Reported / Citable
Background
The City of New Braunfels enacted a comprehensive zoning ordinance in 2006 that prohibited short-term rentals (stays of fewer than 30 consecutive days) in districts zoned Residential, while allowing them with a special use permit in certain commercial districts. The ordinance was amended in 2011 to expand those restrictions further. Property owners wishing to conduct short-term rentals could apply for a zoning change, but such changes required City Council approval.
All of the plaintiffs—seven individual property owners and a production company—purchased their properties in Residential-zoned districts after the ordinance’s STR prohibition was already in place. Most applied for a zoning change and were denied. After the City issued Notices of Violation to some plaintiffs who had rented illegally, the group sued in federal court, claiming the ordinance violated the Due Process and Equal Protection Clauses of both the U.S. and Texas Constitutions.
The district court dismissed the case in 2020, but a prior Fifth Circuit panel vacated and remanded for discovery in 2023 without reaching the merits. Following discovery and cross-motions for summary judgment, the district court again ruled for the City on all claims. The plaintiffs appealed.
The Court’s Holding
The Fifth Circuit affirmed on both claims. On due process, the court held that Texas law does not recognize a constitutionally protected property interest in “the right to lease one’s home on a short-term basis.” Because a due process claim requires a protected property interest defined by state law, and Texas appellate courts — most recently the Fort Worth Court of Appeals in Modern Builders, LLC v. City of Fort Worth (May 2026) and the Houston First Court of Appeals in City of Dickinson v. Crystal Cruise Investments (February 2026) — had squarely held that no such vested right exists, the plaintiffs’ due process claims failed at the threshold. The court distinguished cases involving retroactive ordinances or property owners who had been renting before a ban was enacted, noting that all plaintiffs here purchased their properties after the prohibition was already in force.
On equal protection, the court applied rational-basis review and upheld the ordinance’s distinction between rentals of 29 days or fewer (prohibited in Residential zones) and rentals of 30 days or more (permitted). The court found that the City’s interest in preserving the residential character of its neighborhoods provided a sufficient rational basis. The geographic line-drawing — including the 29/30-day cutoff and the boundary between commercial and residential zones — was reasonable legislative judgment that courts are not empowered to second-guess absent evidence of improper motive. Plaintiffs presented none.
The court further noted that the City’s ordinances were the product of a deliberative multi-year process, including public hearings and workshops, and that complaints from citizens about disruption caused by short-term rentals supported the legislative judgment. Because rational-basis review does not require empirical proof and permits “rational speculation,” the court found no equal protection violation under either the federal or Texas constitution.
Key Takeaways
- Under Texas law, there is no vested or constitutionally protected property right to lease one’s home on a short-term basis — a right to lease in general does not encompass a right to lease for fewer than 30 days.
- Purchasers who buy property after a short-term rental ban is already in place acquire no protected interest in the prohibited use, even if neighboring properties operate as short-term rentals.
- Municipal STR bans survive rational-basis equal protection review when they are tied to preserving residential neighborhood character, and courts will not second-guess the specific lines drawn (30-day cutoff, district boundaries) absent improper motive.
- Federal courts applying Erie will follow intermediate Texas appellate court decisions holding no vested STR right exists, until and unless the Texas Supreme Court rules otherwise.
Why It Matters
This decision reinforces the broad authority of Texas municipalities — and likely other cities within the Fifth Circuit’s jurisdiction — to zone against short-term rentals without fear of federal constitutional challenge. Property investors who purchase homes in Residential-zoned areas subject to existing STR prohibitions have no recourse under due process doctrine; their remedy, if any, lies with the city council or state legislature.
The ruling also closes a significant litigation avenue that had been actively pursued across Texas. By making an Erie prediction that squarely aligns with two 2026 Texas intermediate appellate decisions — and by noting that the Texas Supreme Court has so far declined to intervene — the Fifth Circuit signals that the constitutional debate over municipal STR bans is largely settled for now in Texas, absent a contrary ruling from the state’s highest court.