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This is precisely why I think courts should have a "return to legislator" option, at least for future cases if not for the current one. Rather than have a war between the letter of the law and the spirit of the law and being forced to either ignore the spirit, or mangle the language of the letter until it fits what you think the law should be, this should be a case where the judge goes "Hey, lawmakers, we found a bug in your code, fix it!"
Now, it would be unfair for the people involved here for the law to suddenly change on them mid-court battle, and their own case should be decided based on the law as written, but the law could update for future cases.
In this particular case, the obvious solution is to adjust the "single-family" zoning law to prohibit renting to more than a single family at a time. You can build your 24 room "single family house", good luck finding single families that will pay you enough to recoup your costs when renting in series instead of in parallel.
In Ireland it’s not uncommon for judges at sentencing to say something like “I have to judge in accordance with the law as it stands but the legislation needs updating on these points”.
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The Washington State Supreme Court did this with education funding in the McCleary case. They found that the legislature was failing in fulfilling the constitutional mandate to fund public education as the state’s “paramount duty” and so imposed fines on the legislature until they “fixed the bug.”
The court wouldn’t actually say what they wanted, just that the status quo was unacceptable. This resulted in many rounds of funding changes and court rejections until the last attempt, which largely removed local school funding, instead putting almost all of the funding into one statewide pot to be redistributed with equal funding per student.
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Legislators are free to update legislation anytime they feel like it, they don't need special permission from the judiciary. And I think I have heard of cases where the Supreme Court recommends Congress update relevant laws in the end. The trouble is that leglistatures can be very disagreeable and unable to pass a law, so how to actually govern gets left to the courts while the legislature is deadlocked.
Technically they could and should do it on their own, but clearly they don't, so some sort of handholding might help. Like, if the court could formally submit the law to the legislators with the specific part highlighted as being ambiguous or exploitable, and the case motivating this as an example, and then the legislature must handle it in a timely manner to clarify their intent. Given them an option to say "we endorse this exactly as written, even in light of the example you've submitted with it, the law needs no changes", but if they have to explicitly vote for that publicly then it removes a bunch of the status quo bias that lets these loopholes exist for so long. And also have a system where if the legislature ignores the bill entirely or can't come to a consensus on it then the court publicly admonishes them for being incompetent or something symbolic that doesn't give the courts any actual power beyond what they already have, but makes the legislators look bad publicly when they make stupid laws.
And limit the court's ability to do this to a certain number of times per year or per law or something to prevent activist judges from just harassing legislators with laws they disagree with. But I mostly just want a fastforward button on the existing "law runs into trouble in court -> legislators notice and care -> legislators fix law -> courts can do sane things without having to abuse language" process. And then maybe use this as an excuse to crack down on courts abusing language and bending laws towards what they think was intended instead of what it literally says. Just always do what it literally says and if you think the intent was different ask the legislature to make them match.
I don't think that'd actually do anything, both sides would just blame the opposing side for being partisan in refusing to update the law to their own preference.
A system I've seen casually proposed that's somewhat related that I like the sound of that for every law on the books, some legislater needs to take responsibility for it and say "That's my law", and at any time that legislater has the power to repeal the law if no one else is willing to step up and claim responsibility for it. That way if there's an outdated law, it gets repealed automatically when the legislater leaves office if no one's willing to take it up. And every legislater needs to think carefully about the laws they take responsibility for, because if it causes some big problem, the blame will be on them personally.
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