OC Real Estate Industry Rallies Against Proposed Rental Changes; New District Would Prohibit Weekly Rentals In Certain Areas

OC Real Estate Industry Rallies Against Proposed Rental Changes; New District Would Prohibit Weekly Rentals In Certain Areas
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OCEAN CITY – The local real estate community is rallying together and seeking support this week with the Mayor and City Council expected to deliberate this month on the implementation of a district that could ban short term rentals in certain parts of town.

The Planning and Zoning Commission held a public hearing last month and voted to forward 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 prohibit rentals shorter than one year.

The proposed ordinance 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.

During last month’s public hearing on the ordinance, several Mallard Island residents who live 15th Street bayside and other citizens spoke in favor of the proposed R-1A district but a larger force of rental property owners and Realtors in attendance voiced opposition.

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However, the commission voted 5-2 to forward a favorable recommendation to the Mayor and City Council to approve the new R-1A district. The commission described the district as “another tool in the toolbox” recognizing it will only be considered if requested by a neighborhood.

The Planning and Zoning Commission’s favorable recommendation to implement the R-1A district is scheduled to be discussed by the Mayor and City Council at the July 14 work session.

Prior to the discussion, Coastal Association of Realtors (CAR) and Coldwell Banker Vacations are working to encourage their membership to voice their concerns in the meantime.

“This measure directly impacts all single-family investment properties in Ocean City,” CAR submitted in marketing materials this week in regards to the proposed R-1A district.

Both CAR and Coldwell Banker Vacations are advising their membership to attend Monday’s Mayor and City Council regular session, call the Planning and Zoning Department or email the Mayor and City Council to voice concerns.

“If you do not actively oppose this measure, there is a very real possibility that it will be approved, setting a dangerous precedent that could spread throughout the State of Maryland,” CAR said in its marketing message.

In a letter, titled “Proposed Legislation That Would Impact Your Investment Property,” addressed to Coldwell Banker Vacations membership, Regional Vice President Christopher Mitchell and General Manager William Ritz expressed fear the R-1A district will begin to ban vacationers from Ocean City. Letters of opposition to the Planning and Zoning Commission dated June 10, 2015, and to the Mayor and Council dated Aug. 5, 2014 were also provided to the rental property owners.

“… The tourism industry is what drives our local economy. From the many restaurants and shops to the hotels and charter fishing boats, without our annual influx of tourists, none of these businesses would survive. One of the things that make Ocean City great is the variety of accommodations options from which to choose,” the letter to the planning commission states. “The vacation rental industry is unique in that it offers not the only more variety for vacationers, but also beneficial way for people to purchase a second home. Buyers are able to off-set expenses associated with second home ownership by offering it as a short term rental. Obviously, the ability to use and enjoy the property themselves is not possible if the property is rented only on a 12 month basis. In such cases, it is no longer a vacation home, but strictly an investment property and most of the buyers in the secondary home market are not looking for that type of arrangement.”

The letter cites a recent article published on www.vrmintel.com demonstrating how the implementation of restrictive policies in California has negatively impacted home sales in that market compared to the national average.

According to the article, four major California cities have voted to ban traditional vacation rentals of less than 30 days, resulting in a decline in vacation home sales of 5 percent in 2014 and of 6 percent in 2013. While, the National Association of Realtors published its 2015 Investment and Vacation Home Buyers Survey which reported that sales in 2014 were up 57.4 percent over 2013 in the market in the United States as a whole.

“These facts show in real terms that the restriction of property rights negatively impacts property values, which is a direct contradiction to one the stated purposes of this proposal for Ocean City,” Mitchell and Ritz stated.

The letter recognizes there were a total of 13 R-1 zoned properties that received complaints in the past two years, which represents only 4 percent of the total amount of properties licensed R-1 zoned properties in town.

“Any decision to alter zoning regulations that will affect current and future generations of property owners and potential investors, based on such a small number of issues, certainly gives all appearances of an overreaction,” they stated. “Better enforcement of the current regulations is the best answer. Rental companies and owners alike need to work harder to ensure that the proper information is being relayed when offering properties for rent in any current R1 district. If problem situations occur in these properties, quick action by the property owner or rental company must be taken to address it. If renters are found to be in violation of the terms of their rental agreement, the agreement should be terminated and the property vacated.”

The letter echoed Joe Wilson, who represented CAR during the Planning and Zoning Commission’s public hearing, in his concern that a R-1A district will create a domino effect that will regulate short-term rentals out of all single family areas in Ocean Cit.

“Vacationers who choose these types of properties will not simply move to multi-family areas, but will take their business to other municipalities that will better welcome them and cater to their needs. These families will establish their vacation traditions in a different resort, and Ocean City will lose these visitors for generations to come,” the letter concluded. “These renters will no longer fall in love with Ocean City, and will not decide to purchase that vacation home on our shores, but will do so somewhere else. Our local economy will be impacted.”

The most recent letter comes 11 months after Mitchell and then-Regional Vice President Susan Holt addressed the matter in a letter to the Mayor and Council.

“We do not want renters disrupting the peace of others, … Occupancy limits must be disclosed and enforced by the property owner and rental company,” that 2014 letter read. “The renters need to be informed that if they break the rules they will be held responsible for their actions and removed from the property. Let’s all try to improve the situation with better communication and education rather than send our valued visitors elsewhere.”