Debate continues over Wilmington's new short-term rental rules as market evolves

Last week, the Wilmington City Council formally amended the ordinance governing the city's short-term rentals -- rules that some welcomed with relief and others met with frustration when they went into effect in 2019.

The council vote was, in effect, a rubber stamp that brought Wilmington's short-term rental regulations into compliance with a ruling from a North Carolina appeals court in April. The court ruled the short-term rental ordinance violates state statute by requiring owners to register with the city to rent their properties.

The city of Wilmington decided not to appeal the decision to the state's Supreme Court.

The April ruling made waves in Wilmington and beyond.

Here in the Port City, while it is unclear exactly how many short-term rentals operate, some owners of this type of real estate have reported seeing online a rise in the number of such units this summer. 

Additionally across the state, the ruling forced other major municipalities like Asheville to review and adjust their own rental regulations. The debate over short-term rentals has raged nationwide over the past decade since the launch of online home rental platform like Airbnb and Vrbo.

The appeals court's opinion partly affirmed a 2019 decision from a New Hanover County judge. But, instead of striking down the entire rental ordinance as the New Hanover judge did, the appeals court ruled parts of the ordinance not tied to permitting or registration can remain in place.

The amended ordinance, which was adopted at the city council's August 2 meeting, eliminated yearly registration requirements, removed a clause requiring 400 feet of separation between short-term rentals, and got rid of a limit that capped short-term rentals at 2% of the residential lots inside the city's 1945 corporate limits and 2% outside of the limits. 

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The separation and cap requirements meant rental operators needed to register their properties with a system created by the city, which gave out the registrations by lottery.

The ruling stems from a lawsuit filed by David and Peg Schroeder, a couple who operated a short-term rental in a townhome they owned in Wilmington when the ordinance was approved in January 2019. They tried to register their property but ended up losing out because another property within 400 feet drew a lower number.

They appealed to the Wilmington Board of Adjustment, which upheld their registration denial. They then filed a lawsuit in New Hanover County in October 2019.

That court struck down the ordinance in its entirety but dismissed the Schroeder's constitutional claims. The city of Wilmington then appealed the ruling to the state court of appeals, as did the Schroeders.

While the court of appeals ruling prohibits registration requirements for short-term rentals, the possibility of regulating rentals through the city's zoning and land use regulation remains, according to Adam Lovelady, an associate professor of public law and government at the University of North Carolina at Chapel Hill's School of Government.

Lovelady authored a blog post in the wake of the appeals court ruling that breaks down its impact on short-term rental regulations for local governments. As long as registration and permitting isn't required, cities have the ability to impose some other types of regulations, Lovelady writes.

Wilmington, for example, can keep parts of a rental ordinance that requires owners to provide at least one parking space for every bedroom, to post emergency numbers and other information inside the rental unit, to prohibit cooking in bedrooms and restrict whole-house lodging in certain zoning districts.

There is room for refining the basics of the ordinance, city attorney John Joye told the Wilmington City Council before its vote to amend the rental rules, but first he suggested the city come into compliance with the court ruling.

"This doesn't necessarily end the inquiry," he said. "We can roll up our sleeves and look at it."

Joye noted that gathering the data needed to support new regulations in certain districts would take time and said there's potential for the state legislature to take up the issue during their next session.

Ahead of the council's vote, several residents with homes in Wilmington's downtown historic district asked city leaders to explore restrictions for short-term rentals in residential neighborhoods.

Joe Pawlik has lived in the historic district near the corner of 2nd and Ann Streets for 32 years and has been a advocate for short-term rental restrictions in Wilmington. 

As short-term rentals gained traction in Wilmington in the mid-2010s, a home near Pawlik's was converted into a short-term rental, which meant more noise and trash in the neighborhood on the weekends and an largely empty home during the week. When the rental restrictions went into effect in 2019, Pawlik said he noticed a marked improvement.

Ahead of the council's vote, Pawlik sent a letter to each member of the city council, encouraging them to vote down the amendments and instead ask city staff to follow the city of Asheville in banning whole-house rentals -- something he said he's been pushing for all along.

“We told them at that time, ‘Use Asheville’s regulations. They're tried and true.’ But the city decided to pursue its own compromise measure, which is what got them into trouble,” he said.

Although the city has options for regulating rentals, Pawlik doesn't see much urgency behind the push to update regulations. 

“When they did deal with the issue, it was because city council chambers were full of people that were furious about short term rentals in their neighborhood," he said. "And we don't currently have that, and we probably won't have that for a while.”

It's unclear just how many short-term rentals operate in the Wilmington area, but in July city zoning administrator Kathryn Thurston told the Wilmington Planning Commission the city recorded 772 rental units earlier this year.

Jordan Giovannucci and her husband Christopher Russell operate three short-term rentals through Airbnb. One is attached to their home and located outside of city limits. The two other units are located in a house near downtown.

The two began hosting through Airbnb in 2019 after the rental restrictions and lottery had taken effect. The regulations, especially the 400-foot separation requirement, complicated their hunt for a home to house their downtown rentals.

“It was a crazy scenario," Giovannucci said. "It made everything kind of difficult when we were looking for that second house.”

The two started hosting through Airbnb as a way to pay for the mortgage on their first house, and Giovannucci said starting a short-term rental is like opening a small business in a neighborhood.

Since the rental regulations were lifted, Giovannucci said she's seen an uptick in the number of short-term rentals that are coming online. She typically monitors short-term rental sites closely and said she's seen new rentals popping up downtown and outside city limits in areas like Kings Grant and Murrayville. 

“It's definitely growing a lot faster than it did with the restrictions in place,” she said.

Reporter Emma Dill can be reached at 910-343-2096 or edill@gannett.com.