Southport will take another look short-term rentals following Wilmington’s legal battle

The N.C. Court of Appeals found Wilmington’s ordinances were illegal, the impacts of that decision could be far-reaching as other cities and towns consider the implications of their own requirements.
Southport will take another look short-term rentals following Wilmington’s legal battle
Published: Aug. 24, 2022 at 4:46 PM EDT
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SOUTHPORT, N.C. (WECT) - Vacation rentals, short-term rentals, homestays, and whole-home rentals; they go by different names but there’s one thing that stays the same: their existence and popularity is an issue dividing communities.

Some love them and see them as a valuable part of a tourism industry and investments. Others say they harm neighborhoods with transient neighbors and the feeling of community is deteriorating due to these rentals.

As the popularity of these rentals grows, cities across the state have looked for ways to restrict homeowners from renting properties. Some use outright bans in certain zoning districts, while others prefer requiring permits and registrations, among other things. In Southeast North Carolina, the City of Wilmington and the City of Southport both took steps to restrict these rentals. There’s just one problem with the latter: state law prohibits cities from requiring registration or permission to rent a home.

That’s something that the North Carolina Court of Appeals affirmed in a lawsuit filed against the City of Wilmington by a Dave and Peg Schroeder almost exactly two years ago. Following that decision, the City of Wilmington reversed it’s restrictions, but other municipalities have not yet done that.

“I think local governments, whether it’s Wilmington, Asheville are Southport or anywhere else, are generally aware that they’re prohibited from imposing these registration requirements. But they’re sort of just brazenly doing it and waiting to be sued. If people want to sue them, I think they all know that they’re running afoul of state law,” Attorney for the Institute of Justice Ari Bargil said.

In Southport, the city’s Board of Aldermen will review their own ordinances in September. However, Town Manager Gordon Hargrove was unable to say more, for now.

“The Board of Aldermen are scheduled to discuss those provisions that were found to be non-compliant in the September 8th board meeting. My thoughts are the Board will send the matter back to the planning board for further review. I think it best to refrain from comment until I have a clearer direction from the Board of Aldermen,” he said.

Southport’s restrictions, while different in language than Wilmington’s previous ordinances, still require permits.

“This ordinance prohibits short-term vacation rentals within the residential districts of the City of Southport but does allow short-term vacation rentals existing on the date of the adoption of the ordinance to continue as lawful nonconforming uses provided that the property owners obtain a zoning permit from the City of Southport,” the city’s website reads.

If homeowners do file suits against cities and towns with restrictions still in place, getting sued ultimately means taxpayers money will be lost if the courts find their ordinances are illegal.

In Wilmington, the city spent more than half-a-million dollars returning rental fees collected since enacting the restrictions, more than $100,000 in legal fees, and now, the Institute for Justice has asked the courts to award more than $300,000 in their own legal fees. However, Bargil believes that Wilmington’s legal defeat will lead to changes across the state.

“I think over time, I suspect that some of these localities will rescind the registration and permitting restrictions,” he said.

But he also believes, much like Wilmington’s case, some cities think they can get around state law, and continue to impose restrictions.

“I think it’s also the case that some of them think that there’s a backdoor way to impose something that the General Assembly has said you can’t impose,” he said.

Bargil said the Town of Highlands, located in Western North Carolina is now looking at adding its own restrictions and amending their town ordinances, and that

“It seems like they’re gearing up for for for being that follow on case to the Schroeder decision, basically saying, well, you know, you told us that we couldn’t do this, pass this restriction pursuant to power X, but we’re going to pass the exact same restriction, and we’re going to say that we’re doing it pursuant to power Y and that’s okay,” Bargil said.

Mayor of Highlands Patrick Taylor responded to a request from WECT for more information about the proposed ordinances, but declined an interview for the time being.

“The town board will conduct a public hearing concerning the STR proposals on Thursday, August 25 at 5 p.m.,” Taylor said. “Given the complex legal issues concerning this matter, I decline your request for an interview at this time. Our attorneys are from the law firm Poyner and Spruill. They are Chad Essex and Bob Hagemann.”

Bargil’s letter to the Town of Highlands, as well as the proposed changes to the town’s ordinances can be found below.