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Short-term Rentals Remain a Concern at the State House

This editorial was originally published by The Post & Courier on May 3, 2023, and is reprinted with permission.

The proviso in the 2023-24 state budget discussed in the editorial, which would have prohibited cities and towns from banning short-term rentals in their jurisdiction, was removed from the budget before its adoption. However, the issue continues to see legislative activity, such as in the bill H3253, which would prohibit a municipality from enacting an ordinance stopping the rental of a residential dwelling to a short-term guest. 

Strip SC House’s Short-Term Rental Protections From Budget  

There’s nothing new about property owners renting their vacation home for a little or a lot of the year. What’s new is the ease with which people who purchased second homes for their personal use can now make some money in rental income, thanks to Airbnb and the whole new short-term rental industry it has spawned. What’s new is the ease with which people can rent out their primary residence for a few weeks or weekends a year. What’s new, too, is the growing demand for these vacation rentals, in both resort and traditional residential areas.

The rapid growth of this industry raises complicated policy questions: To what degree should people who bought homes in traditional neighborhoods have to put up with the disruption of what are essentially small hotels opening up next door? To what degree should government be able to tell homeowners what they can and can’t do with their property?

But a couple of answers are easy: The S.C. Legislature shouldn’t tell local governments — whose leaders are elected, just like legislators — what they can and can’t do to regulate or even restrict short-term rentals. And if legislators insist on ignoring the principles of home rule — which unfortunately is one of their favorite habits — they absolutely should not do it as part of the state budget.

Yes, this is sort of wonkish, but it’s extremely important.

And it’s one reason we were glad to see Senate President Thomas Alexander rule — correctly — that Sen. Sandy Senn couldn’t insert a provision into the state budget last month to punish Folly Beach and other small Charleston County beach communities for trying to preserve their way of life by limiting the number of short-term rentals, or in other ways regulating or restricting them.

Another reason we were glad to see Sen. Alexander’s ruling was that Sen. Senn’s amendment was almost certainly a violation of the state constitution, which limits the circumstances under which the Legislature can carve out special laws that apply to a limited number of people — in this case, Charleston County communities with populations between 1,800 and 4,400.

Sen. Senn wanted to withhold state funding from municipalities that prohibit short-term residential rentals, which she defined bizarrely as any period of more than three consecutive days. She argued that local governments are getting state money to help renourish their beaches and then making it impossible for people from the rest of the state to vacation on those beaches — which might be a good argument if the question were whether to give those communities more renourishment money, but not when it’s whether to give them state money to do routine government work the Legislature orders them to do. The Senate adopted her amendment while Sen. Chip Campsen, who represents all the affected beaches, was out of the chamber. When he returned, he came within one vote of convincing the Senate to kill the amendment; he then raised the point of order.

Senate rules and good sense prohibit using the budget to amend state law. Sen. Senn’s proposal would have effectively amended the state law that divides state funding among local governments based on their share of the state’s population. Lawmakers can pass stand-alone legislation to withhold that money for actions they don’t like, but they can’t do that through the budget. So that battle was won. But the war’s not over.

Without any debate, the House included a proviso in its version of the budget that withholds state funding for communities that prohibit short-term rentals unless they spend money and adjust their zoning requirements to help provide affordable housing. Now, we think all communities ought to do both of those things, and it’s true that in some communities the short-term rental market is making it more difficult to find affordable housing. But this was a particularly clumsy pairing, the decisions about how or whether to support affordable housing should be left up to individual communities, and again, the state budget is no place to deal with such complicated questions.

It’s worth recalling that the House spent 90 precious minutes on the penultimate day of last year’s legislative session on a bill that ended up protecting the short-term rental industry by outlawing restrictions on the rentals. That there was no debate at all in the full House this year — and less than five minutes of friendly conversation in committee — strongly suggests that most House members didn’t recognize what their short-term rental proviso did.

Once the state budget passes the House and Senate and a conference committee reaches a compromise between the two versions, it’s an all-or-nothing affair — and there’s tremendous pressure on legislators not to raise points of order that could unravel the whole deal. So Senate Finance Chairman Harvey Peeler and the Senate’s two other budget negotiators need to make it clear from the start that they’re not going to accept a proviso that deals with short-term rentals. In fact, House leaders should strip it out of the version of the budget they ask the House to adopt before they even start those negotiations.

If the Legislature insists on tying local governments’ hands on this matter, it needs to do it through stand-alone legislation, where the debate can focus on the very real issues at play, and not part of a grand compromise, on completely unrelated matters, in the one bill the Legislature has to pass every year.