Chapel Hill still has the authority to regulate short-term rentals

Image courtesy of Pixabay.


By Fraser Sherman

While controversial, Chapel Hill’s restrictions on owners renting out property for less than a month came through a recent lawsuit unscathed.

“The town reached a settlement with the Eric Plow Trust,” Strategic Communications Director Susan Brown told The Local Reporter. “The Trust dismissed the action against the town and the town issued a permit to the trust to operate a rooming house on its property.”

A second lawsuit over the town’s 2021 ordinance on short-term rentals (STRs) –  those lasting less than 30 days – is still in the courts at time of writing.

Short-Term Rentals: The Debate

Even before Airbnb and similar platforms made short-term renting easy, governments across the country were grappling with STRs. Supporters say the rentals boost the economy by bringing in extra visitors to spend money. Critics say they saddle residential neighborhoods with added cars, noise and trash.

A 2023 New York Times article found that STR owners catering to the college-sports market sharply reduced the number of rentals available for college-town residents. The cost for long-term renters went up because of competition for the remaining rental units.

During a 2021 Chapel Hill hearing, rental operators said STRs were a good alternative to hotels or motels. Some people had allergies to hotel cleaning products, for instance, or wanted to cook for their college-student kids. In comments on a Local Reporter article, Eric Plow of the Plow Trust said Chapel Hill didn’t draw enough tourism for STRs to cause the problems The New York Times wrote about.

Critics of STRs said Chapel Hill already had a housing crunch and dedicating property to STRs would make things worse. Other speakers objected that a constant stream of strangers in residential communities could make them unsafe.

The Chapel Hill Ordinance

The Town Council passed an STR regulation ordinance in 2021 but allowed non-compliant rentals to stay in operation through December, 2022. The regulations break down STRs into two classes: primary residence STRs and dedicated STRs. The first category applies if, for example, the rental is a garage apartment or spare bedroom in the owner’s main home. If the owner lives on the property less than 183 days a year, it’s a dedicated STR and only permitted in commercial and mixed-use zoning. Among other rules:

  • Any STR rented out more than 14 days a year requires a $150 permit.
  • A multifamily development can’t have more than 3 percent of units or two individual units used as STRs – whichever figure is greater.
  • Maximum STR occupancy, not counting kids under 12, is two people per bedroom plus two extra people.
  • The STR must have one parking space per bedroom, plus one extra.
  • A designated individual must be available to respond to emergencies within two hours.

The Court Battle

Eric Plow owns Chapel Hill Rentals, whose website says it’s the “#1 rental agency providing short-term and long-term housing that is within close proximity of the University of North Carolina campus.” Plow’s attorney, Celie Richardson, told The Local Reporter her client has been using one Hillsborough Street seven-unit building for STRs for two decades. Plow sued, she said, because the new ordinance would have made it difficult or impossible to continue renting out the property.

According to Richardson, “the town doesn’t have the authority to do land use regulation by who owns the property or where the owner lives or for what period of time.” She added that municipal authority is granted by the legislature and North Carolina hasn’t granted anything that authorizes Chapel Hill’s ordinance.

In 2022, the city won in Superior Court. Richardson appealed but the two sides settled out of court before the appellate hearings began. Under the settlement, Plow’s Hillsborough St. property is classified as a boarding house, which allows him to continue renting it. Richardson said a boarding house must have at least two units, so a single-family home or condo used for STRs can’t qualify.

A second court case, filed against the town by former Chapel Hill residents Joe and Irene Valentine, is still on-going. According to the court paperwork, after the Valentines moved to Florida they turned their Chapel Hill home into an STR. The city says that under the new regulations that has to stop.

STR owner Biao Zhou has organized a GoFundMe in support of Valentine’s legal costs. Zhou says on the web page that supporting the Valentine’s court case is the best chance STR owners have of protecting themselves against the new regulations.

Fraser Sherman has worked for newspapers, including the Destin Log, the Pensacola News-Journal and the Raleigh Public Record. Born in England, he’d still live in Florida if he hadn’t met the perfect woman and moved to Durham to marry her. He’s the author of several film reference books and has published one novel and several short story collections.

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