Chapel Hill settles on rules for short-term rentals. First, you’ll need a permit.

Short-term rental hosts in Chapel Hill will have 18 months to get a permit and comply with the rules of a pilot program that took effect Wednesday night.

The Town Council voted unanimously to prohibit dedicated short-term rentals, which do not have a host living on site, in all residential areas of town.

Dedicated STRs will be allowed in high-density residential, commercial and mixed-use zoning districts, such as the Blue Hill District.

Property owners with existing short-term rentals will have to comply with the new rules and get a zoning compliance permit by Dec. 23, 2022, or stop operating. The permit will cost $150 and will need to be renewed annually.

The town has been studying the STR issue since 2019. Short-term rentals typically offer stays of up to 29 days 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.

The town’s senior planner Anya Grahn said there are roughly 250 STRs currently operating in Chapel Hill.

Council members, before voting, admonished whoever was behind a recent postcard mailing campaign that warned that the town was going to rezone all neighborhoods, allowing investors to buy homes and turn them into short-term rentals.

The postcard “distressed quite a number of people, and there was misinformation on that postcard” about the council’s discussion, which never involved rezoning neighborhoods, Mayor Pam Hemminger said.

Anonymous mailings make “it much harder for us to communicate with the public and have good dialogue and communication,” Council member Karen Stegman added.

Residents instead should report their safety, parking and noise concerns to the council, Council member Hongbin Gu said.

“I think those data points are very important for us to, over time, to make the policy really address the concerns, and at the same time not take away the livelihood for the people actually running the business,” Gu said.

Chapel Hill STR rules

The rules adopted Wednesday:

▪ Allow homeowners living on site to rent out an accessory apartment or room for up to 30 days throughout the year, and rent out their primary home while not on site for up to half a year. Homeowner associations could set more strict rules.

▪ Events that could affect neighbors will require a separate, special events permit.

▪ Multi-unit buildings could have two STR units, or up to 3% of the units.

▪ 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 to respond to emergencies within two hours by phone, email or in person.

▪ Set a minimum rental age of 18 years old.

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

▪ Require a minimum stay of 18 hours or overnight

▪ Allow the town manager to revoke an STR permit if the operator violates the zoning rules. The operator can appeal the decision by requesting a reinstatement within 90 days, correcting the violation and complying with the zoning rules.

Town staff will buy software to help track the town’s STRs and compliance and report back to the council next year. More changes are possible over the next few years, Council member Michael Parker said.

“That should not be viewed as a failure,” he said. “It is a success that we’re willing to look at what we do, and if there are things that don’t work, we fix them rather than stick our heads in the sand.”

Hemminger suggested another option for people already operating dedicated STRs in residential areas.

“I just want to remind folks that there is a great demand for long-term rentals in our community, and that is another way to have income on an investment home,” she said.

Short-term rental types, concerns

The town’s STRs currently fall into three categories, Grahn said.

▪ 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 property owner living on the lot. Allowed as a tourist home in non-residential districts and as Blue Hill District overnight lodging.

In 2019, the Chapel Hill-Carrboro Chamber of Commerce and the citizens group Chapel Hill Alliance for a Livable Town asked for rules to 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. The town’s new rules require STR operators to pay all applicable sales, occupancy and state taxes.