The Dallas Short-Term Rental Alliance announced Monday the hire of “top litigation firm” Lynn Pinker Hurst Schwegmann to sue the City of Dallas, seeking an injunction allowing short-term rentals to continue operating throughout the city limits.
The Dallas City Council banned short-term rentals from residential neighborhoods in June and vowed to begin enforcing the new initiative in mid-December.
DSTRA board member Lisa Sievers told daltxrealestate.com on Monday that the vast majority of Dallas short-term rental operators are good actors who bring value to their neighborhoods.
“While we support a fair and sensible registration ordinance, we do not support a ban that punishes nearly all STR owners/operators in an effort to root out the few bad apples,” Sievers said. “We are fighting to preserve our right to continue to operate well-managed STRs and provide a necessary and beneficial neighborhood service.”
Olive Talley, an outspoken “Homes Not Hotels” advocate of the “Keep It Simple Solution” approved by the Dallas City Council earlier this year, said she’s not worried about a lawsuit.
“We are not surprised by the threats of litigation from the STR industry,” Talley told daltxrealestate.com shortly after the City Council approved the residential ban. “It’s what STR operators do when they don’t get their way. Litigation is expected and we’re comfortable that the city is in a strong position when litigation comes.”
Dallas Executive Assistant City Attorney Casey Burgess and Director of Communications Catherine Cuellar did not immediately reply to a request for comment Monday.
City of Dallas Code Compliance
Prior to the lawsuit announcement, some STR operators said they had unanswered questions about whether they should continue paying hotel occupancy taxes and how enforcement is going to work.
daltxrealestate.com reached out to the City Attorney’s Office and City Controller’s Office, which is responsible for collecting hotel occupancy taxes, and received the following response from the Communications Department several days later.
“Dallas City Code Article V relating to Hotel Occupancy Tax (HOT) was not affected by Ordinance Numbers 32473 and 32482,” the response states. “All STRs operating legally or illegally are subject to collecting, reporting, and paying HOT; however, a STR may be subject to a citation or other consequence for operating illegally.”
Conversations about the new ordinance and its enforcement are taking place daily at the City of Dallas Code Compliance office, Assistant Director of Code Compliance Jeremy Reed told daltxrealestate.com prior to the lawsuit announcement.
“We’re working toward the plan,” he said. “Our official response is basically the same as it has been, to the timeline and the process. It’s all on our FAQ page. We cannot enforce before Dec. 14. Every STR that ends up being legal will need to register with Code Compliance and get a certificate of occupancy with Development Services.”
Reed said enforcement would not be entirely complaint-driven.
“We’re in the process of procuring software that gives us booking information all across the city in real-time and in the future, like future bookings,” he said. “If the software points us in the direction of a property that is unregistered, we will take the step to issue a notice of violation to let them know that they’re operating out of compliance. We’ll give them a period to come into compliance by getting a registration and certificate of occupancy. If they choose to not do that or stop operating, and the data shows that they continue to operate past that compliance date, then we will issue citations.”
Short-Term Rentals And Hotel Occupancy Taxes
The city’s statistics show that the ordinances passed in June will put 94 percent of existing STRs out of business, the Dallas STR Alliance maintains.
“It does so even though the city’s statistics also show that over 80 percent of STRs have zero 311 or 911 calls,” board members said in a press release. “Over the last three years, the DSTRA worked with the City on several city-initiated task forces to try and craft sensible regulations about the handful of nuisance STR properties. Many of these sensible suggestions were rolled into the new Registration Ordinance also passed by the Council on June 14. But the City Council’s passage of the ban means that fair and sensible solutions have been left behind.”
Increased Communication And STR Budget
The City Council’s Government Performance and Finance Management Committee reviewed the results of an audit last month that found no major issues with the process used by the City Controller’s Office to collect HOT from hotels and short-term rentals.
Manager of Public Information Jennifer Brown said the City Controller’s Office worked with the Code Compliance Department to prepare a letter with information and resources related to Ordinances 32473 and 32482.
“The letter was sent to all STRs currently registered with the CCO to report and pay hotel occupancy taxes,” Brown said. “The CCO will continue to periodically send out these letters to help STR operators prepare for the upcoming enforcement.”
City officials have sent emails and letters to registered STR operators and “suspected operators” at about 3,000 addresses, Reed said.
“We plan to increase the messaging at a higher frequency rate between now and December to drive the point home that if you’re in X, Y, and Z zones, it’s already not legal for you to continue,” he said.
The Dallas City Council adopted a budget on Sept. 20 for Fiscal Year 2024-25 that includes nine new code enforcement positions and a $1.4 million allocation for the new short-term rental registration and inspection program.
The controller’s office will continue to monitor the collection of hotel occupancy taxes, city officials said.
It was unclear late Monday how the lawsuit will affect the planned Dec. 14 enforcement date.
David Coale, an attorney with Lynn Pinker Hurst Schwegmann, said the ban on residential STRs violates constitutional rights.
“Legally, the City’s zoning ordinance swats a fly with a sledgehammer,” he said. “It imposes a drastic ban that is totally out of proportion to any harm identified by City staff. In so doing, the City has violated fundamental rights of STR owners protected by the Texas Constitution of 1876.”
