South Lake Tahoe’s STR ban overturned

Member since 2023 · 113 posts · 129 votes

This is big news in my neck of the woods. STRs have been mostly banned in the City of South Lake Tahoe since a voter initiative passed in 2018. It created a carve-out though for locals to STR their primary residence up to 30 days per year.

The court found that favoring local owners over non-locals violated the dormant commerce clause and they invalidated the whole measure.

Lawsuits against the city expected soon over lost STR revenue.

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John UnderwoodPro Member

Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes

Quote from @Craig Jones:

The court found that favoring local owners over non-locals violated the dormant commerce clause and they invalidated the whole measure.

Lawsuits against the city expected soon over lost STR revenue.

That's good news.

Do you think they will create a new law that bans STRs equally amount residents and non residents in response to this law being overturned?

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John UnderwoodPro Member
Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
1y
Quote from @Craig Jones:

This is big news in my neck of the woods. STRs have been mostly banned in the City of South Lake Tahoe since a voter initiative passed in 2018. It created a carve-out though for locals to STR their primary residence up to 30 days per year.

The court found that favoring local owners over non-locals violated the dormant commerce clause and they invalidated the whole measure.

Lawsuits against the city expected soon over lost STR revenue.

That's good news.
Do you think they will create a new law that bans STRs equally amount residents and non residents in response to this law being overturned?
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- Craig Jones
  OP
  Member since 2023 · 113 posts · 129 votes
  1y
  It'll be interesting to see what happens. The original ban was a voter-sponsored initiative and it barely passed. Ostensibly it was about protecting LTR inventory for locals, but I don't think it accomplished that. I'm pretty sure most of the inventory that was STR before the ban just reverted to 2nd homes that are empty most of the time, or ski leases / summer monthly rentals which have been popular for decades.
  
  I don't think the city government was particularly in favor of it. They recognized that the local economy is almost 100% tourism based. And any gains for locals in terms of LTR inventory / rents would be offset by less money coming into town, fewer jobs, etc.
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Andrew SteffensBusiness Member
Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes
1y
Seemingly good news but will this cause an explosion of supply hurting STR owners in nearby town's income?
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Mark Driskell
Property Manager · Fort Collins, CO · Member since 2024 · 28 posts · 13 votes
1y
Wow, that's a huge ruling! It'll be interesting to see how this plays out. This could set a major precedent for other cities trying to limit non-local STR owners. I wonder if the city will try to rewrite the measure to comply with the ruling or if they'll double down on restrictions in another way. Either way, it sounds like there will be a long legal battle ahead.

Have any local investors weighed in on what this could mean for the market? Are people expecting a flood of new STRs or just more uncertainty for now?
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Michael BaumPro Member
Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
1y
Interesting news. Could have far reaching affects.

Thanks @Craig Jones!
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Bradley BuxtonBusiness Member
Real Estate Agent · NV · Member since 2023 · 1k+ posts · 714 votes
1y
@Craig Jones

Do you think this will make residents reconsider the status quo of not really having any STRs the last few years? What has been the negative economic impact? With the demographic change up at the lake over COVID, there might be a renewed call to ban all STRs outright.

@Mark Driskell the way the law was written was the issue, not the ban itself, had they banned STRs outright then it might have been upheld. It will be a cautionary event for other towns on how to write a ban.

@Andrew Steffens I live on the north side of Lake Tahoe and it will likely not have much of an impact because of the different activities that bring people to the Lake. It would be interesting to know if there are shortages of short term housing. It could have an effect on Stateline in Douglas county because they have fairly tight restrictions on STRs if there in an increase in inventory from the city of SLT. I'm sure on busy weekend but the hotels have many rooms that are available.
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Patrick OsterlingBusiness Member
California/Nevada · Member since 2021 · 54 posts · 41 votes
1y
@Bradley Buxton - My understanding is Measure T was supposed to help with affordable housing and cut down on neighborhood issues, but it doesn’t seem like it actually did much. Housing prices are higher than ever, and I haven’t seen any real proof that it created more long-term rentals. Most of those STRs just turned into second homes that sit empty most of the time or were converted into 30+ day rentals, which still doesn’t solve the housing issue. I’ve talked to several owners recently, and they either leave their place vacant or try to rent it out monthly, but it’s not exactly making housing more affordable for locals. If they push for a full ban, wouldn’t that hurt the local economy even more? South Lake Tahoe runs on tourism, there has to be a better way to find a balance.
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Collin HaysBusiness Member
Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
1y
Watershed moment! Will be interesting to see how things unfold now. A construction boom perhaps?
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Josh St LaurentBusiness Member
Financial Advisor · Stateline, NV · Member since 2023 · 131 posts · 122 votes
1y
I live in Stateline on the NV side and I can say the ban didn't do much for LTRs like they hoped it would. Like a few others said, there is a lot of vacant housing or people trying to rent furnished homes that were setup for STR. It'll be interesting to see how it all plays out. Tahoe revenue comes nearly all from tourism and I can't imagine a scenario where supply exceeds demand. The parking lot at heavenly near my house usually is full and turning people away by 8:45 AM every weekend.
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- Craig Jones
  OP
  Member since 2023 · 113 posts · 129 votes
  1y
  Quote from @Josh St Laurent:
  
  I live in Stateline on the NV side and I can say the ban didn't do much for LTRs like they hoped it would. Like a few others said, there is a lot of vacant housing or people trying to rent furnished homes that were setup for STR. It'll be interesting to see how it all plays out. Tahoe revenue comes nearly all from tourism and I can't imagine a scenario where supply exceeds demand. The parking lot at heavenly near my house usually is full and turning people away by 8:45 AM every weekend.
  
  It's hard to calculate exact numbers, but Tahoe gets 10 - 20 million visitors a year. If it was a national park, it would likely outrank Great Smoky Mountains for the #1 spot. There are surprisingly few hotels, and STR supply is limited by hard caps on the number of permits in every jurisdiction except Washoe County.
  So I'm with Josh. I think the market could absorb quite a few more STRs without making a dent in rates or occupancy. Especially larger properties.
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Vilandre Forestt
Member since 2025 · 2 posts · 0 votes
1y
Yeah, that's huge! South Lake Tahoe has been a battleground for STR (short-term rental) regulations for years, and this ruling could shake things up even beyond Tahoe. The dormant commerce clause argument makes sense—favoring local owners over non-locals can be seen as discriminatory against out-of-state property owners.

I imagine the city will try to come up with new STR restrictions that comply with the ruling while still keeping things in check. But in the meantime, lawsuits are definitely coming from people who lost rental income. Could also open the door for similar legal challenges in other cities with strict STR bans.

Are locals mostly celebrating this, or is there pushback?
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- Craig Jones
  OP
  Member since 2023 · 113 posts · 129 votes
  1y
  Quote from @Vilandre Forestt:
  
  Yeah, that's huge! South Lake Tahoe has been a battleground for STR (short-term rental) regulations for years, and this ruling could shake things up even beyond Tahoe. The dormant commerce clause argument makes sense—favoring local owners over non-locals can be seen as discriminatory against out-of-state property owners.
  
  I imagine the city will try to come up with new STR restrictions that comply with the ruling while still keeping things in check. But in the meantime, lawsuits are definitely coming from people who lost rental income. Could also open the door for similar legal challenges in other cities with strict STR bans.
  
  Are locals mostly celebrating this, or is there pushback?
  
  At one time "locals" might have been mostly service industry employees. But that's a shrinking group who largely commute in from Reno now because it's gotten too expensive to live up at the lake. They blame rising rents on LTRs converted to STRs, which was the genesis of the voter initiative to ban STRs in South Lake Tahoe. But I think it has more to do with the nationwide run-up in housing costs and Bay Area tech wealth consuming Tahoe housing inventory as 2nd homes.
  "Locals" now are just as likely to be small biz owners who have a visceral connection to more visitors = more revenue. Boutiques, galleries, coffee shops, ski & bike rental shop, natural grocery, the employee-owned Ace Hardware -- you name it.
  2 Reply
Jeremy Jareckyj
Real Estate Agent · Salt Lake City, UT · Member since 2020 · 490 posts · 205 votes
1y
Great to see. Hope other cities who have stripped operators of their granted use see this as well and caution to do the same.
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Craig Jones
OP
Member since 2023 · 113 posts · 129 votes
1y
The city council voted April 1 not to appeal to the court ruling that struck down the STR ban.
Last night they voted to reinstate STR permitting in residential areas. Cap of 900 permits, preference given to previous permit holders. Permits not transferable, 2 year moratorium after property sale. Cameras required on parking and trash, decibel meter required.

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