A bill introduced in early 2023 may change the current NC short term rental regulation for local governments. If passed, the bill would effectively reverse some of the existing restrictions on short term rentals in a handful of cities. While the bill’s effect on homeowners associations remains to be seen, HOA leaders should nevertheless familiarize themselves with the bill and its purported changes.
New NC Short Term Rental Regulation Yet to Pass
North Carolina has long grappled with regulating short-term rentals — a contentious issue that has been the subject of numerous debates. One significant effort to regulate short-term rentals came in the form of a new bill filed earlier this year.
In April, the North Carolina legislature filed Senate Bill 667, titled “Regulation of Short-Term Rentals.” Senators Timothy Moffitt and Bobby Hanig act as the primary sponsors of the bill, with Senator Tom McInnis co-sponsoring. As of writing, though, SB 667 has only passed the first reading and has since stalled.
What Is Considered a Short Term Rental in North Carolina?
According to the North Carolina Vacation Rental Act, a short term rental is a rental of a residential property for a period of less than 90 days. To fall under a short term rental, the rental must be for recreational, leisure, or vacation purposes. Additionally, according to the NC Vacation Rental Act, the tenant must have another permanent residence where they will return after the vacation period ends.
Is There a North Carolina Short Term Rental Ban?
There is no NC short term rental ban. Simply put, North Carolina does not prohibit short term rentals in the state. Furthermore, the state government has struck down on local cities and counties that require operators to register their properties. Owners need not register their properties, though they may need to secure a permit for zoning for Airbnb and short term rentals in their city.
Short Term Rental Ban in NC Cities
Short-term rentals have become a growing concern among North Carolina cities. Many residents have submitted complaints citing the negative effects of rentals on property values and the quality of life. Local governments responded by enacting city-level laws restricting or outright prohibiting short-term rentals.
In 2021, Raleigh approved a short-term rental ordinance requiring operators to secure a zoning permit. The law also prohibits special gatherings and events. In addition, the ordinance limits short-term rentals in multifamily buildings to only 25% of the units.
Even earlier, Asheville passed stringent short-term rental laws in 2018. After passing the new law, operators are required to obtain special zoning permits (conditional zoning) from the city council.
The village of Pinehurst also followed suit in 2022. After a year of discussion, Pinehurst banned short-term rentals in all areas zoned for residential use. The ban, though, does not work retroactively. This means existing rentals were permitted to continue operations regardless of zoning. However, new rentals can only operate in areas with hotel and mixed-use zoning conditions.
North Carolina Airbnb laws are quite lacking, resulting in city governments enacting their own. However, taking matters into their own hands may not be fruitful should SB 667 pass into law.
Potential Changes to North Carolina Short Term Rental Law
Senate Bill 667 proposes significant changes to NC short term rental laws. The bill aims to establish a unified regulatory structure across the state, though it may render existing city ordinances invalid if passed.
Forbidden Regulations
According to the bill, city governments are not permitted to adopt or enforce a regulation that does any of the following:
“(1) Prohibits using residential property as a short-term rental.
(2) Prohibits the use of accessory dwelling units as short-term rentals.
(3) Limits the number of nights a property can be rented as a short-term rental.
(4) Requires the owner of the short-term rental to occupy the property for any 2 period of time during a rental to an occupant.
(5) Classifies short-term rentals as a commercial use.
(6) Limits the operation of a short-term rental marketplace.”
Permitted Regulations
The second part of the bill states the following:
“A city may adopt an ordinance, rule, or regulation that regulates short-term rentals by:
(1) Requiring a lodging operator to obtain a permit to operate a short-term rental within the city’s corporate limits. The city may revoke the permit if the short-term rental incurs five health and safety violations within a 12-month rolling period; provided, however, the city shall, before revoking the permit, allow the lodging operator to contest the alleged violations and, if found to exist, an opportunity to remedy the violations. The city may charge a one-time fee of not more than twenty-five dollars ($25.00) for each permit issued and an additional fee of not more than twenty-five dollars 15 ($25.00) to reinstate a permit that has expired or been revoked.
(2) As part of the permitting process authorized under subdivision (1) of this subsection, limiting the number of occupants allowed to stay in a short-term rental. The city may consider State and local building code standards and septic tank capacity in determining the number of occupants under this subdivision.
(3) As part of the permitting process authorized under subdivision (1) of this subsection, restricting the number of occupant vehicles to one vehicle per bedroom.
(4) Restricting the location of short-term rentals to areas of the city that have been zoned for residential use and requiring that the property remains in compliance with all applicable residential zoning requirements.
(5) Requiring short-term rentals comply with all applicable city ordinances and codes, including building and housing codes.
(6) Requiring that all contracts for short-term rentals include a copy of any city ordinances that regulate noise, waste removal, and parking or, in the alternative, that the lodging operator provides to the occupants a written 32 summary of city ordinances that regulate noise, waste removal, and parking.
(7) Prohibiting the use of short-term rentals for any purpose other than that allowed in hotels, motels, and inns without the property owner’s prior approval, which a written agreement between the lodging operator and the occupant shall evidence.
(8) Requiring a lodging operator or authorized agent of a lodging operator be within a 50-mile radius of a short-term rental when an occupant is staying in a short-term rental.”
North Carolina Short Term Rental Tax
Short term rentals in NC are subject to state sales tax, local sales tax, and local lodging taxes. The North Carolina Department of Revenue and local tax jurisdictions are responsible for administering these taxes. Operators of short term rentals must register with the NCDOR. They will then receive a state Sales and Use Tax Certificate of Registration. For local taxes, operators must register with their local tax authority.
STR operators that transact exclusively through a marketplace such as Airbnb or VRBO don’t need to register with the state or file lodging tax returns. If lodging taxes are not facilitated on their behalf, operators must remit lodging taxes to the state themselves. An example of this is when a tenant books their stay directly with the operator instead of through Airbnb, VRBO, or some other marketplace.
How Will the NC Short Term Rental Regulation Affect HOAs?
Senate Bill 677 targets city ordinances, rules, and regulations. Many HOA leaders and residents, though, wonder if the new bill will affect them in any way. Currently, the proposed bill’s implications on homeowners associations remain uncertain. However, it likely will not affect HOAs in the same manner as city governments.
Homeowners associations are generally permitted to enact short term rental requirements and restrictions as they are private entities. Such restrictions, though, must be included in the governing documents. Whether or not an STR is allowed in your HOA depends on your rental restrictions. If your HOA does permit rentals, you will still need to abide by the short term rental requirements of your local government.
The Negative Impact of Short Term Rentals on HOAs
There is a reason why people are calling for stricter NC Airbnb laws. Short-term rentals pose specific adverse effects. For one thing, permanent residents feel unsafe when a constant stream of strangers comes in and out of a rental property.
Furthermore, short-term rentals may lower curb appeal and property values. Renters tend to care less about property maintenance and are more likely to damage property and common areas. And then there are other issues such as increased traffic and noise disturbances.
Short-term rentals do come with potential disruptions. There is also a perceived lack of control over who resides in the neighborhood. As such, communities typically don’t favor these types of rentals.
The Final Word
The debate surrounding NC short term rental regulation will likely not stop here. Senate Bill 667 is still under consideration, and some believe it will stall indefinitely. In the meantime, city ordinances concerning short-term rentals remain in effect.
Cedar Management Group provides expert management services to HOAs and condos in North Carolina and more. Call us today at (877) 252-3327 or contact us online to learn more!
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