IJ Takes on the Fight for Owner's "Right to Rent" in Wilmington, N.C.

David and Peg Schroeder are lifelong residents of Wilmington, North Carolina. They raised their family in Wilmington and were small business owners in the city. After retiring to the mountains, the Schroeders bought a townhome in Wilmington as a place to stay when they visit family and to maintain their ties with the community. To afford the townhome, they planned also to offer it as a vacation rental when they were not living there. But now the city of Wilmington is trying to ruin their retirement plan by taking their right to rent away from them.

https://ij.org/case/north-carolina-amortization/

The Schroeders made substantial investments to renovate their townhome to make it suitable as a vacation rental—all based on the correct belief that it would be perfectly legal for them to do so. After several months and about $75,000 in renovation costs, the Schroeders had the property ready to rent. That is when the City changed the rules on them—passing a zoning ordinance that created a hard cap on how many properties were allowed to engage in vacation rentals. And under the cap, any property that fell within 400 feet of another vacation rental would be prohibited from operating as a vacation rental. Finally, to decide which property owners would retain their right to offer vacation rentals, the city devised a randomized lottery process. The result was an arbitrary, zero-sum process that pitted neighbor against neighbor in a raffle for property rights. And because the Schroeders’ neighbor drew a winning ticket, the Schroeders lost.

Using an oppressive and little-known process called “amortization,” Wilmington gave properties that did not win the lottery one year to continue operating. At the end of that time, people like the Schroeders would have to quit renting. That is because, as the theory of amortization goes, the Schroeders would be able to use that one-year period to recoup their investment in their property. And according to the city, this absolves the city of having to pay the Schroeders “just compensation” for their taking of the Schroeders’ property rights. In other words, Wilmington believes that it can take the Schroeders’ property and not pay for it because the Schroeders had time to cover their own losses.

But if the city wants to take the Schroeders’ property rights, it has to pay for them. What Wilmington cannot do is turn peoples’ property rights into lottery tickets and raffle them off. Nor can it create a small group of people allowed to exercise rental rights at the expense of everyone else. The North Carolina Constitution protects the Schroeders’ right to rent and it prohibits the city from granting exclusive privileges and creating rental monopolies that prohibit everyone else from renting. Now the Schroeders are fighting back, determined not to lose the property right they invested so much to acquire. That is why they have teamed up with the Institute for Justice to challenge Wilmington’s unconstitutional zoning and amortization scheme.

https://ij.org/case/north-carolina-amortization/
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