Judge rules Wilmington short term rental law illegal, both sides react

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WILMINGTON, NC (WWAY) — The City of Wilmington has been dealt a blow to its ordinance on vacation and rental properties.

On Tuesday, Judge Richard Harrell ruled that the law violates a North Carolina statewide law prohibiting municipalities from requiring rental permits.

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This comes after months of work by Wilmington homeowners David and Peg Schroeder and their newly hired representation, the Institute for Justice. The two say they need short term rental income to sustain their livelihood.

“We lived in Wilmington for a long time, retired to the mountains, and then bought this home so we would have a place to stay when we came back and gather with family and friends,” Peg Schroeder said. “And the only way we could afford it was if we could rent it short term while we weren’t using it.”

After years of controversy, the city put a two percent cap on the number of vacation rentals in 2019, and set a minimum 400 foot separation between units. A lottery system was used to determine which homes could be rented out short term.

The Schroeders lost that lottery, leaving them banned from participating.

“They actually are pitting us against our neighbors,” David Schroeder said.

“So what they did was they gave our neighbor a monopoly on rentals in our neighborhood,” “Peg added. “And all of the rest of us who were renting in there were no longer allowed to.”

Ari Bargil with the Institute for Justice says these restrictions imposed by the city were illegal under state law.

“The North Carolina General Assembly passed a law telling municipalities that if they want to regulate vacation rentals they can’t require permitting or registration,” he said. “And because that’s exactly what the city of Wilmington did, that law was preempted by state law.”

Bargil says homeowners in Wilmington can immediately start renting their homes to vacationers. The Schroeders reacted to the judge’s ruling on Wednesday.

“We’re thrilled that we were able to do this not just for us, but everyone in the community now benefits,” Peg said. “When you live in a democracy you have to be fair to everyone.”

However, not everyone agrees that this ruling is fair. 30 year downtown Wilmington resident Joe Pawlik says he’s had bad experiences with short term rentals and vacationers.

“We had parties on the street, lots of drunk people, parking in areas that are consistently over parked to begin with, a lot of late night noise,” Pawlik said.

Pawlik says he supports vacation rentals, but views them as a business. He says they belong in the business district, not residential areas.

“If you buy property and it’s zoned for one thing and you want to do something else, you don’t have that right, you bought under that zoning,” he said. “For the same reason that I can’t open a factory in the residential district.”

Bargil says he’s confident the Institute for Justice would win an appeal if the city chose to go that route. However, Pawlik believes this could lead the city to outright ban short term rentals in residential areas.

The City of Wilmington released the following statement regarding the judge’s decision:

“In light of the Judge’s recent ruling relating to short-term whole-house rentals in residential and historic districts within the City of Wilmington, City Council, in consultation with the City Attorney’s Office, will review the ruling and consider an appropriate way forward over the next few weeks. Staff will request Council enter into a closed session to discuss the ongoing litigation as early as October 5, at which time we hope to be able to provide further comment.”

Click here to view the full news release from the Institute for Justice.

Click here to view the judge’s order.