The U.S. Court of Appeals for the Fifth Circuit has handed New Braunfels a decisive win, ruling that property owners do not have a constitutional right to run short-term rentals in most residential neighborhoods. In a decision that keeps the city's 30-day cutoff firmly in place, the panel signaled that federal courts are inclined to let local governments draw their own lines on transient lodging.
The three-judge panel upheld the Western District of Texas' grant of summary judgment for the city, concluding that Texas law "does not recognize a protected property interest in 'the right to lease one's home on a short-term basis,'" according to CaseMine. The court also found that the ordinance passes rational-basis equal-protection review because the city had plausible reasons for trying to preserve residential character and protect property values. The opinion is brief but blunt: "finding no reversible error, we affirm the judgment of the district court."
New Braunfels has treated short-term rentals as a distinct land use for years. The city's code, adopted in 2006 and amended in 2011, defines short-term rentals as one- or two-unit dwellings rented for fewer than 30 consecutive days and prohibits them in districts zoned "Residential," according to the City of New Braunfels. Permitted short-term rentals are still allowed in other zones, but those units must be registered where the use is authorized.
The lawsuit came from six homeowners and an LLC, including Rafael Marfil and Verge Productions, who argued the ordinance unconstitutionally blocks them from renting out homes for stays shorter than 30 days, as reported by San Antonio Express-News. Federal Judge Alan Albright entered judgment for the city in December 2024, and the appeals panel later affirmed that result after reviewing the record, as reported by Texas Lawbook.
Why the court sided with the city
The Fifth Circuit zeroed in on two key questions. First, it held that under Texas law the plaintiffs did not have a protected property interest in a general right to lease their homes on a short-term basis, especially where the restriction was already on the books when they bought their properties. Second, applying a lenient rational-basis standard, the panel said New Braunfels' stated aims of preserving neighborhood character and preventing nuisances comfortably justify the 30-day line, as summarized by Take the Fifth.
Legal implications for hosts and cities
The ruling highlights an important nuance: Texas courts have recognized a vested right to keep operating an existing short-term rental only when the owner was already renting before the city imposed new limits. For buyers who came in after New Braunfels' 2006 and 2011 rules, the Fifth Circuit's interpretation sharply narrows the path for federal due-process challenges and steers future fights toward state and local forums instead. CaseMine reproduces the court's discussion of that distinction.
What’s next
City officials told local media they see the decision as confirmation that New Braunfels can keep enforcing its short-term rental ordinance, while lawyers for the homeowners say they are weighing further appeals, as reported by San Antonio Express-News. For now, cities have wide latitude to clamp down on short-term stays in residential zones, though both regulators and property owners are bracing for the battle to potentially resurface in state court or at a higher level of federal review.
