Can the Government Arbitrarily Restrict Property Rights?

By Katelynn McBride

Crushing property rights sometimes seems like a government pastime. Winona, a river town in southeastern Minnesota, is the latest offender with its destructive ban on renting out homes.

In Winona, only 30 percent of homes on a given block may receive a government-issued license entitling the owner to rent them out. As soon as 30 percent of the properties on a block obtain rental licenses, no other property on that block may receive a rental license. That means if 30 percent of your neighbors have already secured rental licenses, you will be turned away even if your neighbors with licenses live in their homes and don’t rent them out and even if your home is perfectly safe and your tenants would be perfectly law abiding.

Winona homeowners who have been denied the right to rent out their homes have joined with the Institute for Justice Minnesota Chapter to challenge the city’s unconstitutional rental ban in the hopes of protecting the property rights of all Minnesotans.

Ethan Dean owns a home in Winona and he is currently serving as a U.S. advisor in Afghanistan after serving four previous stints in Iraq. While working abroad, Ethan was left with a home that he could not sell and that the government would not allow him to rent. Ethan has been granted a temporary permit, but it will expire soon. Because of this senselessly heavy-handed and ill-conceived government policy, he is left not knowing how he will pay his mortgage in the long term.

Ethan and three other Winona homeowners represented by IJ are challenging Winona’s rental ban as violating the Minnesota Constitution. IJ’s lawsuit is the first challenge to such rental bans, which are slowly spreading from Winona to other Minnesota cities. The goal is to nip these acts of grassroots tyranny in the bud before they spread elsewhere.

The effects of rental-property bans can be devastating. When life’s circumstances change and Winona homeowners must unexpectedly move to another town to pursue other opportunities, the question of how the mortgage will get paid looms large. In our sluggish economy and housing crash, many homeowners are struggling to sell their homes. Renting is the next-best option for those who do not want to lose a significant amount of money or, worse, lose their homes entirely.

Not only does the rental ban forbid homeowners from covering their mortgages with rental income, but it also damages their property values and their ability to sell their homes in the first place. Potential buyers who may want to rent out a property after purchase lose interest after they learn a property can’t be rented. This pushes housing prices—and homeowners’ ability to sell—down even further.

Your right to use your property should not depend on the actions of your neighbors. This has been long understood, but too often forgotten. IJ’s role is to remind petty tyrants that their power is limited.

Katelynn McBride is an IJ Minnesota Chapter attorney.