New Braunfels, a German‑flavored city between San Antonio and Austin, has become a Hill Country tourism powerhouse.  The Greater SATX Regional Economic Partnership stated that the city attracted about 3 million visitors in 2023, and that the hospitality industry generated over $1.3 billion in economic impact while supplying about 31 % of local jobs.  Visitors come for water recreation and events. The city boasts two scenic rivers—the Comal and Guadalupe—that are popular for fishing, tubing and swimming and a world‑famous water park.  New Braunfels’ hospitality sites extend beyond the water; the ten‑day Wurstfest celebration celebrates German heritage and draws over 240,000 attendees each November, and the Schlitterbahn Waterpark—voted the world’s best water park by Amusement Today for 25 consecutive years—spreads across 70 acres and features 51 attractions.

Ordinance and lawsuit

Against that tourism backdrop, New Braunfels adopted a comprehensive zoning ordinance in 2006, that restricted short‑term rentals—defined as stays of less than 30 days—in residential districts and allowed them only in certain commercial zones or with special use permits.  The city expanded the regulations in 2011, but kept the prohibition in residential neighborhoods.  Several property owners, including members of the Marfil family, purchased homes in residential districts after the ordinance was enacted and then sought to rent them on a short‑term basis; they applied for rezoning and were denied, and some engaged in rentals illegally, drawing neighbor complaints and city enforcement actions.  The owners sued, claiming that the ordinance violated their rights under the Due Process and Equal Protection Clauses of the U.S. and Texas constitutions.

Court’s reasoning

Writing for the Fifth Circuit Court of Appeals, Judge Stephen Higginson explained that Texas law does not confer a vested property right to lease a home for less than 30 days.  The court observed that property owners do possess a general right to lease their property but that this right does not extend to short‑term rentals, citing state cases that found no constitutionally protected interest in such uses.  Because the plaintiffs bought their properties after the city banned short‑term rentals in residential neighborhoods, the court concluded that they lacked a vested interest; it rejected their reliance on prior cases like Zaatari v. City of Austin and City of Grapevine v. Muns, noting that those decisions involved retroactive ordinances or plaintiffs who had already been renting before bans were enacted.  As a result, the court ruled that the plaintiffs’ due‑process claim failed because they could not identify a protected property interest.

Rational basis for preserving neighborhoods

The court next evaluated the equal‑protection claim and applied rational‑basis review because the ordinance did not implicate a suspect class or a fundamental right.  The property owners argued that distinguishing between rentals of 29 days and 30 days was arbitrary, but the court emphasized that municipalities have broad leeway to regulate land uses and that “equal protection is not a license for courts to judge the wisdom, fairness, or logic of legislative choices.”  The panel concluded that the City of New Braunfels could rationally believe that short‑term rentals threaten the residential character of neighborhoods, citing the city’s record of citizen complaints and public hearings and quoting an earlier California case describing how transient visitors may not participate in local civic life.  Because the ordinance was at least “based on rational speculation” following a five‑year deliberative process and public input, the court held that the regulation satisfied the rational‑basis test and affirmed the district court’s judgment.

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