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Thursday, May 23, 2024

City makes court ruling official on short-term rental ordinance, considers future distinction within districts

A court ruling overturned the City of Wilmington’s short-term rental permitting process, and the planning commission made official changes to the ordinance Wednesday as a result. (Port City Daily/file)

WILMINGTON — While Wilmington Planning Commission made the court-ordered changes to the city’s short-term rental ordinance official Wednesday, chair JC Lyle said it’s not the last time this issue will be raised.

Some residents and commissioners said there should be stricter rules on rental properties and limits on where they can exist. Or at least explore different options.

READ MORE: City required to refund more than $500K in short-term rental fees

“Our attorneys have spoken and made recommendations for us to move it along to city council,” Lyle said. “I take that very seriously, of course, but also keeping in mind this is not the last time we’ll see this issue and not the last time we’ll make any kind of recommendation to city council on this issue.

Following a three-year public input and research process beginning in 2016, the City of Wilmington implemented specific regulations for short-term rentals, as they were gaining in popularity, according to zoning administrator Kathryn Thurston. The ordinance went into effect March 2019 but not without pushback from rental property owners opposed to some of the restrictions.

The guidelines required homeowners to register their rental properties with the city. It also placed certain restrictions, including 400-foot separation between rentals and a cap on the number allowed within residential areas (2% of all units). Additional rules included a parking requirement, noise and party restrictions, trash pickup and insurance requirement, which still remain.

The city also implemented a lottery system for rental permits and David and Peggy Schroeder — who had just renovated a house for rental purposes — were not selected. National law firm Institute for Justice took up their case in 2019, arguing the city’s actions were unconstitutional.

The N.C. Court of Appeals unanimously ruled April 5 that provisions within the city’s ordinance violated state law, as local governments are prohibited from requiring an owner of rental property to obtain a permit. The city was required to refund all applicants who had paid in, costing half-a-million dollars and ended its registration requirement April 17.

As of April 2022, the city had 722 properties listed as rentals, based on its third-party monitoring software. Thurston told the planning board Wednesday, while the software was budgeted for the next fiscal year, she’s still waiting on direction as to whether it will be discontinued. Without homes having to register with the city, there is no point to continue using it, aside from having a core list of rental properties operating in the area.

“The assumption is most [rentals] will continue and I’m sure there will be more once the separation requirements are not an issue,” she added.

The ordinance initially limited how close rentals could be to one another, but part of the court ruling deemed that invalid.

Over the last two months, city staff and its legal team have dissected the ruling to determine what changes need to be made. At the behest of the city attorney’s office, the planning commission approved changes to its short-term rental ordinance exactly as laid out by the courts.

This means the permitting process is removed and the 400-foot separation and 2% cap no longer exists.

But community issues surrounding short-term rentals were prevalent long before. Many have spoken that rentals diminish quality of life in their areas, specifically by not knowing the neighbors and living near a house with rotating visitors. 

Resident Joe Pawlik, who lives in the historic district downtown, spoke in opposition of the short-term rental ordinance Wednesday.

“This zoning ordinance is going to turn STRs loose in the city of Wilmington,” he said. “It’s amazing we’ve reached this point because for all the battles that raged over this issue, it’s like a whisper at this point, which is to me really tragic.”

As a 32-year homeowner of South 2nd Street, he told commissioners his community of neighbors is “greatly threatened” by the whole-house short-term rentals.

“Residential zoning is supposed to protect us from business uses in residential districts,” he said. “An LLC operating a daily rental hotel in a single-family home, I think you can all agree, is a business use.”

Pawlik specifically said the historic downtown residential district is not ideal for short-term rentals because of the lack of off-street parking and high density of housing units. Yet it’s the same district that is targeted for rentals due to its proximity to downtown entertainment and venues.

He also noted, each housing unit used as a rental is one less available for those employed in the city.

Planning commissioner Al Sharp asked city staff if the board had discretion over which zoning districts the short-term rental ordinance applies to, since the court did not give an “all or nothing” response.

“Our recommendation is to not make additional restrictions right now,” deputy city attorney Meredith Everhart said in response.

She said it’s possible legislators may “step in” to make additional changes to short-term lodging rules and suggested waiting to see how things shake out first. Currently, Airbnbs and other rentals are not regulated and individual local governments set their own rules.

Everhart also explained the city attorney’s office would have to spend up to a year researching certain districts to provide evidence they were disparately impacted to justify a ban.

“I wonder whether we shouldn’t continue to look at the impact on workforce housing, quality of life, historic district credibility,” Sharp said. “The whole idea is the city is not one homogenous development but really a set of distinct neighborhoods.”

Right now, only mobile home districts are completely banned from allowing short-term rentals.

Sharp iterated the board should “take stock in its actions” and evaluate its decisions.

“If it doesn’t work, let’s reconsider; if it works, good,” he said. “I just think there is a process by which we need to do some self-evaluation after four or five years of continual discussion and apparent differential impacts on types of neighborhoods.


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