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Regulating Short‐Term Rentals (STRs)

Rebecca BadgettAttorney Educator

Where are you in the process of adopting STR regulations?

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Steps to Leading to STR Ordinance Adoption

Understand Current RegulationsWhat does the code regulate?

-Residential dwelling units-Tourist Homes-B&B’s-Hotels and motels

Do short-term rentals fall within a current regulation?

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Example:Municipal code requires that the residences located within the R‐1 district are single‐family dwelling units.

The code defines dwelling unit as:

“A building or portion thereof providing complete independent living facilities for one or more persons, including permanent provisions for living, sleeping, eating, cooking and sanitation. This use shall not be deemed to include other types of transient lodging, such as hotels, motels, rooming or boarding houses.” 

Are STRs are dwelling units or transient lodging?

Understand Local Market • How many STRs are operating? (use AIRDNA)

• Where are they located?

• Does the jurisdiction have enough alternative lodging options?

• Has the local government received complaints?

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Identify Key Stakeholders

• Who has an interest?

• Who will this impact?

• Who should be involved?

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Case Study: Chapel Hill

Public Engagement Strategy

• Community interest meeting • Survey to community members• Town council appointed a 12‐member Task Force charged with identifying goals and components of an effective STR ordinance

• Four task‐force meetings• Recommendations to council

Identifying Planning Objectives

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Short-Term Rentals: Regulatory Objectives

Neighbors:

• Parking

• Noise

• Strangers in the neighborhood

• Lack of community feel

• Lack of affordable housing

Hoteliers:

• Level regulatory playing field

• Impacts to business

Staff:

• Health and safety

• Occupancy tax revenue

STR Operators:

• Consumer demand

• STR revenue is important source of personal income

• Property rights

• Economic development opportunities

• Housing Availability/Affordability• Preserving Neighborhood Character• Economic Development• Safety• Level Regulatory Playing Field

Summary

This Photo by Unknown Author is licensed under CC BY-SA-NC

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Ordinance Drafting

Ordinance Drafting• Define STRs as a separate land use

• Geographic Regulations

• Determine in which zoning districts STRs will be allowed to operate

• Set additional restrictions within zones

• Operational Requirements

• Occupancy caps

• Parking

• Noise

• Notice to neighbors

• Designated responsible party

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Defining STRs: Model 1• “Homestay” An arrangement where the guest and host are co‐occupants of a dwelling unit being used as a short‐term rental. This means that the host remains on‐site during the rental period.

• “Whole‐House” STR The entire dwelling unit is rented while the host is away from the property. Property may be used as a permanent vacation rental or rented while the primary resident is temporarily absent. 

Defining STRs: Model 2

• Homestay: Owner on‐site during rental period.• Whole‐House STR

○ “Un‐Hosted,” “Primary Resident,” or “Type 1” STR: The dwelling unit is rented only when the primary resident is temporarily away (e.g., homeowner takes a weekend trip).

○ “Dedicated” or “Type 2” STR: The residence is used as a permanent, full‐time STR. There is no primary resident. 

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City Homestay (owner on-site) Whole-House (no distinguishing between primary and dedicated)

Asheville, NC Allowed Prohibited in nearly all zoning districts. Allowed in Resort district.

Bloomington, IN Allowed Allowed

Savannah Prohibited 20% per-ward cap in certain mixed-use zones, which includes residential. No cap in commercial zones

Wilmington, NC Allowed Allowed in specified zones, including residential: 2% cap, 400 ft. separation requirement

Raleigh, NC Allowed Prohibited

Model 1: STRs in Residential Zoning Districts

Model 2: Cities that distinguish between primary residence STRs & dedicated STRs

• Berkley, CA

• Boulder, CO

• Fort Collins, CO

• Lawrence, KS

• Kansas City, MO

• Madison, WI

• Nashville, TN

• Seattle, WA• Homestay rentals allowed in each of these

jurisdictions

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Berkley, CA

• 948 STRs• 600 Whole-House

Primary Residence

Dedicated STR Accessory Dwelling Units

• 90-day cap • Prohibited Accessory dwellings built after 1/1/2017 cannot be STRs

Boulder, CO

• Primary residence is defined as a dwelling unit in which a person resides for more than one half of the year.

• 1,285 STRs

• 900 Whole-House

Primary Residence Dedicated STR Accessory Dwelling Units

• Allowed (up to 182 days)

• Prohibited Owner must be on-site in either the primary or accessory unit.

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Fort Collins, CO

• Primary = occupied at least 9 months.

• 546 STRs• 400 Whole-House

Primary Residence STR

Dedicated STR Accessory Dwelling Units

• 90-day cap

• May operate in most zones except high-density residential

• Allowed in districts such as low & medium density mixed use and anywhere that hotels, motels or B&B’s are permitted.

• Prohibited in high-density residential.

• Allowed subject to 90-day cap. Accessory dwelling units or duplex units are considered primary STRs

*May only rent one unit at a time.

Yellow = Both Primary & Dedicated STRs allowed

Green = Primary STRs only

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Seattle, WA

• Limit of two dwelling units that many be used as short-term rentals. If operating two dwelling units, one must be a primary residence.

Primary Residence STR

Dedicated STR Accessory Dwelling Units

• Allowed • Limit of one non-primary STR

Allowed (provided owner is within the 2-per-person limit)

Dedicated STRs in Residential Districts

Prohibit Allow

Cap on nights rented

DensityCap total # of

permitsSubject to

operational regs.

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Operational RegulationsOccupancy Cap: (e.g., 2 persons per bedroom, plus 2 additional guests)

Notice to Neighbors

Designated Responsible Party: A person or company within a designated radius who is a point-of-contact and available to respond to issues within a certain timeframe.

Parking: (e.g., 1 space for every 2 bedrooms). Occasionally grandfathered.

Special Events (weddings, fundraisers, large gatherings)

Safety Inspection/Safety Checklist

Zaatari v. City of AustinAustin’s 2016 STR ordinance amendment suspended licensing of any new whole‐house rentals and required current operators to cease operation by 2022.

• Type 1 (“homestay”)—single‐family residence that is owner‐occupied or is associated with an owner‐occupied principal residential 

• Type 2 (“whole‐house”)—single‐family residence that is not owner‐occupied and is not associated with an owner‐occupied principal residential unit, 

• Type 3—residence that is part of a multi‐family residential use

Ordinance Provisions:

• banning all assemblies, including a wedding, bachelor or bachelorette party, concert, sponsored event, or any similar group activity other than sleeping, whether inside or outside, after 10:00 p.m.;

• banning outdoor assemblies of more than six adults at any time;

• prohibiting more than six unrelated adults or ten related adults from using the property at any time; and

• giving City officials authority to enter, examine, and survey the short‐term rentals to ensure compliance with applicable provisions of Code.

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Safety Inspections

• Mandatory safety inspections may be conducted at the time of the initial permit issuance and thereafter only on a reasonable periodic basis

• Cities that require safety inspections:

• Lawrence, KS: initial inspection & annual inspections thereafter)

• Madison, WI: initial inspection

• Bloomington, IN: initial inspection, permit granted for 3, 4, or 5 years. Provides a pre‐inspection addendum

• Alternative: Self‐inspection checklists 

• Cities with self‐inspection checklists: Colorado Springs, CO; Park City, UT; Savannah, GA; and Fort Collins, CO

Common Safety Inspection Requirements

• General conditions—premise maintained in a sanitary condition

• Smoke detectors—Ensure adequate number of operable smoke detectors

• Carbon monoxide detector

• Bedroom egress requirements

• Address visible from the street and posted within unit

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NC Vacation Rental Act: N.C.G.S. Chapter 42A

• Spells out the rights of renters, homeowners, and rental agents entering into a vacation rental agreement. Local governments are not parties to the rental agreement

• Vacation rentals are properties rented for vacation or leisure purposes for fewer than 90 days

• The Act covers:

– Handling of Funds

– Expediated Eviction Proceedings

– Landlords’ duty to provide a fit premise

– Tenants’ duty to maintain dwelling unit

• Landlords’ Duty to Provide Fit Premise– Comply with current building and housing codes

– Maintain property/make repairs

– Provide operable smoke detectors. Replace batteries annually or when tenant provides notice

– Provide minimum of one operable carbon monoxide detector and check every 6 months

• Tenants’ Duty to Maintain Dwelling Unit– Keep property clean and safe

– Dispose of garbage, ash, and rubbish in a safe manner

– Comply with building and housing codes

– Notify landlord when smoke detectors need new batteries 

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Insurance

• Standard residential homeowner’s insurance does not cover STR‐related claims because providers consider STRs to be a business/commercial use of property

• Consider requiring a disclaimer or notice to applicants to check policies to determine coverage 

• Airbnb and HomeAway automatically offer $1 million in coverage

Grandfathering Existing STRs

• Existing STRs can be grandfathered

• Allow a certain amount of time to come into compliance with other standards

• If STRs are currently illegal, the local government can recognize STRs as a land use, grandfather existing STRs, and regulate new ones.

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Enforcement

• Generally complaint‐based enforcement• May contract with third‐party companies to help 

with enforcement

○ Host Compliance

○ STR Helper

Setting fees

• Reasonable fees may be charged for regulatory programs

“The generally accepted rule today seems to be that the municipal power to regulate an activity implies the power to impose a fee in an amount sufficient to cover the cost of  regulation.” Homebuilders Association of Charlotte, Inc. v. City of Charlotte, 336 N.C. 37, 42 (1994).

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State Preemption 

• North Carolina Legislature could preempt local regulation

• Arizona

• New York

Questions?

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