policy, which faced a similar dormant-commerce-clause challenge that the 9th Circuit struck down in 2019. And during a personal visit to Southern California, Malmsheimer recalled how a full-time tenant occupied an accessory dwelling unit (ADU) while he stayed in the main house.

“It’s not that big a stretch to turn a long-term rental … into a profit-bearing, short-term rental. That’s the exchange that the City of Hood River has asked plaintiffs to make,” Malmsheimer said. “Make it something that works for our town that has a very serious problem, given the nature of the quick growth that’s happened over the past ten years.”

Hood River’s City Council pursued the policy for fear of short-term rentals reducing units available to year-round workers, the original ordinance states, and clusters of vacation homes eroding neighborhood quality. Still, Senior Circuit Judge Richard R. Clifton felt the period for establishing residency was too long and “unusually burdensome.”

A written ruling from the 9th Circuit is expected in the coming months.