Planning and Development Regulation
Land Use Regulation of Short Term Rental of Residential Property
[Adapted from Owens, Land Use Law in North Carolina (4th ed., 2023)]
Local zoning regulations have long regulated hotels and motels as a different use than a residential apartment building or condominium, with the difference being transient occupancy rather than permanent residence. That distinction is less clear when the short-term rental is of a single-family residential structure or a bedroom within that structure. The distinctions between a “residential structure,” a “residential property,” and a “residential use” are not always clear nor uniformly made by statutes and ordinances.
Owners of residential properties have long rented bedrooms to boarders and transient visitors. It was not unusual for zoning regulations in the 1930s and 1950s to have provisions regulating boarding and rooming houses. In later years, the use of large houses for bed-and-breakfast establishments, particularly in older neighborhoods, became commonplace in some communities. For the most part, the use of residential structures for these purposes was readily identifiable and most development regulations treated them as a lodging or commercial use rather than a residential use. [1]
While renting a home by the night or week has long been prevalent in the state’s coastal and mountain resort towns,[2] doing so in non-resort areas is a newer phenomenon. With the advent of Internet marketing and booking, the use of some or all of a residential structure for short-term-rental use has become more common in recent years.[3] This widespread practice of short-term rental to transient visitors led to increased local government regulation of this use of property in residential areas.[4] Any ambiguity as to whether earlier restrictions on the location and use of “tourist homes,” “boarding houses,” and similar uses also apply to short-term rentals of residential properties is resolved in favor of the free use of property.[5]
In Schroeder v. City of Wilmington, the court addressed a regulatory program for short-term rentals of residential property.[6] The court held that G.S. 160D-1207(c) preempted the registration requirements of the regulation but not the authority to require zoning permits.[7] The court also held that this statute’s permitting restriction does not apply to zoning permits or development approvals other than those for building- and housing-code enforcement. However, this provision’s prohibition on requirements to “enroll” in a government program as a condition of receiving a certificate of occupancy does preclude local registration requirements for short-term rentals. As a result, the court upheld the city’s regulatory provisions that restricted whole-house short-term rentals to specified zoning districts, as well as those that set parking requirements, limits on the use of properties for large gatherings, mandatory insurance, and other operational requirements. The court held that the cap on the number of short-term rentals that could be approved, the requirement for a minimum separation between short-term-rental properties, and the amortization requirements for nonconforming short-term rentals were so intertwined with the invalid registration requirement in this particular regulatory scheme that they were preempted.
[1]. See, e.g., Hayes v. Fowler, 123 N.C. App. 400, 473 S.E.2d 442 (1996) (use of bedrooms in a residential structure for bed-and-breakfast is not an accessory use to the residential use); Ballas v. Town of Weaverville, 121 N.C. App. 346, 465 S.E.2d 324 (1996) (upholding denial of special use permit for bed-and-breakfast in a residential zoning district given adverse impacts on surrounding neighborhood).
[2]. This traditional widespread use led to the 1999 adoption of the Vacation Rental Act in G.S. 42A. This law applies to the rental of residential property for vacation, leisure, or recreational purposes for less than ninety days by a person who has a place of permanent residence to which they intend to return. G.S. 42A-4(3). This law deals primarily with landlord-tenant and consumer-protection issues—contracts, deposits, fees, and evictions. It is not a land use regulation. In 2019, G.S. 42A-3(a) was clarified to explicitly provide that the periodic-inspection statute applies to properties covered by the Vacation Rental Act. Longer term rental of residential property for use as a residence, as opposed to transient occupancy, is subject to the Residential Rental Agreement law, G.S. 42-38 to -46. This law does not apply to short-term rentals.
[3]. The advent of Airbnb, Vrbo, HomeAway, and similar online platforms facilitated widespread use of short-term rentals (STRs). Broad and unregulated use of STRs prompted concern about health and safety standards for the occupants, collection of sales and occupancy taxes, reduced supply of affordable housing, and land use impacts on neighbors. Courts in other states have held that short-term rental of a residential structure is not a “residential” land use.
[4]. In North Carolina, regulations on short-term rental of residential properties were initially adopted by Asheville, Blowing Rock, Brevard, Cornelius, and Wilmington. In S.L. 2014-91, the General Assembly explicitly allowed Cornelius to use zoning to regulate the location of vacation rentals and other transient occupancy. A number of other local governments have used the general-zoning authorization to do so. For example, the Asheville UDO provides, “Short-term vacation rental means a dwelling unit with up to six guest rooms that is used and/or advertised through an online platform, or other media, for transient occupancy for a period of less than one month. A short-term vacation rental is considered a ‘Lodging’ use under this UDO.” Asheville Code of Ordinances, § 7-2-5 (2019). For more on regulation of short-term rentals, see Rebecca L. Badgett & Christopher B. McLaughlin, Regulation and Taxation of Short-Term Rentals (UNC School of Government, 2019).
[5]. Frazier v. Town of Blowing Rock, ___ N.C. App. ___, 882 S.E.2d 91 (2022). Prior to 2020, the town’s zoning regulation limited “tourist homes and other temporary residences renting by the day or week” to nonresidential zoning districts. In 2019 and 2020, the regulations were amended to define “short-term rental of a dwelling unit” and to allow these only in a short-term-rental overlay district. The court held that because prior to 2020 the regulations were ambiguous as to whether the restrictions on the location of tourist homes included short-term rentals that ambiguity must be resolved in favor of the free use of property. Since the notice of violation was for a “short-term rental” use and not for a tourist home or temporary residence “renting by the day or week,” the question of whether the use violated the pre-2020 regulations was not before the board of adjustment and thus could not be considered by the court.
[6]. 282 N.C. App. 558, 872 S.E.2d 58 (2022). The program required annual registration of properties to be offered for rent, limited their location to certain zoning districts, set various operational requirements, required a 400-foot setback from other short-term rentals, capped the overall number of short-term rentals to 2 percent of the city’s residential parcels, and had a lottery system to allocate permits.
[7]. G.S. 160D-1207(a) authorizes periodic inspection of residential building for “unsafe, unsanitary, or otherwise hazardous or unlawful conditions.” G.S. 160D-1207(c) prohibits local governments from requiring a permit under the building or housing code in order to rent residential real property absent a history of violations.
Related blog posts:
Short-Term Rental Regulations after Schroeder (4/14/22)
Understanding the Legal Basis for the Strike Down of Wilmington’s Short-Term Rental Ordinance (10/02/20)
Short-Term Rentals: Dwelling Units or Transient Accommodations? (1/2/20)
Regulation of Short-Term Rentals and the Effect of S.L. 2019-73 (9/9/19)Short-Term Rentals and Regulatory Approaches (2/27/19)
