Short Term Rental Restrictions in North Carolina

Regarding Short Term Rental restrictions in North Carolina:

I get this question a lot, especially from out of state investors, as I basically only broker short term rentals in North Carolina in the mountains and around the Charlotte area: "What are the STR restrictions like in North Carolina?"

I figured since this is a hot investment strategy, that I would shed some light on it in this group for anyone who might be interested.

To put it simply, North Carolina is a very STR-friendly state.

However, it's important to note in light of the Wilmington lawsuit that created strong precedent in what is allowed and not allowed, that there are some limitations, and it's important to know what they are. I'm not an attorney, but as a citizen and business owner curious in this matter, this is what I know.

Basically, the law is derived from statute § 160D-1207(c) stating, "(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"

In short, cities and local governments cannot legally institute a permitting system in North Carolina. 

This law was central to the Wilmington case, and was ruled that Wilmington passed an illegal statute. In the end, Wilmington did not appeal the ruling, and returned over $500,000 in fees to owners.

https://www.wect.com/.../appeals-court-rules-wilmingtons.../

Interestingly, the timing of this ruling (May of this year) was when the city of Charlotte was in the final stages of amending their new zoning package which included a new permitting system for Short Term Rentals. The District Attorney for Charlotte sent a letter to the city council advising them to remove all language that would require permitting or otherwise restrict short term rental usage in Charlotte.

https://www.wsoctv.com/.../SRLZ7YXQ6FAX5OZKWCTSDEWPFY/

Does this mean that city councils can't regulate STRs? No. They can either by way of simply passing whatever they want and breaking the law, effectively daring their citizens to sue them (think Asheville, which is clearly not in compliance with their permitting system under the Wilmington precedent, and is probably in the early stages of a big lawsuit).

OR they can restrict STR usage by the LEGAL way of zoning laws. Zoning use laws don't get passed very often (think decades), so most cities and towns in North Carolina do not have a restriction on STRs in their zoning package. However, most new zoning packages passed through city councils in NC in the modern era will include STR restrictions. A good example here would be Blowing Rock, NC which has a legal zoning restriction in general business areas, and does not have a permitting system. If you're in the zone, you can do it, if you're not, you can't. Keep in mind, this only applies within city limits.

Critically: if you own a short term rental before the zoning laws are changed, it stands to reason you will qualify for a "nonconforming use" exemption (this is automatic, and not an application) to the new zoning as long as you own the property. This, in theory, provides a unique opportunity to buy properties in cities that have not changed their zoning laws in some years to adapt to the modern era of land uses and wait for the new zoning to restrict competition (Think small towns in booming areas in the mountains like Sylva, NC which just passed their new zoning package in the last year).

In short, there are no state laws that restrict STRs. There are no county laws that restrict STRs that I'm currently aware of (at least in the ones I primarily work). STR restrictions almost always come from HOA's. I advise my clients to stay away from HOA's because even if there is no restriction, they are easy to get passed and could leave you invested in a property that will become much harder to sell without the ability to STR. There are some cities and towns in North Carolina that restrict, and this is why it's important to work with a realtor that KNOWS this, knows the areas, and isn't shooting from the hip.

The landscape around STR's is always changing, but in general, if you're outside of an HOA and city limits in North Carolina, you're basically good to go. If you are in city limits, understanding the city regulations will give you a big leg up in finding a property that cash flows well, and could even work in your advantage to restrict competition.

I hope this is helpful, and happy hunting.