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Downtown Wilmington Issues
Posted on Jul 13th, 2017

The City held two public meetings, one in 2016 and one in March, 2017, to seek public input about STRs. The process of the second meeting was more confusing than enlightening in that 14 stations containing multiple questions were posted for comments.
Two new ROW members who recently moved to Wilmington have told cautionary tales about conditions in New Orleans and Venice, California after Short Term Rentals were allowed in these urban areas. Both members warned that allowing STRs in Wilmington will eventually drive out permanent residents and increase the homeless population. Interestingly, New Orleans now does not allow STRs in the French Quarter.
ROW opposes STRs in Residential districts for the following reasons:
  • Neighborhoods lose a sense of community as strangers come and go.
  • Short Term renters often disrupt residential neighborhoods with noise and sometimes drunken behavior.
  • Parking becomes unavailable to permanent residents when renters' cars fill the street.
  • Property values are lowered by the presence of STRs. By law, realtors must identify nearby STRs, which may cause home owners to have more difficulty selling their house.
  • Affordable housing is reduced when apartments or condos that were formerly long term rentals are purchased for use as STRs.
Wilmington residents have reported many problems caused by short term vacation rental businesses to City Code Enforcement and City Council, but unfortunately Code Enforcement does not document these complaints.  Problems include loud weekend parties, too many people in the houses, too many cars on the street, cars illegally parked, and trespass on neighboring properties. Permanent residents sometimes are driven to call law enforcement to deal with these problems.   

Staff reported to City Council that it has four options:
1) keep the status quo (City will enforce the Code as best it can when a complaint is received); 
2) step up enforcement of the existing Code (which will require more personnel);
3) amend the Code to better define where these businesses will be permitted and enforce the amended Code; or 
4) amend the Code to exempt short term vacation rentals from regulation and permit them to operate in residential neighborhoods without limitation. 

The money interests that profit from short term vacation rentals are lobbying for option 4, no limitations on where and how they operate. 

II. Position of ROW and Other Neighborhood Groups.  
1. Short term vacation rental businesses are the functional equivalents of suites hotels.  Under the Code, such businesses are not, and should not be, permitted in residential neighborhoods. ROW does not oppose STRs in districts zoned for businesses. There are many housing units in districts zoned business and mixed use, like the Central Business, HD-Mixed Use, and the Main Street Districts, that already are being used as short term vacation rentals.
2. With smart zoning and good Code enforcement we can have both: vibrant healthy neighborhoods and a variety of tourist accommodations. City staff has acknowledged these businesses are difficult to regulate, and many of the owners and their guests have shown they will not abide by regulations. Law and Code enforcement officers should not be forced to become “hotel security” for vacation rental businesses in residential neighborhoods.
3.  We support an amendment to the Code to better define “residential housing” so that it is clear what types of rentals are residential in purpose and thus permitted in residential neighborhoods and what types are vacation rental businesses that should be restricted to districts zoned business.
4. We do not support “grandfathering” existing short term vacation rental businesses currently doing business in residential neighborhoods.  
5.  We do not support changes to the existing B&B regulations. Owners are required to reside in B&Bs and B&Bs are heavily regulated. Only one B&B is permitted per neighborhood block.   The regulations are working for the neighborhoods, the B&Bs, the tourism industry and the City.  
Frequently Asked Questions About Short Term Vacation Rental Businesses
A. What is a short term vacation rental, sometimes called a VRBO?
These are internet-based businesses that offer overnight accommodations to vacationers, tourists and other travelers for a fee. The fee paid by the customer is shared between the property owner and an internet marketing/booking company like VRBO (Vacation Rental By Owner). The vacation rentals are furnished and include towels, linens, toiletries, cleaning. The vacation rental may be a whole house, an apartment, a condo or a room within a house. 
There are two types of STRs:
  • Whole House STRs are purchased as an investment and the owner does not reside on the property. They manage the rentals remotely through local agents who also do not live on site. 
  • Home Stay STRs are private homes where the owner resides on the property and rents out rooms.
B. Do we have short term vacation rentals in Wilmington?
Yes. A City staff report states that they are difficult to identify but estimates there are approximately 540 properties being operated as short term vacation rentals both in business districts (like the Central Business District/CBD) and residential neighborhoods. They are especially concentrated in the historic neighborhoods (HD-R, HD-5, HD-O) because of proximity to tourist amenities.  
C. Why should we be concerned about short term vacation rentals in residential neighborhoods?   
See the information stated on the ROW Home Page. Most importantly, the Zoning Code properly prohibits these businesses in residential neighborhoods, and short term vacation rental businesses are detrimental to residential neighborhoods.  
The increased number of hotels in downtown Wilmington eliminates the need for Short Term Rental businesses. The City needs hotel development in the CBD to support the Convention Center and downtown businesses.
D. Is there merit to the claim of short term vacation rentals businesses that they should be permitted to operate in the historic residential neighborhoods because they are necessary to the preservation and maintenance of heritage homes? Short term rental owners claim they are making significant investments in historic homes that are in disrepair. They argue they maintain them better than do owners of long term rentals so that affluent vacationers will stay in them.
This argument includes inaccurate assumptions and overlooks important facts:
  • Not all short term vacation rental businesses maintain their properties. Typically, these businesses buy up the smaller, more affordable, move in ready townhomes, condos, and smaller houses in the neighborhood, and do very little to the home before they begin renting it out short term.
  • Permanent on-site resident homeowners are the best stewards of historic homes. The real preservationists are those who live in their homes. For decades, residents have been purchasing derelict heritage homes in the historic districts, investing far more in them than they will ever be worth because they are creating a special home to live in. (It is estimated that the property values in ROW’s area total close to $1 billion.)
E. If we prohibit short term vacation rentals in our neighborhoods will we lose tourists?
There is no evidence that this is true. We agree that Wilmington’s regulations should permit a variety of tourist accommodations, including short term vacation rentals. It is not necessary, however, to sacrifice our residential neighborhoods to achieve this goal. Short term vacation rentals are, and should be, permitted in under these conditions:
  • In business and mixed use districts. These include historic homes around the edges of the Central Business, Main Street Business and Historic Theater Districts adjacent to residential neighborhoods.
  • Protection of the residential character of the historic neighborhoods through good residential zoning is, in fact, good for tourism. Tourists come to see our beautifully restored historic neighborhoods. Tourists will not be so charmed by a district overwhelmed with vacation term rental properties.  
F. Is there merit to the claim of short term vacation rental business owners that they generate large Room Occupancy Taxes for the City and should be permitted to operate in residential neighborhoods for that reason?
Some short term vacation rental business owners make the claim short term vacation rentals “generated $2.859,516 in Room Occupancy Taxes in 2015….27.7% of the county’s bed tax income.”  They claim this figure comes from New Hanover County. This claim is inaccurate and misleading. 
First, the County does not maintain data on the amount of ROT paid by “short term rental businesses.” The County keeps data by geographic area and by two property categories: 1) hotels/motels/inns and 2) “other.” According to New Hanover County, “other properties,” which include short term rentals, B&Bs, guest houses, and other types of properties, in the City of Wilmington (excluding the rest of New Hanover County and the special Convention Center ROT area) paid a total of only $28,544.32 in Room Occupancy Taxes for the most recent reported period (7/1/14 to 6/30/15).   By comparison, hotels, motels and inns in Wilmington generated over $3.8 million in ROT in the same period.  
G.  What does Wilmington’s zoning Code say about short term vacation rentals?    
Because they are businesses, the Code prohibits short term vacation rentals in districts zoned single family residential. The following provisions from the Code section for the Historic District Residential neighborhoods (HD-R) are illustrative. The Code sections for the other residential districts have similar language.    
1.  Section 18-189 provides that the purpose of the HD-R is “single family and other residences.” The “uses permitted by right” are single family residences (detached, duplex and accessory apartment) and a few listed non-residential uses that do not undermine the residential purpose and character of the HD-R (neighborhood recreational facilities, historic foundation offices, and one B&B per block with owner living on site.) The Code clearly states that business uses, not expressly listed, are prohibited. Short term vacation rentals, hotels and other guest lodgings, are not listed and thus are prohibited.   
2.  Section 18-10 states: “No interpretation [of the Code] shall be effective to change the character of a district in comparison with the purpose of such district and other allowed uses.”  The stated purpose and character of the HD-R is single family residential. Short term vacation rental businesses change that character and purpose. Thus, they may not be permitted by interpretation.
3. Section 18-173(g) provides that “all uses that are not listed in this article, even given the liberal interpretation mandated in this section, are prohibited. This article SHALL NOT be interpreted to allow a use in one zoning district when the use in question is MORE CLOSELY RELATED TO another specified use that is permissible in other zoning districts.” (Emphasis added.) Short term vacation rental businesses are “more closely related to” hotels, suites hotels, and other tourist and traveler accommodations, which are expressly listed as permitted uses in districts zoned business. They are not listed and thus are prohibited in the HD-R and other districts zoned residential. Section 18-173(g) mandates that short term vacation rentals SHALL NOT be permitted in the HD-R by interpretation.  
Short term vacation business owners argue that the Code permits short term vacation rentals in residential neighborhoods so long as the rental agreement with the guest is “weekly or more.” They cite Code section 18-812, which defines single family residences as “a separate independent housekeeping establishment for owner occupancy or rental/lease on a weekly or longer basis for …not more than one family.” 
This argument ignores the fact that the definition has two important parts: 1) a permitted residential use (housekeeping by one family) and 2) if the house is rented, the lease period must be “weekly or more.”   Use for “housekeeping” is the threshold requirement.  If the rental is not for “housekeeping,” the duration is irrelevant.  
H. What are other tourist destination cities doing about this problem?
These virtual short term vacation rental businesses are a new phenomenon and they aggressively push the limits of zoning restrictions. Many local governments are struggling to determine how they fit into local zoning rules. City staff has studied other municipalities, including Asheville, North Carolina, which has a 30 day rental rule for housing rentals in its residential districts. A 30 day rule is more clear cut, harder to evade, and easier to enforce. Someone who rents for 30 days is more apt to be renting for residential purposes. It outlaws the party weekend rental and prevents much of the bad behavior that comes with shorter vacation rentals. Asheville recently updated its Code to back up this rule with severe fines. Revenue from the fines is used to fund enforcement. This is a model for Wilmington to consider.
I. What can you do to protect your neighborhood?  
First, get the facts and stay informed.  Let the City know we do not have to sacrifice our neighborhoods and residential housing for tourism. With sensible zoning, that permits short term rentals in business districts but prohibits them in residential neighborhoods, we can have vibrant neighborhoods, investment in affordable housing, and accommodation options for tourists.
For more information, follow this issue on the City’s website, www.wilmingtonnc.gov, and on the website of Residents of Old Wilmington, www.rowilmington.org.
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