Here’s how Chapel Hill could limit how, where short-term rental homes could operate

Short-term rental hosts in Chapel Hill would have to get a permit and follow other rules under a pilot program the town is considering.

The program would require a zoning compliance permit that would help gather more precise data about how many short-term rentals exist and where.

In March, town staff reported that roughly 3.4% of the town’s residential units had been used as short-term rentals over the last six years, mostly in residential neighborhoods.

The estimated number of active short-term rentals plummeted — from 445 to 182 — between March 2020 and March 2021, largely because of the COVID-19 pandemic. Roughly 71% of those were renting out an entire house, staff said.

The biggest issues raised so far include health and safety, whether STRs unfairly compete with hotels, and whether STRs without an on-site owner or even owner-occupied STRs should be allowed in neighborhoods.

The town eventually could limit the number of STRs allowed and give property owners with existing short-term rentals from six months to a year to comply with the new rules.

Residents, hosts speak to town

Several residents and short-term rental hosts spoke to the Town Council on Wednesday about the rules, proposed by a task force of residents, hotel owners and others.

Linda Carol Davis said she never realized how STRs affected neighbors and pressed the council for a 60-day limit in residential areas.

“The main thing is when you have a short-term rental, you don’t have a neighbor that’s living there, who waves at you and interacts with you, and volunteers at the library,” she said. “It changes our neighborhood when we don’t have neighbors. Good neighbors are quite a benefit to the town.”

Others, including B.J. Warshaw, who has operated a short-term rental for five years, said a proposed three-strikes rule for noise and other violations “is ripe for abuse by neighbors with an ax to grind.”

“We’ve had parents who want to cook meals for their UNC students or individuals with serious allergies who can’t stay in hotels due to the type of cleaning products they use, and we even recently hosted a young mother and her daughter who was undergoing life-saving treatments at UNC and needed private, comfortable and affordable lodging,” Warshaw said. “We’re not a party house. Our guests are required explicitly to follow our house rules, including our occupancy cap and no unauthorized guests.”

The council, after a long meeting and quick feedback to staff, continued the public hearing to June 16. The council could vote June 23.

Types of short-term rentals

Short-term rentals typically offer stays of up to 29 days and often are rented out through online sites like Airbnb and VRBO. They let property owners earn extra income, while allowing visitors to more affordably travel and to stay in a private home.

Chapel Hill already allows homeowners to rent out their primary residence for up to 14 days, but the rules prohibit homeowners from renting their home and an accessory dwelling on the lot to two different parties at the same time.

Other types of short-term rentals are:

Homestays: The owner lives on the lot and rents out a bedroom or accessory dwelling. Allowed as a home occupation in most town zoning districts.

Unhosted rentals: Dwelling can be rented for up to 95 days a year, and the property owner lives somewhere else. Allowed as a tourist home in non-residential districts and as overnight lodging in the town’s northeastern Blue Hill District.

Dedicated rentals: Investor-owned short-term rentals with no one living on the lot. Allowed as a tourist home in non-residential districts and as Blue Hill District overnight lodging.

Proposed Chapel Hill STR rules

Let owners across town rent out their primary home for up to half a year, or between 146 and 183 days.

Prohibit short-term rentals in the historic districts

Limit dedicated STRs to high-density residential, commercial and mixed-use zoning districts, such as the Blue Hill mixed-use district

Establish STR operating standards, including a maximum overnight occupancy of four people over the age of 12 (plus children), on-site parking, and a designated person who can respond to emergencies within a specified period of time

Set a minimum rental age; most council members supported 21 years of age

Allow property owners who live on-site to rent out more than one unit on a single lot to different parties

Require an annual permit; neighbors living within 100 feet would be notified

“Three strikes, you’re out” clause enforced by police or the town in the case of a zoning violation. Council members wanted to make the appeals process fair and limit abuse by neighbors opposed in general to short-term rentals.

Hotel, neighborhood concerns

Local hoteliers, the Chapel Hill-Carrboro Chamber of Commerce and the citizens group Chapel Hill Alliance for a Livable Town asked the council in 2019 to create short-term rental rules that would protect neighborhood standards and slow the conversion of the town’s limited affordable housing into investor-owned homes.

Local hoteliers also worried about competing with property owners who don’t have to meet the same safety and health standards or, in some cases, pay the 3% local occupancy tax on room rentals.

Airbnb has collected occupancy taxes from North Carolina hosts since 2015, but other companies leave tax collection to their hosts.

Manish Atma, president of Atma Hotel Group, pushed for banning all dedicated STRs in residential areas. They harm small businesses, he said, and remove affordable homes from the market. They create an unlevel playing field for hotel operators, he said.

“We have no problem with property owners renting part of their homes to a guest to supplement their income by renting their residence while away, but dedicated STRs are nothing more than lodging businesses,” he said. “It’s an entirely different issue.”