For Policymakers, Short-Term Rental Focus Continues

SCOTT MOONEYHAM, NCLM Director of Political Communication & Coordination

Looking at a pressing issue this legislative session

In April, two people were killed and 14 others injured when a party being held in a rented home through the Airbnb platform in Philadelphia turned violent.

The two people killed, along with many of the others there, were minors, even as the Airbnb rules prohibited minors from renting homes. The rental agreement also prohibited the renter from using the home for a party.

It didn’t matter.

Neighbors in what was normally a peaceful, residential neighborhood were shocked, as police swarmed on the home after multiple shooters fired as many as 50 shots. The story garnered national headlines and was featured heavily on cable TV news stations. (As of this writing, no arrests had been made.)

Many other less violent but still problematic conflicts occurring every week at short-term rental properties never receive that kind of press attention. Nonetheless, they pose similar challenges for nearby homeowners, who have to worry about safety, noise, and the general disruption of their lives, as well as the local governments called on to address the problems.

And these issues continue to arise even as companies like Airbnb lobby state legislatures to restrict or pre-empt local regulation designed to curb public safety violations while balancing the rights of existing homeowners.

In 2019, the N.C. League of Municipalities beat back an effort to restrict local regulation of short-term rentals in the final days of the legislative session. But that doesn’t mean there won’t be further efforts to do so.

At that time, proponents of legislative pre-emption argued that they were trying to protect the property rights of the homeowners who just wanted to rent their homes. “They’re just normal people, and they have one or two properties as a way that they either can afford to stay in a house that they normally couldn’t stay in, or they’re saving for retirement, or it’s a house they use part time and not other times,” Mark Zimmerman, senior vice president of the NC Realtors, told WRAL-TV then.

What has become clear since then is that homes in many North Carolina markets are being bought up by investor groups, and rented on both a short-term and long-term basis, and that these homes are typically in the price range of those bought by first-time homebuyers. By buying homes with cash, they are able to outbid traditional homebuyers, with the result driving up home costs.

A recent series of articles by The News & Observer of Raleigh, focused primarily on investment firms buying up homes for long-term rental, concluded that 20 companies have bought up 40,000 homes in the state, most of them in major metropolitan areas.

The effect of short-term rentals on housing affordability also has been cited as a major concern in several North Carolina cities.

And those arguments regarding the rights of the renters of these homes fail to take into account the rights of nearby homeowners who are not renting, particular on a full-time basis as part of an investment strategy.

Against that backdrop, the state Court of Appeals recently struck down portions of a Wilmington ordinance placing restrictions on short-term rentals. The court essentially found that North Carolina law prohibits cities from requiring registration of those rentals, and that any permitting or other requirements associated with registration is banned under that existing law. The ruling will not affect land-use based restrictions, but how it plays otherwise is complex.

As Adam Lovelady with the UNC School of Government wrote in an analysis of the case, “As always, the devil is in the details.” While land-use law would allow for zoning-based restrictions, the court found that other Wilmington limitations—such as a cap on short-term rental, distance requirements, and proof of shared parking—were so tied to the registration requirements that they were struck down as well.

But what happens when they are not tied to a registration requirement? Loveland noted that restrictions such as a distance requirement could, perhaps, stand if not tied to a registration requirement. “There is a good argument that a basic separation requirement enforced through a standard zoning could stand even though the Wilmington separation requirement (being dependent on the unauthorized registration program) was pre-empted,” Lovelady wrote.

Even less clear is what any of this means for the possibility of any new legislation affecting Airbnb and other short-term rentals in the ongoing legislative session and future legislative session.

Airbnb and its lobbyists have certainly been active at statehouses around the country. At the same time, shootings like that in Philadelphia and other high-profile incidents at short-term rental homes have captured the attention of local and state policymakers. Publicity regarding investment firm purchases of homes, and their effects on housing affordability, have only brought more policy focus on the issues created by non-resident home buying.

One result is certain: the push and pull for public policy solutions—at the state and local level—will not be going away anytime soon.