LAND DEVELOPMENT CODE

AMENDMENT

Case: LDC-6-1120
Staff Contact: Kathryn Thurston; [email protected], 910-341-3249

Staff Recommendation: Approval

Planning Commission Scheduled for public hearing December 2, 2020

Recommendation:
City Council Action: Pending

Request
Code Section(s) Amend City Code Chapter 18, Sections 18-329, 18-330, and 18-331,
pertaining to short-term lodging regulations
Request To revise short-term lodging regulations to better align with statutory
allowances governing the use and to modify separation requirements in
multi-family developments.
Applicant City of Wilmington

BACKGROUND / ANALYSIS

Following a three-year research and public input period, City Council adopted regulations for
homestay lodging in all districts and whole-house lodging in commercial districts in July 2018. In
February 2019, City Council adopted regulations for the final component of short-term lodging,
whole house rentals in residential and historic districts. To allow time for staff to implement the
regulations, City Council set an effective date of March 1, 2019 for both ordinances. A lottery was
held to determine which rentals with separation conflicts would be allowed to continue operating.
Additionally, City Council allowed a one-year amortization period for rental operators that could not
comply with the newly adopted ordinances. That amortization period ran from the date of the lottery
(April 15, 2019) until April 22, 2020. On April 3, 2020, city staff sent a letter to operators whose
amortization period was ending to inform them of the need to discontinue use as short-term lodging.

As a result of that letter, the city received several appeals, including one to the lottery process
relative to the properties at 1800 Eastwood Road. The city is appealing the order in that case but
seeks to address some of the issues brought forward by the judge presiding over the appeal. One of
those issues is the use of a registration program, which is prohibited by NCGS §160D-1207(c). The
entirety of that statutory reference is included as an attachment, but generally that section limits local
government authority on the registration and permitting of residential rental properties. The statute
specifies applicability to NCGS Chapter 11 (Building Code Enforcement) and Chapter 12 (Minimum
Housing Codes). It does not specify applicability to Chapter 7 (Zoning). Annual permits are a
necessary tool for zoning enforcement to effectively and efficiently administer the short-term lodging
regulations; however, use of the term “permit” instead of “registration” better aligns with statutory
language, other land use approvals, and current operating procedures.

As part of the rewrite of the Land Development Code, staff had already proposed many of the
changes reflected in this amendment; however, the update has been expedited as a result of the
ongoing litigation of the city’s short-term lodging requirements.
 2
LDC-6-1120 Short-term Lodging revisions

PROPOSED AMENDMENT

The full text of the proposed changes is included as an attachment but the proposed amendment, in
summary, would:

 Replace the word “registration” with “permit” to align with standard operating procedure for
approving short-term lodging uses and to better differentiate zoning approval of the use from
a general landlord tracking program;
 Remove the two percent (2%) cap on whole-house lodging uses relative to the total number
of dwelling units for all districts except multi-family;
 Remove the minimum 400-foot separation between whole-house uses in multi-family districts
but retain the two percent (2%) cap for multi-family developments;
 Eliminate reference to penalties for violations of laws or regulations that are not part of the
Land Development Code.

CONSISTENCY WITH ADOPTED PLANS

The following analysis examines the City’s short-term lodging regulations relative to the policies of the
Create Wilmington Comprehensive Plan. The proposed amendment improves upon those adopted
regulations. Not all policies carry equal weight and depend on the specifics of the proposal.

Strong Support Modest Support Modest Non-support Strong Non-support

Policies 1 Development & City Building

Neighborhood Conservation, Infill, and Redevelopment
1.7.1 Growth should be accommodated in the city through mixed-use neighborhoods
with a variety of housing types and price points.
1.7.2 Revitalization and stabilization of neighborhoods at risk should be facilitated
through grants, loans, housing rehabilitation efforts, commercial investment
programs, capital improvements, public-private partnerships, and other
actions.
1.7.3 The need to increase housing supply, neighborhood commerce, and to mature
as a city should be balanced with the need to protect desired neighborhood
character, preserve historic resources, and protect the natural environment.
1.7.4 Unique character areas that have become marked by vacant or abandoned
buildings, underutilized older buildings, and low occupancy rates should be
priority areas for rehabilitation and adaptive reuse.
1.7.5 Historic and unique neighborhoods with an abundance of desired character
should be protected and conserved through the use of zoning, reinvestment,
and other tools.
Policies 3 Housing
Diversity of Housing Options
3.1.5 The preservation of existing housing units, rather than demolition, should be
encouraged, especially structures of historic significance.
 3
LDC-6-1120 Short-term Lodging revisions

Fair Housing, Universal Design, and Aging in Place

3.4.1 Universal design and lifecycle housing should be encouraged to facilitate the
ability of homeowners and neighborhood residents to age in place in their
homes and neighborhoods.
3.4.3 Housing rehabilitation programs that assist elderly homeowners to repair,
modernize, and improve the energy efficiency of their homes should be
supported.
Policies 5 Economic Development
Neighborhood Reinvestment
5.2.1 In partnership with neighborhood groups, focused reinvestments to make safe,
attractive, and walkable neighborhoods and attract skilled workers to
Wilmington should be encouraged. A mix of housing types and price points
should be encouraged to diversify neighborhoods, particularly around business
clusters and schools.
Business Development
5.3.5 In collaboration with businesses and neighborhoods, issues and conflicts that
inhibit economic growth and neighborhood development should be addressed
in order to help grow and expand job opportunities and provide a healthy
economic base.
5.3.10 Low-impact, home-based businesses and “cottage industries” should be
supported, where appropriate.
Tourism and Hospitality
5.6.3 Diverse and accessible lodging and accommodations to support tourism
growth should be supported through partnerships with developers, investors,
and other local organizations.
Policies 11 Historic Preservation
Wilmington’s Historic Identity
11.1.2 The city’s historic resources and heritage should be recognized and promoted
as an economic asset. As the city grows and redevelops, stewardship of
neighborhoods, places, landmarks, historic districts, and landscapes should be
fostered.
Housing, Adaptive Reuse, and Rehabilitation
11.3.1 Adaptive reuse of historic buildings and sites should be encouraged to support
the goals of housing diversity and affordability, economic development,
environmental sustainability, parks and recreation, and urban design,
particularly in areas with a strong historic context.
11.3.4 Reuse and rehabilitation of existing dilapidated homes should be encouraged
and supported for use as scatter-site workforce housing units. The minimum
housing code should be applied in a manner that ensures historic preservation.

The goals of the short-term lodging regulations are to:

1. Ensure the safety, welfare and convenience of renters, owners and neighboring property
owners throughout Wilmington.
2. Balance the legitimate livability concerns with the rights of property owners to use their
property as they choose.
3. Recognize the need to limit short-term rental options within the neighborhoods to ensure
compatibility, while recognizing the benefits of short-term rentals in economic
development, business, film, hospital-related short stays, and transitional housing.
 4
LDC-6-1120 Short-term Lodging revisions

4. Help maintain the city’s needed housing supply for residential use, balanced with the
need to evolve with current economic realities.
5. Protect the character of the neighborhoods by limiting the number and concentration of
short-term rentals in residential zones. The transient rental of dwelling units has the
potential to be, but is not necessarily, incompatible with surrounding residential uses.
6. To balance the regulation of dwellings listed for transient occupancy necessary to ensure
that these uses will be compatible with surrounding residential uses, will not materially
alter the neighborhoods in which they are located and in a manner that is enforceable
and equitable.

CONCLUSION / RECOMMENDATION

When the short-term lodging regulations were originally adopted, it was with the understanding that
changes would likely be necessary once staff had the opportunity to evaluate the effectiveness of
the program. Several changes were already planned as part of the Land Development Code rewrite;
however, due to pending litigation relative to this use staff decided to expand and expedite those
changes. The original ordinance is consistent with the policies set forth in the Create Wilmington
Comprehensive Plan and the proposed changes strengthen and clarify that ordinance. Staff
recommends approval of the amendment to the Land Development Code as proposed.

NEIGHBORHOOD CONTACT
Planning Commission City Council
Advertisement Date(s) 11/20/20

ACTIONS TO DATE

Planning Commission Scheduled for public hearing December 2, 2020

City Council Pending

ATTACHMENTS

1. Map of current STLs (dated November 19, 2020)

2. School of Government blog (dated October 2, 2020)
3. NCGS § 160D-1207(c)
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 Coates' Canons
NC Local Government Law
https://canons.sog.unc.edu

Coates' Canons Blog: Understanding the Legal Basis for the Strike Down of Wilmington’s Short-
Term Rental Ordinance

By Rebecca Badgett

Article: https://canons.sog.unc.edu/understanding-the-legal-basis-for-the-strike-down-of-wilmingtons-short-term-
rental-ordinance/

This entry was posted on October 02, 2020 and is filed under Land Use & Code Enforcement

To understand the Superior Court judge’s rational for striking down the city of Wilmington’s whole-house lodging ordinance
(Sec. 18-329), it is helpful to review the law that served as the basis for the decision. As discussed in this previous blog
post, S.L 2017-73 clarified that properties subject to the Vacation Rental Act, including short-term rentals (STRs), are also
subject to the requirements set forth in the Periodic Inspections statutes (previously G.S. 160A-424 & 153A-364, now G.S.
160D-1207). The Periodic Inspection statutes afford owners of residential rental properties certain protections because the
law limits local government authority to conduct periodic inspections, prohibits the registration of residential rental
property, limits permitting, and bans the imposition of taxes and fees not likewise charged to commercial rental properties.

With the recent adoption of Chapter 160D, the limitations outlined in the Periodic Inspection statutes have been relocated
from the statutes on general building inspections to the statutes on housing code enforcement. The legislature also
amended subsection (c) of 160D-1207 to clarify the restrictions on permitting and registration of residential rental
properties:

“In no event may a local government do any of the following: (i) adopt or enforce any ordinance that would require any
owner or manager of rental property to obtain any permit or permission under Article 11 or Article 12 of this Chapter from
the local government to lease or rent residential real property or to register rental property with the local government . . . .”
S.L. 2019-111 (emphasis added).

The added reference to Articles 11 and 12 indicates that the prohibition on requiring permits for residential rental property
is specific to building code or the housing code permits (i.e., Articles 11 and 12). However, rental registries continue to be
unlawful—the legislature did not amend 160D-1207 to provide otherwise. Thus, a local government may not require an
owner to participate in a registration program for rental residential property, nor may a local government require owners to
obtain extra permitting under building code or housing code in order to rent residential property (Articles 11 and 12).
Importantly, the amended statute does not divest local governments of their authority to regulate different land uses
through zoning. Therefore, it is reasonable to conclude that local officials may require a zoning-compliance permit or other
zoning approval in order to commence a short-term-rental land use.

The Wilmington Case

The recent New Hanover County Superior Court case, Schroeder v. City of Wilmington (19-CVS-4028), supports the
above interpretation of the law. The judge held that state law clearly preempted the city’s requirement that STR owners
must register their rental property with the city annually: “No local government may adopt or enforce any ordinance that
would require any owner or manager of rental property to register rental property with the local government.” Notably, the
judge also concluded, “[t]he amendments made to G.S. 160A-424 in 2019 S.L. 111 limit the prohibition on permits and
permissions to Articles 11 and 12 of that chapter but no such limiting language was made applicable to the prohibition on
the registration requirement.” Thus, the judge also interpreted the law as requiring a broad prohibition on registration, but
the prohibition on permitting requirements is narrower and limited to Articles 11 and 12.

Copyright © 2009 to present School of Government at the University of North Carolina. All rights reserved.

Page
 Coates' Canons
NC Local Government Law
https://canons.sog.unc.edu

It is worth noting the judge struck down in its entirety the city’s whole-house lodging ordinance as being preempted by
state law, but that ordinance is more than just a registration requirement. It includes a 400-foot separation between STR
properties, a 2% cap, a lottery for permits, amortization of unpermitted uses, and more. It is unclear if or why these other
provisions are directly preempted by state law, but nonetheless they were struck down along with the registration
requirement. This uncertainty has caused some local officials to ask what exactly is lawful when it comes to regulating
STRs? Why didn’t the judge simply strike the registration requirement?

For the time being, there are more questions than answers. The judge has agreed to a stay and it seems reasonable that
an appeal may be forthcoming. Given the ongoing interest in short-term rentals across the state, it is likely we will get
more clarity and refinement of the authority of North Carolina local governments to regulate short-term rentals soon.

What now?

In the meantime, land use regulations such as zoning remain, and local governments may continue to use their zoning
authority to regulate STRs as a separate land use. In doing so, a local government will want to define short-term rentals as
a separate land use within the code, just as they would define conventional bed-and-breakfasts as a separate land use.
Further, because G.S. 160D-1207 does not limit the issuance of permits under zoning, it seems reasonable for a local
government to require a basic zoning permit for the land use should it wish to do so. Importantly, local officials must
remember to avoid adopting a property registration requirement—this is where the city of Wilmington ran into trouble. Had
the city simply issued zoning permits to regulate this land use, the judge probably couldn’t have struck down the ordinance
on the basis the city violated G.S. 160A-424(c) (i.e. G.S. 160D-1207(c)).

Links
library.municode.com/nc/wilmington/codes/code_of_ordinances?nodeId=PTIIITECO_CH18LADECO_ART6SUDER
E_DIVIPRCOSPUSPRACUSST_S18-331WHUSLOUSREMUHIDI
www.ncleg.gov/EnactedLegislation/Statutes/HTML/ByChapter/Chapter_160D.html
www.ncleg.gov/EnactedLegislation/SessionLaws/PDF/2019-2020/SL2019-111.pdf

This blog post

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to present postedofonline by the School
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at the University to address
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Carolina. of interest
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reserved.
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To browse a complete catalog of School of Government publications, please visit the School’s website at www.sog.unc.edu or contact the Bookstore, School of
Government, CB# 3330 Knapp-Sanders Building, UNC Chapel Hill, Chapel Hill, NC 27599-3330; e-mail [email protected]; telephone 919.966.4119; or fax
919.962.2707. Page
§ 160D‐1207. (Effective January 1, 2021) Periodic inspections.
(a) Except as provided in subsection (b) of this section, the inspection department
may make periodic inspections only when there is reasonable cause to believe that unsafe,
unsanitary, or otherwise hazardous or unlawful conditions may exist in a residential building
or structure. However, when the inspection department determines that a safety hazard
exists in one of the dwelling units within a multifamily building, which in the opinion of the
inspector poses an immediate threat to the occupant, the inspection department may
inspect, in the absence of a specific complaint and actual knowledge of the unsafe condition,
additional dwelling units in the multifamily building to determine if that same safety hazard
exists. For purposes of this section, the term "reasonable cause" means any of the following:
(i) the landlord or owner has a history of more than two verified violations of the housing
ordinances or codes within a 12‐month period, (ii) there has been a complaint that
substandard conditions exist within the building or there has been a request that the
building be inspected, (iii) the inspection department has actual knowledge of an unsafe
condition within the building, or (iv) violations of the local ordinances or codes are visible
from the outside of the property. In conducting inspections authorized under this section,
the inspection department shall not discriminate between single‐family and multifamily
buildings or between owner‐occupied and tenant‐occupied buildings. In exercising this
power, members of the department shall have a right to enter on any premises within the
jurisdiction of the department at all reasonable hours for the purposes of inspection or other
enforcement action, upon presentation of proper credentials. Nothing in this section shall be
construed to prohibit periodic inspections in accordance with State fire prevention code or
as otherwise required by State law.
(b) A local government may require periodic inspections as part of a targeted effort
to respond to blighted or potentially blighted conditions within a geographic area that has
been designated by the governing board. However, the total aggregate of targeted areas in
the local government jurisdiction at any one time shall not be greater than 1 square mile or
five percent (5%) of the area within the local government jurisdiction, whichever is greater.
A targeted area designated by the local government shall reflect the local government's
stated neighborhood revitalization strategy and shall consist of property that meets the
definition of a "blighted area" or "blighted parcel" as those terms are defined in G.S. 160A‐
503(2) and G.S. 160A‐503(2a), respectively, except that for purposes of this subsection, the
planning board is not required to make a determination as to the property. The local
government shall not discriminate in its selection of areas or housing types to be targeted
and shall (i) provide notice to all owners and residents of properties in the affected area
about the periodic inspections plan and information regarding a public hearing regarding
the plan, (ii) hold a public hearing regarding the plan, and (iii) establish a plan to address the
ability of low‐income residential property owners to comply with minimum housing code
standards.
(c) In no event may a local government do any of the following: (i) adopt or enforce
any ordinance that would require any owner or manager of rental property to obtain any
permit or permission under Article 11 or Article 12 of this Chapter from the local
government to lease or rent residential real property or to register rental property with the
local government, except for those individual properties that have more than four verified
violations in a rolling 12‐month period or two or more verified violations in a rolling 30‐day
period, or upon the property being identified within the top ten percent (10%) of properties
with crime or disorder problems as set forth in a local ordinance, (ii) require that an owner
or manager of residential rental property enroll or participate in any governmental program
as a condition of obtaining a certificate of occupancy, (iii) levy a special fee or tax on
residential rental property that is not also levied against other commercial and residential
properties, unless expressly authorized by general law or applicable only to an individual
rental unit or property described in clause (i) of this subsection and the fee does not exceed
five hundred dollars ($500.00) in any 12‐month period in which the unit or property is found
to have verified violations, (iv) provide that any violation of a rental registration ordinance
is punishable as a criminal offense, or (v) require any owner or manager of rental property
to submit to an inspection before receiving any utility service provided by the local
government. For purposes of this section, the term "verified violation" means all of the
following:
(1) The aggregate of all violations of housing ordinances or codes found in an
individual rental unit of residential real property during a 72‐hour period.
(2) Any violations that have not been corrected by the owner or manager
within 21 days of receipt of written notice from the local government of
the violations. Should the same violation occur more than two times in a
12‐month period, the owner or manager may not have the option of
correcting the violation. If the housing code provides that any form of
prohibited tenant behavior constitutes a violation by the owner or
manager of the rental property, it shall be deemed a correction of the
tenant‐related violation if the owner or manager, within 30 days of receipt
of written notice of the tenant‐related violation, brings a summary
ejectment action to have the tenant evicted.
(d) If a property is identified by the local government as being in the top ten percent
(10%) of properties with crime or disorder problems, the local government shall notify the
landlord of any crimes, disorders, or other violations that will be counted against the
property to allow the landlord an opportunity to attempt to correct the problems. In
addition, the local government and the county sheriff's office or city's police department
shall assist the landlord in addressing any criminal activity, which may include testifying in
court in a summary ejectment action or other matter to aid in evicting a tenant who has been
charged with a crime. If the local government or the county sheriff's office or city's police
department does not cooperate in evicting a tenant, the tenant's behavior or activity at issue
shall not be counted as a crime or disorder problem as set forth in the local ordinance, and
the property may not be included in the top ten percent (10%) of properties as a result of
that tenant's behavior or activity.
(e) If the local government takes action against an individual rental unit under this
section, the owner of the individual rental unit may appeal the decision to the housing
appeals board or the zoning board of adjustment, if operating, or the planning board if
created under G.S. 160D‐301, or if neither is created, the governing board. The board shall
fix a reasonable time for hearing appeals, shall give due notice to the owner of the individual
rental unit, and shall render a decision within a reasonable time. The owner may appear in
person or by agent or attorney. The board may reverse or affirm the action, wholly or partly,
or may modify the action appealed from, and may make any decision and order that in the
opinion of the board ought to be made in the matter. (2019‐111, s. 2.4.)