The west side of Cornelius ends in dozens of tiny peninsulas that spread across Lake Norman like tree roots through soil. The bedroom community north of Charlotte is only 15 square miles but boasts 75 miles of lakefront, likely the most of any North Carolina town.
Around a decade ago, locals noticed an uptick in the number of out-of-town guests booking homes through then-nascent rental platforms like Vrbo and Airbnb.
They weren't pleased.
“We’re not a vacation town,” said Frances Dawson, a realtor who lives in Cornelius. “The people who spent their good hard-earned money on these waterfront properties didn’t want to listen to loud music and 2 a.m. pool parties.”
In the early 2010s, the town passed an ordinance barring all short-term rentals from its shoreline neighborhoods. After the law was challenged in court, Cornelius officials asked the N.C. General Assembly in 2014 to codify the town’s abilityto “establish and enforce zoning regulations” for vacation rentals.
Both chambers agreed, passing a bill by a combined vote of 154 to 5. It was one of the first laws out of the state legislature addressing the burgeoning online short-term rental industry.
“It passed relatively easily,” said Wayne Herron, the deputy town manager of Cornelius. “Since then, we feel like the ban has done very well for us.”
The bill containsa sunset provision that lets it expire at the end of this year. Local officials have asked the General Assembly to extend this local authority, but today, seven years after the bill was overwhelmingly approved, it's renewalappears doubtful.
“The world has changed since then, and Airbnb and Vrbo are so much more popular,” Herron said. “Their lobby is much stronger. I think it’ll be much more difficult just because it’s a bigger animal than what it was in 2014.”
While the Cornelius bill is limited in scope - it only impacts one North Carolina town, its tenuous fate reflects a shift in how the state legislature is defining what cities can - and especially what they can’t - do to control vacation rentals.
In September,ajudge invoked a 2019 statewide law when striking down Wilmington's short-term rental rules.And this month, legislation making its way through the General Assembly has officials inAsheville on alert.
This bill, House Bill 829, could bring about a “sea change” in the way North Carolina cities regulate vacation rentalssaid Ashevillecity attorney Brad Branham.
In a city where housing is top of mind,Branhamsaid of the bill: "We are watching it, concerned with it, and paying close attention."
Rise of regulations andlobbying
Living in a state bookended by two tourism magnets - the mountains and the ocean - North Carolinians have beenfront rowto the nation’s short-term vacation rental boom.
Most of this rental market, about 65%, is controlled by one company. In the past five years, Airbnb listings in North Carolina have ballooned by 660%, from 4,700 to 31,200 according to the analytics firm AlltheRooms. The next most popular platform, Vrbo, has about half as many listings statewide.
Some North Carolina homeowners rely on renting out rooms to supplement their incomes; othersown numerous unitsas investment assets. The rentals - made easily accessible through phone apps - can help funnel tourism dollars into communities, howeverresidents have also derided the rental platforms for introducing noisy neighborswhile eating into the local housing stock.
In what’s called the “Airbnb effect,”researchers have found that a 1% increase in Airbnb listings can raise an area’s rent by 0.018% and home prices by 0.026%. These percentages may seem trivial but can add up in a soaring vacation rental market.
Over the past decade, North Carolina cities began passing restrictions, frommandating hosts live in the homes they rent to outrightrental bans.Asheville’s current rules, implemented in 2018,require homeowners receive a permit before renting out up to two rooms. The next year,Wilmington made hosts renting outentire housesenter a lottery with only the winners able to continue booking guests.
Ascities set regulations, the short-term rental industry revved up its lobbying effortsagainst them. In the mid-2010s, Airbnb hired the North Carolina-based public relations firm Targeted Persuasion to convince local officials to ease restrictions in Raleigh and Asheville.
In 2018, Airbnb sent its first lobbyist to the General Assembly, and the San Francisco-based company has had at least one registered lobbyist working in the state each year since. In 2019, thecompany paid three lobbyists around $32,000 in total for their work in North Carolina. Expedia, which purchased Vrbo in 2015, has three lobbyists in the state.
"There is a push by certain short-term rental platforms to try to remove the power from local governments to regulate short-term rentals," said Ulrik Binzer, whose company Host Compliance helpsa half-dozen North Carolina municipalities, including Asheville, monitor rentals and enforce regulations.
In an email to the USA Today Network, Airbnb spokesperson Laura Rillos wrote, “Whether at the state or local level, our focus is on helping public officials understand the benefits and various use cases of short-term rentals, as well as advocating for our hosts, and being good partners to the communities they call home.”
Groups that support local rental regulations, like the N.C. League of Municipalities and the N.C.Restaurant and Lodging Association,also have registered lobbyists. Yet when it comes to lobbying, state Rep. Deb Butler, D-New Hanover, believes the short-term rental industry holds unique advantages.
“Vrbo, Airbnb, they have one issue on their minds when they’re (in the General Assembly),” shesaid. “When you think about the lobbyists who are lobbying on behalf of these communities, they have thousands of issues that impact them. They don’t have nearly the money or the staff or the capacity to be as effective as someone with one issue and a lot of money.”
The regulatory landscape lobbyists and politicians operate withinhas yet to solidify, notedRebecca Badgett, an attorney with the UNC School of Government. Short-term rental platforms are relatively new. Local regulations are relatively new. The state government's overall response to cities' regulationsis still up-in-the-air.
“It’s a time where things are not very set," Badgett concluded.
Perhaps nowhere is this uncertainty as pronounced - andas dependent on a growing tug-of-warbetweenstate and local laws - as Wilmington.
More:The battle for 'middle housing': Asheville neighbors fight to save single-family zoning
'The worst-case scenario'
In the spring of 2018, David and Peggy Schroeder bought a townhouse in Wilmington. Having retired from the coastal city to the Western North Carolina mountains, the couple looked to use this second home periodically when visiting their friends, children, grandchildren. To afford the property, they planned to rent it out as a short-term rentalwhen they weren’t in town.
Soon after the Schroeders listed the house on Vrbo, Wilmington issued a new rentalordinancethat, among other things, prevented entire-home rentals from operating within 400 feet of each other and capped vacation properties at 2% of the city's housing supply. To ensure these metrics, Wilmington made all hosts register their propertiesand enter a lottery through which the city would grant a select number of permits.
The Schroeders entered the lottery and lost. Peggy called the process, “an absurd way to give people their rights.” David said the city was gambling people's property. Forced to stop renting out their home, the couple sued the city. Last September, theywon.
“When we won the case it felt so good,” Peggy said. “It felt as if there actually is justice in our country.”
In his ruling,Superior Court Judge Kent Harrell declared the city'sordinance "void and unenforceable'. Harrell cited G.S. 160D-1207, a statute within the state's planning and development regulations, that reads: “In no event may a city do any of the following: 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 city to lease or rent or to register rental property with the local government.”
Until recently, it wasn't clear whether this statute applied to short-term vacation rentals, but in 2019, the General Assembly emphatically answered that it did, unanimously passingSB483, which Gov. Roy Cooper signed into law.
"The law was important because the legislature recognized there may be some limits to what a local government may do when it comes to STR (short-term rental) regulation," Badgett said.
Judge Harrell referenced this 2019 law several times when ruling againstWilmington. If vacation rentals are covered by the state's planning statute andif this statute bans local governments from requiringrental registrations, thenhe reasonedWilmington's rental ordinance was unlawful.
Yet while Harrell called the state's planning statute “clear and unambiguous,"Wilmington - which has appealed his decision- contends it doesn'tpreempt its local authority to regulateshort-term rentals.
The crux of the city’s argument focuses on oneparticular phrase in the planning codes: "under Article 11 or Article 12". Wilmington, like Asheville, believes its authority to regulate vacation rentals falls not under these articles, but rather under Article 7,which covers zoning. If the planning code only mentions Article 11 and 12, city officials argue, then they can still regulate under zoning.
But a new bill seeks to edit this language in a way that could tilt the debate.
House Bill 829, which passed the GOP-control state house in a largely partisan vote two weeks ago, erases the line “under Article 11 or Article 12 of this Chapter” from the planning codes. By deleting these seven words and two numbers, some say the justification cities stand on to maintain many of their rental regulations could topple. If references to Article 11 and Article 12 aredashed, the courts may conclude cities can’t require zoning permits or possibly adopt other regulations under any article of the planningcode.
“I do believe it would be devastating to the arguments that the city (of Wilmington) is making,” said Ari Bargil, the Schroeders’ lawyer who works for the Institute for Justice, a nationalfirm focused on promoting Libertarian ideals.
Experts say the impacts of HB829, if passed, would rely on judges’ interpretations. Still, from the mountains to the coast, local officials areworried at the prospects.
In an email, Wilmington city attorney John Joye wrote, “We believe this legislation could impair that local authority, which would negatively impact certain neighborhoods and communities.”
Branham, the Asheville city attorney, said, “I would admit that there absolutely exists the possibility that this could have ramifications for Asheville -and any other city or county that is attempting to create permission requirements to lease or rent residential properties.”
In what Branham called “the worst-case scenario,”he foresawAsheville notbeing able toenforcemost of its current short-term rental regulations: No more limits on entire-house rentals or permitting requirements. If stripped of this control, he predicted a flood of new short-term rentals opening up and carving into the city’s already tight housing supply.
Related coverage:The Airbnb effect: Short-term rentals alter housing markets in WNC
More wrangling to come
On May 11, House Bill 829 passed by a vote of 66 to 45. Only three Democrats supported the bill. The only two Republicans to oppose it, Rep. Ted Davis and Rep. Charles Miller, represent parts of Wilmington.
Rep. Butler criticized her Republican colleagues for introducing the bill late in the legislative session and then havingit "cram through"by the May 13 crossover deadline, the unofficial day by which bills must pass either chamber if they stand a chance to succeed.
Explaining why she voted against HB829,Rep. Susan Fisher, D-Buncombe,texted that short-term rental regulations are "best left to the local authorities and the courts."
Rep. Dean Arp, R-Union, the bill's sponsor, didn't respond to emailsand callsasking why he supported the legislation deletingthe phrase: "under Article 11 or Article 12 of this Chapter” from the state's planning statute.The bill is now in the Senate, where it's been referred to the chamber's rules committee.
Badgett, whocoauthored the 2019 book Regulation and Taxation of Short-Term Rentals, cautions against assuming HB829would doom local rental regulations.
“It’s not clear that it’s going to stop regulating through zoning, but it might have a limiting effect,” she said.
No matter the outcome of HB829,Badgett foresees the General Assembly growing more aggressivein clarifying how cities and towns can and can't control vacation rentals.
As an Airbnb host,Raleigh resident Michael LoDebole would welcomethe General Assembly taking more initiative to shield homeowners from outright bansand other"unreasonable" restrictions. Local ordinances, he argued, have misguidedly scapegoated rentals for causing neighborhood disturbances andhousing shortages that havemyriad other contributing factors.
“(Regulation) should be handled locally if it’s reasonable, and when unreasonable things happen, then someone has to step in,” he said.
While LoDebole supports the current pro-host stances of the Raleigh City Council (the city recently walked backa ban onwhole-house rentals), he remains wary of future regulations. LoDebole, who owns multiple properties, declined to say how manyhe rents out due to concern “there still may be some movement on council.”
As state-level wrangling over local rental rules intensifies, Wayne Herron hopes Cornelius has a voice in the debate.
“I’m really confident that the General Assembly is going to have a bigger and broader discussion about where do we go with this in the future,” he said. “And we just want to be a part of that conversation.”
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With its expiration approaching, Cornelius's 2014 rental regulatory law looks unlikely to survive beyondthis year. In March, Sen. Natasha Marcus, D-Mecklenburg, sponsored legislationto extend the town's local authority, but after being referred to the Senate Rules Committee, it failed to get a hearing. In an email, Marcus wrote this “is an indication that leadership is not in favor of the ideas and/or has other reasons it doesn’t like the bill.”
Laura Rillos of Airbnb said her company was not involved in lobbying efforts around this bill or HB829.
If the Cornelius billdoes lapse, the city won't necessarily lose its current restrictions. Other cities - like Asheville and Wilmington - maintain similar rules without having the explicit permission of the state legislature.
But as the state seeks to placemore limitations onlocal rental restrictions, many North Carolina cities and towns would probably like to have their right to regulate in writing.
Brian Gordon is a statewide reporter with the USA Today Networkin North Carolina. Reach him at bgordon@gannett.com or on Twitter @briansamuel92.
