Background
In 2022, the Village of Sister Bay adopted a Short-Term Rental Licensing Ordinance. A year later, the Village amended its zoning code to limit short-term rentals to four bedrooms maximum in residential districts. Four couples who owned homes in the Village with five or six bedrooms challenged the restriction. Two couples (the Clintons and Swansons) had already been operating their homes as short-term rentals before the limit took effect. The other two couples (the Wilsons and Froemmings) had intentionally designed and constructed their homes with five and six bedrooms, respectively, specifically to attract short-term rental guests. When the property owners attempted to license their homes for short-term rental under the new rules, they were limited to four bedrooms and challenged the ordinance in circuit court.
The property owners argued that the four-bedroom limit violated Wisconsin’s “Right to Rent” law, WIS. STAT. § 66.1014, which prohibits municipalities from enacting ordinances that prohibit the rental of residential dwellings for seven consecutive days or longer. They alleged eight causes of action, including violation of the state statute and constitutional claims. The circuit court granted summary judgment to the Village on all but one claim, and the property owners appealed.
The Court’s Holding
The Wisconsin Court of Appeals reversed the circuit court’s judgment and held that the Village’s four-bedroom limit is preempted by state law. The court concluded that the limit logically conflicts with the plain language of § 66.1014, which forbids local ordinances that prohibit rental of “any building, structure, or part of the building or structure” used or intended to be used as a residential dwelling for seven or more consecutive days. Because the four-bedroom restriction effectively prohibits owners from renting the fifth and sixth bedrooms in their homes, it operates as a “back-door prohibition” on rental of “part of” a residential dwelling, directly violating the statute.
The court rejected the Village’s argument that the limit merely constitutes reasonable regulation rather than a prohibition. It reasoned that the statute’s definition of “residential dwelling” broadly includes “any…part of the building,” and nothing in the statutory language permits municipalities to prohibit rental of particular bedrooms while allowing rental of others. The court also rejected the Village’s interpretation that § 66.1014 addresses only time-based restrictions. Because the four-bedroom cap operates as a total prohibition on renting the extra bedrooms—a restriction that extends indefinitely, well beyond seven consecutive days—the limit violates the statute. The court declared the four-bedroom limit provision void and preempted by state law.
Key Takeaways
- Wisconsin’s “Right to Rent” law prevents municipalities from restricting which bedrooms in a home can be used for short-term rental, even if the municipality can still regulate through licensing and occupancy limits.
- Local zoning ordinances cannot use “back-door” restrictions—such as limiting rentals to a specific number of bedrooms—to effectively prohibit short-term rentals of parts of residential properties.
- The statute’s definition of “residential dwelling” extends to “any part” of a building used as a residence, protecting homeowners’ rights to rent all usable bedrooms in their properties.
- Municipalities retain authority to impose timing limits on short-term rentals and to require licensing, but cannot restrict the physical features or capacity of properties used for short-term rental.
Why It Matters
This decision significantly constrains local regulatory authority over short-term rentals in Wisconsin. Communities concerned about the impact of short-term rentals on residential neighborhoods cannot rely on bedroom-limitation ordinances to restrict rental activity. The ruling establishes a bright-line rule: state law protecting short-term rentals preempts local attempts to regulate based on property features or bedroom count. For property owners, particularly those who invested in multi-bedroom homes specifically for short-term rental purposes, the decision protects their business model from local restrictions that would effectively render their properties unusable for their intended purpose.
The decision also has practical implications for municipalities seeking to manage short-term rental impacts. Communities must now pursue alternative regulatory strategies—such as licensing requirements, density restrictions based on rental frequency, occupancy caps, or conditional use permits—if they wish to limit short-term rental activity. However, any regulation that functions to prohibit rental of portions of residential dwellings will likely face preemption challenges under this precedent.