The legal challenge that could change how Bellingham regulates short-term rentals

Bellingham places certain limits on short-term rentals in single-family neighborhoods — but there’s a lawyer in town hoping to change that. 

Patrick Sutton is a real estate lawyer whose work successfully overturned short-term rental bans in cities across Texas. In April, he applied for a variance, or an exception to Bellingham’s city code, that would allow him to rent out the little house in his backyard in Sehome for less than 30 days at a time. 

The city received 17 letters opposing the variance. Then, in April, the hearing examiner denied the application, citing the prohibition of short-term rentals (STRs) in detached accessory dwelling units (DADUs) in single-family neighborhoods.

However, Sutton recently filed with the Superior Court of Whatcom County to appeal the hearing examiner’s decision.

“The City of Bellingham's position is almost surely going to be that we can't bring a constitutional challenge to their ordinance if we don't exhaust all our remedies locally,” Sutton said. “I'm not saying that we are going to bring such a challenge, but … you definitely can't bring such a challenge if you don't complete your administrative appeal process.”

In 2023, a U.S. District Court judge overturned rental regulations in Austin, Texas, and declared them unconstitutional. Sutton represented the homeowners in that case, arguing that the ban violated the Interstate Commerce Clause. 

“Same thing, city said you can't rent out your house unless it's your primary residence,” Sutton said. “That just means every other citizen of every other state is not entitled to rent out their home for short terms. Only residents of the state of Washington, and particularly the city of Bellingham, are entitled to do that — and I'm sorry, that's just not the way our system of government works.”

The City of Austin prohibited non-owner-occupied STRs, which it classified as Type Two STRs, in single-family neighborhoods. 

“The phase-out and prohibition on new Type Two STRs in residential areas were adopted because of council concerns related to potential displacement of families and disturbances to neighbors,” said Tara Long, a public information specialist at Austin’s Development Services Department.

Similarly to Austin’s old regulations, Bellingham only allows STRs in single-family neighborhoods if they’re owner-occupied. Sutton said his primary legal argument against these regulations is substantive due process.

“We rely on that because none of the cities have any data, studies or evidence showing that these harms that are complained of are any different from a two-week rental than from a two-year rental,” Sutton said. 

According to Kurt Nabbefeld, Bellingham’s development service manager, the city began regulating STRs in May 2019 after learning that between 350 and 380 unregulated STRs were operating in Bellingham. 

“When we started drafting up the rules and regulations, we had some discussions with both our planning commission and city council as to what the appropriate level of regulation should be,” Nabbefeld said. “I think at that time, we were very concerned about out-of-town buyers buying up potential houses and utilizing them for the short-term rentals … not to provide more permanent housing for our community members.”

Sheri Russell, an instructor at Western who has lived in Bellingham for 16 years, said that there are not enough long-term rental options available to meet the needs of student renters. 

“I have had many current and past students who cannot find affordable rental options in Bellingham, especially near campus,” Russell said. “These students are or have been living in vehicles, on friends' couches and/or commuting between 45 minutes to two hours each way to get to campus.”

Keaton Miller is a professor of economics at the University of Oregon whose research has looked into the market impacts of short-term rentals. According to Miller, different types of short-term rentals have varying impacts on housing supply. For example, he says owner-occupied rentals have minimal effects. 

“I have some colleagues that will take their family camping on a football weekend, and they'll rent out their house for somebody that wants to come into Eugene and watch the Ducks play football,” Miller said. “He gets some money for renting out his house. It doesn't hurt anybody else because it's not like that housing unit would be used for anything else during that time.”

However, he said non-owner-occupied rentals are different. 

“[A mixed-use hotel and apartment building] is a really good example of how short-term rentals can decrease housing supply,” Miller said. “You have units in that building that could be used for people that need a place to live long term … but instead of that housing unit being available for them, it's used as a short-term rental, which are usually [for] travelers.”

Current regulations allow homeowners to get a STR permit for the house they live in, but they can’t rent other properties for less than 30 days at a time. According to Nabbefeld, this means that most housing stock remains owner-occupied or is rented out to long-term tenants, but people can still rent out their place while they’re out of town. 

“[The city] balanced the need for this transitory type of use with the longer-term housing needs for our community members,” Nabbefeld said. “They essentially said, we support having short-term rentals in our community but under some certain rules and regulations.”

Christine Furman is a member of the Sehome Historical Group. She has experience working with Road2Home, a local non-profit serving Bellingham’s houseless population, and was one of the people who wrote a letter to the city objecting to Sutton’s application for a variance.

“The city was very thoughtful in creating these ordinances,” Furman said. “We have a shortage of affordable housing, and so the ADU ordinances are in place to partially address that.”

Furman said that the limits on renting out DADUs short term help protect the historic and community aspects of the Sehome neighborhood. 

“That's not to say ADUs can't be built, but they [can’t bring] tiny hotels into our neighborhood,” Furman said. 

Another letter writer, a long-time Bellingham resident and homeowner, said she had concerns about allowing more STRs in single-family neighborhoods after seeing their impacts firsthand. [Source requested anonymity due to fears of being targeted by Sutton.]

When her neighborhood had more short-term rentals, she said there was not much of a sense of community. Now that there are more permanent residents, that’s changed.

“People look out for one another,” she said. “In the age of alienation that we live in, that is a really exceptional thing.”

The homeowner also said she was concerned that STRs make it harder for students to find long-term housing.

“Not only are the students at a disadvantage around [finding rentals], but are then at an added disadvantage when vacationers decide that they want to come and use this as a springboard to go to the mountains or go yachting,” she said. “I mean, isn't that why we have hotels?”

Like Furman, the anonymous homeowner supported the city’s regulations. 

“STRs are the business of hotels, motels and other hospitality facilities in areas already zoned for commercial use,” she said.

Sutton said he read the 17 letters sent to the City in opposition to his variance, which were available through the public record. 

“We were very surprised that people we didn’t know were … attacking us personally for wanting to use our accessory dwelling the way we want to use it,” Sutton said. 

Mark Harmsworth is an author at the Washington Policy Center, a think tank that promotes free-market solutions. He expressed doubt over the need to regulate homeowners’ abilities to rent short term when there are already other laws on the books. 

“If you've got a renter in there, whether it's short term or long term, they're going to have to abide by the city regulations around noise, around parking, around the number of occupants in the building — and they have to be a good neighbor,” Harmsworth said.

On May 6, Nabbefeld said there were 135 licensed STRs in Bellingham. Host Compliance, the organization the city hires to monitor STR listings on sites like Airbnb and VRBO to enforce code requirements, identified 20-30 unauthorized STRs operating in Bellingham around that time.

“There is an Airbnb on my street which is not legal, and it does bring in people that don't care about the neighborhood,” Furman said. “She rented to students before. … there were always students until she turned it into an Airbnb.” 

Harmsworth said that the city’s regulations can result in “black market” rentals, like those that appeared in New York City after its Airbnb ban, because many people will choose to rent out their properties anyway. 

“There's no protection … for the renter or the property owner in that case,” Harmsworth said. 

Sutton said that homeowners should be the ones to determine how they use their property.

“What we're pointing out to judges around the state is that it is fundamentally at odds with everything we've ever thought about private property ownership to have the government or your neighbors decide how long someone stays on your land,” Sutton said. 

While Sutton’s appeal has already been filed, it has yet to be seen whether his efforts will lead to a higher court overturning Bellingham’s STR regulations as he did in Austin. 

“If the ban is overturned, what you're going to see is some people are going to start taking advantage of the ability to have short-term rentals,” Miller said. “I would expect that people …  might take a unit and transition it from a long-term rental to a short-term rental or something like that, and that will lead to an increase in housing prices and maybe a modest increase in tourism to the area.”

Furman said she wants to keep STRs out of Sehome to maintain a sense of community. 

“I want people to be invested in the neighborhood, invested in the community and invested in their neighbors,” Furman said. “I don't think you can put a dollar figure on that, but it's valuable and important.”

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