Losing land through eminent domain can hurt. But property owners at least get compensation. A move by town officials in Highlands, North Carolina, may destroy people’s livelihoods without paying a dime.
The scheme is called “amortization,” a regulatory tool with dubious origins. While eminent domain invites abuse, the Constitution at least allows it under certain circumstances. Amortization, on the other hand, is totally made up.
The process works in slow motion. Rather than transferring real estate to itself for public use, the government puts an expiration date on revenue-generating activities it wants to cancel and then waits. When the deadline arrives, targeted property owners must shut down or move.
No title changes hands. And nobody is grandfathered in, the normal procedure when zoning laws change. People earning an honest living — sometimes for years in the same spot — suddenly find themselves outside the law.
It’s like telling vehicle owners they can keep their cars but no longer drive them. Or telling musicians they can keep their instruments but no longer play them. The objects stay the same but lose value.
This is what Highlands wants to do with short-term rental units in residential zones. If a proposed ordinance passes, host families could keep their houses but not list them on sites like Airbnb or Vrbo. The measure would build on existing restrictions, which already prohibit new vacation rental listings.
Hosts already in operation, who previously invested in home repairs, interior design, and landscaping to attract guests, would be out of luck. So would retirees who rely on short-term rentals to pay bills.
If Highlands officials implemented this plan right away, the Fifth Amendment might call the crackdown a taking and demand “just compensation.” But Highlands officials claim a workaround. They say that by delaying enforcement to Sept. 15, 2027, homeowners would have time to recover their investments and alter their plans — a counterfeit type of compensation that would cost the town nothing.
The North Carolina Court of Appeals struck down a similar scheme in Wilmington in 2022. Retirees David and Peg Schroeder, who bought a townhouse and fixed it up for vacation rentals, sued when the city attempted to shut them down using amortization. They won on grounds unrelated to amortization, and now Highlands thinks it can take advantage of something the court left unsaid.
Our public interest law firm, which represented the Schroeders, will closely watch what Highlands does next. We already countered an amortization plan that Highlands contemplated two years ago. Now the town is trying again. We sent a letter to the mayor and Board of Commissioners on July 17, 2024, laying out the constitutional problems.
Forcing homeowners to eliminate a lawful existing land-use would violate their reasonable expectations when they purchased real estate and made improvements. North Carolina courts have allowed amortization only in narrow cases. One state Supreme Court decision from 50 years ago involved an industrial scrapyard. More recent rulings have involved billboards.
North Carolina courts have never allowed amortization for low-intensity uses in residential zones. Highlands would be pushing the boundaries. The step backward on property rights would be one more example of misguided policies that needlessly limit reasonable activities on private land.
Examples abound nationwide. Zoning police tried to stop Bianca King from running a small day care at her home in Lakeway, Texas. They tried to stop Pat Raynor from styling hair at her home in Nashville, Tennessee. They tried to stop Kathy Hay from operating a “little free pantry” in her back yard in Asotin County, Washington. And they are trying to force Rick Polizzi to tear down a front-yard treehouse at his home in Los Angeles.
Municipal planners often cite vague goals like preserving “neighborhood harmony,” “stability,” “desirability,” “morals,” “comfort,” “convenience,” and “general welfare.” But laws already exist to keep neighbors in line. If partygoers blast music after 10 pm or cause other disturbances, the police or code enforcers can respond.
An extreme measure like amortization is not only unconstitutional but unnecessary. Homes are sacred spaces. Public planners should not intrude without good reason.