Bad Arguments Against Libertarianism
Suppose A rents a house from B, who requires, as a condition that no-one in class C (wrong race, religion, or gender) should share the bedroom with A. Suppose that A signs the lease, but decides that this contractual condition is an unreasonable violation of personal freedom, and decides to ignore it. B discovers this, and seeks the assistance (or at least the acquiesence) of the state in evicting A. On a [libertarian] view, B is in the right, and is entitle to call in the state into the bedroom in question.
I think Quiggin's confusion here results from treating libertarianism as a species of utilitarianism. Quiggin's argument is an effective one for utilitarians (of which I am one, and IIRC he is as well). Utilitarianism is all about balancing the levels of utility (happiness or satisfaction) to be gained from different policies and social arrangements. On one side of the ledger, you have the utility gained by preserving the freedom to invite others of one's choice into one's bedroom, and the danger that allowing such restrictive lease contracts will lead to no non-restrictive leases being available for people who want them. On the other side, you have the loss of utility suffered by those who would like to be able to enter into an enforceable bedroom-activity-restricting contract. On any reasonable interpretation, I think the former utility is greater and thus utilitarianism inclines us to accept some economic regulation in defense of personal freedom. A "utilitarianism of liberty" view, in which we're maximizing liberty itself (rather than maximizing happiness or satisfaction which are often derived from liberty) would come to the similar conclusion.
But Quiggin's argument is not meant to be against "utilitarians of liberty," it's meant to be against propertarian or contractualist libertarianism. This is a deontological view, concerned with not violating someone's rights. The basic right that concerns these libertarians is the right not to be coerced by someone else, and in particular not to have society as a whole gang up to coerce you through the state. To a contractualist libertarian, there's nothing contradictory about the landlord calling in the state to enforce a contract that the tenant freely entered into. In this case, the state is not imposing a definition of proper bedroom behavior on the tenant, the state is merely enforcing an agreement that the tenant consented to. There is no more contradiction here than there would be for a libertarian to expect the state to enforce a contract between an auto manufacturer and its parts supplier, or between a polluter and people who have agreed to allow only a certain amount of waste to be dumped in their stream.