Last Friday, the Texas Supreme Court ruled that short-term rentals are not a commercial use of property. The case involved a home owner association that claimed short-term rentals were a commercial use and violated its deed restrictions (also called covenants). Patrick Sutton, the home owner’s lawyer, said,
This is about as strong of a property rights type opinion as one can imagine. It is broadly applicable to [city] ordinances and to deed restrictions — it tells us what nine justices on this current court think about people using their land.
Sutton implies that deed restrictions somehow violate property rights. In truth, covenants are an application of property rights.
Deed restrictions are voluntary, contractual limitations on how one may use a parcel of property. Because they are voluntary (unlike laws and regulations), an individual has a choice. If he finds the covenants too restrictive, he can abstain from purchasing the property.
We are regularly subjected to similar restrictions. Our employer might restrict our future actions through a non-compete agreement. A restaurant might restrict what we can wear by establishing a dress code. A consultant might be restricted from disclosing certain information through a non-disclosure agreement. In each instance, an individual has a choice: accept the restriction or find a less restrictive employer, restaurant, or client.
The right to property means the freedom to create, use, keep, trade, and dispose of material values. This includes the freedom to voluntarily restrict one’s use of property.
Unfortunately, many see deed restrictions as a violation of property rights. They see a similarity between covenants and regulations–both impose restrictions on property owners. But there is a fundamental difference between deed restrictions and regulations. The former are voluntary and contractual; the latter are mandatory and coercive.
Equating these two fundamentally different activities poses a real threat to property rights. If deed restrictions and regulations are the same, then does it really matter who imposes them? Those who want government control of property will answer “no.” And defenders of property rights will be morally disarmed.
If we want to defend property rights, then we must recognize deed restrictions as an application of the right to property.