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Ocean City

Code change could create impact on rental housing

(July 18, 2014) The city’s Planning and Zoning Commission is expected to hold a hearing next month on a code change that would have a serious impact on the resort’s rental housing landscape.

The commission voted this week to tentatively schedule a public hearing for August 19 to discuss the measure, which as proposed could effectively ban rentals of less than four months in areas zoned R-1 (single-family residential) and MH (mobile home) – although some allowances could be made for existing rental properties.

The move was proposed by city staff to address a mounting level of concern and backlash against the city regarding the overcrowding of nominally single-family homes by weekly vacation renters.

“This is a fairly drastic change for property owners, but it seems to be the direction we need to go in,” said Planning and Community Development Director Matt Margotta.

“I certainly think we’ve come to the point where R-1 and MH areas need some protection,” said Commission Chair Pam Buckley. “We cannot maintain control anymore, and we can’t monitor every single house to see if people are unrelated.”

For many years, Ocean City has seen properties in neighborhoods of single-family homes being purchased and used for weekly vacationers – often dozens at a time in some larger properties. Given that many long-time resident owners are used to a quiet neighborhood, complaints about noise, trash, and other rude behavior by tourists abound.

The only measure in place to protect the residential nature of the R-1 and MH districts is the stipulation that homes must be built for and occupied by two or more persons related by blood or marriage, or no more than four unrelated persons living together under a shared agreement and with a single kitchen facility.

However, this is extremely difficult to enforce, given that city building and zoning inspectors cannot simply barge in on any home were they are told unrelated persons are living, as Buckley suggested.

Further, the delayed response time to noise complaints, particularly on weekends, makes protection via the town noise ordinance difficult. Police actions often are directed at the occupants, not the owner of the property.

“I do know for a fact that this is not enforceable the way it is,” said city Zoning Administrator R. Blaine Smith. “There’s the privacy acts, the Fair Housing Act, and other things that we can’t violate the way the code is.”

The most effective action, Margotta suggested in a memo to the commission, would be to introduce a new definition into Chapter 14, Section 5 of the city code, which governs the licensing of rental housing units and the conditions therein.

The definition of “rental housing” could be split, Margotta said, into “long-term” and “short-term,” the latter of which would not be licensed in R-1 and MH zones per a further code stipulation.

Maryland’s housing code, Margotta noted, uses four months and one day as the minimum for “long-term,” a number which could work in Ocean City given that only the most dedicated seasonal workers typically stay longer than four months. But the commission could go with any length of time it desired if alternatives were suggested at the August hearing.

With the new provision, enforcement on problem properties would not be limited to when renters were being obnoxious – instead, the town could request a copy of the lease from the landlord following any complaints, and could pull the rental license of those found to be renting for too short a term.

However, both Margotta and Smith cautioned the commission that existing owners of rental properties have some expectation of making back their investment.

“You have to ask who are we protecting from who,” Smith said. “If they made an investment and now you take away their rental potential, you have to weigh that burden against the people that live in these properties and what their needs will be.”

Margotta suggested two options – firstly, the phase in of a short term rental ban could be dependent on how fast the owner could make their money back.

“You would have to think about the value of a home, and when to amortize them into the new code,” Margotta said. “That can be done, but it’s difficult to know all the financial situations out there that would make this equitable to everyone.”

An easier alternative, Margotta said, would be to allow current rental owners to apply for a rental license under a conditional use procedure, where the city could set conditions on their approval specific to the property with regards to occupancy and noise. This would also give the city greater leverage to pull the license if the conditions were not met.

“It would basically say you can’t even come to the table unless you can do these certain things,” Margotta said. “That way there’s a means for the property owners to address what the problem is at some of these places.”

Concern about overcrowded and rowdy rentals in R-1 areas began mounting two months ago, when retired local dentist and former P&Z Commission Chair Geoff Robbins appeared before the commission. A home that had recently been sold in Robbins’ Mallard Island neighborhood was now being advertised as a weekly rental for up to 17 people, and most of the guests had proven to be a nightmare for Robbins’ area.

Further, Mallard Island is home to several local business and civic leaders, whose owner-occupied properties have a high real estate value.

“This year, we’ve had more police calls on Teal Drive [on Mallard Island] than we have ever had in the past, and we’ve had two major robberies,” said City Council Secretary Mary Knight, appearing as a homeowner along with her husband, Frank.

The Mallard Island R-1 zone, Knight noted, contains 53 homes and three vacant lots, with a total assessed value of $37 million. The neighborhood pays a collective $174,000 in property taxes to the Town of Ocean City each year, and another $280,000 to Worcester County.

“If this area isn’t livable for locals, you’re going to see assessments go down,” Knight said. “It’s not just me coming up here and saying I don’t like finding strangers in my pool – which has happened – but it’s a greater issue for the town’s tax base.”

Coverage of Robbins’ appeal garnered a number of responses to this newspaper from residents of other R-1 districts, as well as from investment property owners who said their rental agents were being negligent in screening large groups of renters.

Margotta said that he has reached out to realtors and rental agents to let them know that allowing overcrowding could result in penalties for their clients, and lost business for them.

Since the 2008 financial downturn, many residents have noted a proliferation of houses being used as group rentals, likely because the accommodations prove cheaper than hotel rooms if one packs in more people than the home can practically support, as is typically the case with younger visitors.

“I don’t want to say it’s entirely out of necessity, but it’s happened for whatever reason,” Smith said.

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