Imagine this: You inherit a home in the tiny town of Pacific Grove, California, but it needs a lot of fixing, so you take $50,000 out of savings for the work, based on the understanding that you can rent it out to recover your costs.
Later, you've turned an "unmaintained eyesore to a beautiful oceanfront vacation home," and you want to move on that rental income.
However, the city now says you're not allowed to rent it out after all.
That's the focus of a lawsuit over a move by the city of Pacific Grove that cancels some of the rental permits that homeowners there have had for years.
The Goldwater Institute explained that just months ago, the city adopted a 15 percent density rule.
The rule limits the number of homes that can be rented.
Since the number of homes with rental licenses exceeded the new limit, the city held a lottery to decide which ones would be revoked.
"The city actually set up a ping-pong ball lottery machine usually reserved for bingo games – only in this case, the 'winning' numbers corresponded to 51 devastated homeowners who, after April 2019, will be prohibited from renting their homes unless and until some other homeowner gives up his or her right to rent," the institute said.
"The process for stripping people of their right to share their homes was not based on how long the homeowner had been renting the home, or whether they or their guests had caused disturbances. Instead, the drawing was random, meaning that owners who had racked up numerous complaints were allowed to keep their permits, while responsible homeowners were stripped of theirs," the report said.
The complaint in the Superior Court of California for the county of Monterey says the homeowners who had rental licenses had a civil right to continue to generate income from their property.
"The city of Pacific Grove has violated those rights and obligations by adopting Ordinance 18-005, which imposes, among other things a 15 percent density cap on short-term rental permits," the lawyers wrote.
"This means that no more than 15 percent of homes in a given area can be offered as short-term rentals."
The lawyers said the ordinance "deprives plaintiffs of their constitutional right to due process of law under the California and United States Constitutions."
The plaintiffs in the lawsuit are William and Susan Hobbs, and Donald and Irma Shirkey.
Defendants include the city, Mayor Bill Kampe and council members Robert Huitt, Ken Cuneo, Cynthia Garfield, Bill Peak and Nick Smith.
Previously, the city's "transient use licenses" could be obtained by property owners and were indefinitely renewable. They were not revoked unless there was substantial evidence of specific misconduct or code violations.
But the new ordinance now subjects existing licenses to "dissolution."
The case alleges violations of due process, and it asks that the ordinance be tossed.