Federal Judge Delivers Stinging Blow to Clark County's Short-Term Rental Crackdown

A sigh of relief swept through the short-term rental (STR) community in Clark County this week, as a federal judge delivered a significant blow to the county’s controversial new regulations. In a pivotal decision, U.S. District Judge Jennifer Dorsey issued a temporary restraining order (TRO), effectively halting key provisions of an ordinance that many property owners feared would cripple their operations.

The judge’s ruling targets two particularly contentious aspects of the new rules: the stringent 1% cap on STR permits within each unincorporated township’s housing stock, and the requirement for operators to obtain a county business license before even applying for an STR permit.

This development marks a substantial victory for a coalition of Nevada short-term rental owners who filed a lawsuit challenging the constitutionality of the county’s ordinance.

Judge Dorsey’s order, issued just as the county was gearing up to fully implement its new framework, prevents Clark County from enforcing these specific provisions.

This means the county cannot deny applications based on the permit cap, nor can it refuse to process applications because an operator lacks a county business license at the time of application. The judge found that the plaintiffs demonstrated a strong likelihood of success on the merits of their claims, suggesting potential violations of constitutional rights.

The "business license first" requirement was a major point of contention.

Judge Dorsey highlighted that this provision essentially created an "insurmountable hurdle" for many potential applicants. Given that the county requires a physical office or place of business within Clark County to obtain a business license – something many individual STR operators do not possess – it effectively barred a significant portion of the market from legally operating.

The judge noted that the county provided no clear explanation for this prerequisite, deeming it arbitrary and potentially a form of "prior restraint."

Similarly, the 1% permit cap came under fire. The plaintiffs argued that such an arbitrary limit severely restricted property owners' ability to utilize their assets and could lead to an unfair lottery system for permits.

While the full constitutional implications are yet to be thoroughly litigated, Judge Dorsey’s TRO indicates a serious legal challenge to the county’s justification for this blanket restriction.

The backdrop to this legal skirmish is Assembly Bill 363, passed by the Nevada Legislature in 2022.

This state law empowered local governments, including Clark County, to regulate short-term rentals, provided they did so with reasonable restrictions. In response, Clark County enacted its ordinance in October 2022, with various components set to roll out over time. The lawsuit specifically targeted the most restrictive elements of this new regulatory landscape.

For short-term rental owners and operators in Clark County, this temporary restraining order is more than just a procedural delay; it's a critical reprieve.

It allows many to continue operating or apply for permits without facing the immediate, severe limitations imposed by the now-blocked rules. The county, meanwhile, must re-evaluate its enforcement strategy and prepare for a more extensive legal battle.

A hearing for a preliminary injunction is now scheduled, where the arguments for and against a longer-term block on these rules will be heard.

The outcome of this ongoing legal challenge will undoubtedly shape the future of the short-term rental industry across Clark County, determining the balance between local government regulation and property owner rights.