Planning Comm. Endorses New District Where Weekly Rentals Would Be Banned; Council To Have Ultimate Say

Planning Comm. Endorses New District Where Weekly Rentals Would Be Banned; Council To Have Ultimate Say

OCEAN CITY – The Planning and Zoning Commission forwarded a favorable recommendation to the Mayor and City Council to establish a R-1A Single Family Residential District that would provide an outlet for neighborhoods to ban short term rentals.

On Tuesday evening, the commission held a public hearing to consider amending the zoning code to create an R-1A Single Family Residential District.

The proposed amendment states, “The purpose of this district is to provide for established year round residents to maintain the integrity of family values, youth values, and the blessings of quiet seclusion and to make the area a sanctuary for people living in the neighborhood and to avoid the adverse effects of transient short term rentals. This district is for single-family residential development, together with accessory uses as may be necessary or are normally compatible with residential surroundings.”

The permitted use in an R-1A district would be a residence used for a year-round, or 12-month minimum, rental. Short-term rentals, for example the common weekly vacation rentals, would be prohibited. If an R-1A district is added to the code, a neighborhood can apply to rezone and a public hearing would be held before the Planning and Zoning Commission to consider the request. The commission would then forward a favorable or non-favorable recommendation to the council for the final decision.

At the end of last summer, Ocean City experienced a growing number of rental concerns and complaints, primarily from the neighborhood of Mallard Island. There were a couple of public hearings held before the commission to consider a potential amendment to the code regarding the R-1 Single Family Residential District and MH Mobile Home Residential District for the purpose of regulating short-term and long-term rentals.

Although there was no official action made to city laws, the Property Review and Enforcement Strategies for Safe-housing (PRESS) Committee in early May held a meeting to educate landlords, tenants, Realtors and property owners on the town’s rental regulations and enforcement in hopes to start off this summer season on a better foot.

On the same day, Mallard Island submitted a petition signed by close to 80 percent of the neighborhood’s property owners in favor of the community being rezoned as an R-1A Single Family Residential District. Currently, Mallard Island is zoned as an R-1 Single-Family Residential District.

According to the city, there are 3,845 parcels included in the R-1 and MH districts with 276 of those obtaining rental licenses. Between 2013 and now, there have been 67 complaints logged in those areas over 19 months. Only 13 properties received complaints, which is 4 percent of the total number of 276.

Residents Want To Protect Neighborhoods

At Tuesday’s public hearing, a number of residents of Mallard Island, located on 15th Street bayside, were present.

“Passing the amendment will allow the property owners, if they desire, to petition the Ocean City Council for rezoning of their community … it provides for fair opportunity for property owners to be heard without misleading information from outside parties who are not voters, residents or property owners in Ocean City,” Mallard Island resident Ed Smith said. “If the education and enforcement program works, the property owners won’t feel a need to petition for a rezone.

Mallard Island resident John Wright, who purchased his home 16 years ago, chose the community based on former covenants restricting short-term rentals in the neighborhood. However, those covenants have expired and were never renewed.

“In the past four to five years, however, there have been a number of properties for rent in our neighborhood. As a result of these rental units, we have seen an increase in noise, public drinking, profanity, disturbances and trash in our street,” Wright said. “Short-term rental properties in residential communities undeniably detract from the tranquility state and the qualities of the neighborhood. The vast majority of Ocean City housing already consists of rental units that serve the needs of Ocean City vacationers. There is absolutely no need to turn our established tranquil communities into something that they were never intended to be.”

Wright furthered an R-1A district would allow for property owners to determine the fate of their own neighborhood by allowing or restricting short term rentals.

“I strongly believe some things are more important than money, and one of those things is maintaining the sanctity of the neighborhood in which you live,” he said.

It is in Mallard Island resident Frank Knight’s opinion that a small number of rentals would ultimately be affected by the new district

“To answer real estate agents that not only don’t have a community interest but only a financial interest in this change, there will not be a major negative impact on the real estate market. There will still be 20,000-plus choices for our lodging visitors, investors looking to buy rental units will still have hundreds to choose from, buyers seeking a non-transient safe neighborhood will be able to buy in an R-1A zone, and property values and the tax base will increase,” Knight said. “It is undisputed that property values and the tax base decrease if short-term transient rental units invest in traditional R-1 neighborhoods.”

Knight furthered it is impossible to regulate short-term rentals.

“Large groups in vacation party mode are in and out of rental units within three to seven days. No evictions can occur in that time frame and everyone knows it. So we the taxpaying, voting residents are left to anticipate what next Friday or Saturday will bring,” he said. “Instituting the R-1A zone will negate most enforcement issues. A community with year-round residents will exist, owners and renters, all with the best interest of their neighborhood.”

Area Realtors Call Proposed Ban ‘Premature’

The Coastal Association of REALTORS (CAR) came to the hearing with a large force in opposition to the proposed R-1A district. Many held up posters and wore stickers stating, “Private Property Rights Matter.”

Representing CAR was Board member Joe Wilson, a realtor for Condominium Realty LTD who serves as chairman of CAR’s Political Action Committee and the owner of a rental property in Ocean City.

“Over the off-season, the town, as well as the PRESS Committee, did an excellent job reaching out to rental-property owners and their representatives to address concerns of neighbors. The results of their efforts have yet to be measured as we have just begun our summer season. The proposal of a ban on short-term rentals is premature. Property owners and rental agencies have implemented new systems and procedures. The proposal of an R-1A district undermines all of their hard work,” Wilson said.

Although CAR sympathizes with Mallard Island, Wilson pointed out the town has regulations to reprimand landlords and tenants when violations occur and enforcement and monitoring the number of rental housing complaints this summer will measure the effectiveness of these actions.

“This hearing is not about a single community, it is about protecting private property rights in Ocean City, Maryland. Adoption of the R-1A district could open the door for future requests. Who is to say that the Planning and Zoning Commission and the Mayor and City Council will not honor a request from an R-2 or R-3 district to be rezoned, thereby effectively banning short-term rentals?,” Wilson said. “This is not keeping our resort town attractive for rentals and investment opportunity. Limiting rentals to a 12-month minimum will have far reaching economic impacts.”

If the supply of rental properties is decreased, the cost of rentals will increase, causing vacationers to spend less money at the local businesses, Wilson asserted. That will also affect the average length of stay, which has already decreased for the most part, cut into demands for off-peak periods and higher costs may encourage some tourists to vacation in larger groups to share the rental expense or require families to rent smaller accommodations then preferred.

“This legislation is unfair to the many owners who purchased their properties on the premise they could rent for vacation purposes. It will adversely affect those who currently hold rental licenses. There may also be owners who intended to use their property as a vacation rental in the future, to serve as a source of income for retirement or to fund a child’s education,” he said. “The vast majority of properties in Ocean City cannot produce nearly as much income when rented out on a year-round basis compared to weekly in-season rentals. The loss of rental income could cause significant economic distress to rental property owners, including foreclosure.”

Wilson argued because the proposed R-1A regulations are substantially the same as those of the existing R-1 district, except for the treatment of short-term rentals, the targeted treatment of short term rentals may give rise to claims that the R-1A ordinance violates the owner’s constitutional right to equal protection upon basis the zoning ordinance would treat single family homes in single family residential districts differently depending upon whether they are zoned R-1 or R-1A.

“Many investors strictly use the income approach to value when evaluating a real estate investment. Many buyers in our area require rental income in order to qualify for their purchase mortgage,” he said. “In a time when economic opportunity is so sparse, the last thing we need is to regulate owners out of the investments they’ve created for themselves.”

Officials Vote 5-2 To Support Change

Once the public hearing was closed, the commission was torn on whether to deliberate and cast a vote that evening.

“The residents are asking us to put a tool in the toolbox, and that would be the proposed R-1A district,” commission member Palmer Gillis said. “What we are proposing this evening does not impact one piece of property. It does not impact one neighborhood. It is only giving those neighborhoods that collectively come to a mutual decision to place that restriction on themselves. I am in support of suggesting to the Mayor and City Council that they move forward with this initiative …”

According to commission member Lauren Taylor, Ocean City’s residential population has declined while other parts of Worcester County and areas of Delaware are increasing.

“Part of what we are supposed to do is protect property rights, protect neighborhoods, protect people’s freedoms and enjoyment of life,” Taylor said. “I don’t see why this should not be available. Let’s take Mallard Island for example where there are two different types of properties. Whose property rights are more important? There are way more owners than there are renters, so if you are going to look out for property rights, look out for the majority. Why would you allow a very small number of people destroy the character of a neighborhood? This isn’t being imposed on anyone. It is an option if people in a neighborhood want for themselves they can choose it, and I don’t know why we would stand in their way.”

The commission voted 5-2 to forward a favorable recommendation with members John Staley and Chris Shanahan in opposition due to wanting more time to decide.

“The one thing that I would like you all to take from this public hearing that we are here for the entire Town of Ocean City and we have taken the pledge to uphold the safety and welfare of this community, and we all take that seriously,” Chair Pam Buckley said. “The one thing that is certainly true is that it should not just be single-family neighborhoods that have to deal with lousy vacationers … safety to me is the biggest issue.”