New State Law Complicates Short-Term Rental Issue

The waters surrounding proposed regulation of short-term rentals in Raleigh and other North Carolina municipalities got a little murkier last week, as a seemingly simple bill passed both houses of the General Assembly and was signed by the Governor. Senate Bill 483 was enacted into law and became effective on July 1, 2019 as Session Law 2019-73.

As usual, the devil is in the details.

That law amended the North Carolina Vacation Rentals Act to clarify that the provisions of existing state law covering inspections and hazardous conditions in rental properties also applied to “vacation rentals” of under 90 days. This seemingly common-sense bill carries a significant impact for city regulations, because under those provisions, cities and counties are prohibited from adopting or enforcing “any ordinance that would require any owner or manager of rental property to obtain any permit or permission” from the city or county to “lease or rent residential real property.” The law also prevents any “special fee or tax on residential rental property that is not also levied against other commercial and residential properties.”

By clarifying that these rental laws also apply to vacation rentals, this bill throws into question such regulatory schemes as that passed by Raleigh on May 21 for “homestay” rentals or the proposed regulation of whole house short term rentals that is currently before the City Council. The Raleigh ordinance, for example, requires that “every homestay operator shall first apply for and procure a homestay zoning permit,” provides such permits cost $172 and renewals cost $86, and allows the permit to be revoked for certain violations. It seems clear that such a permitting process runs counter to state law.

However, questions abound. The Vacation Rental Act specifically does not apply to rentals to tenants who are “temporarily renting a dwelling unit when traveling away from their primary residence for business or employment purposes.” The law is silent on how that distinction would be enforced, though it certainly would have implications for short term rentals in non-tourist destinations. Moreover, the law does not address whether cities and counties can use zoning law to regulate where short term rentals can be undertaken and whether those zoning laws can be used to effectively eliminate short term rentals across an entire city.

Homeowners and landlords wishing to rent their properties – in whole or in part – on a short term basis should watch these developments closely. City and county legal departments would be well-advised to do the same.