Buying Vacation Homes in Highlands NC: What the Short-Term Rental Rules Allow Now
If you are shopping vacation homes in Highlands NC and rental income is part of the math, start with a correction many listings and online guides have not caught up to: the September 2027 phase-out of existing short-term rentals is no longer on the books. The Town of Highlands settled the lawsuit over that rule in December 2025. The date that still decides a rental's future is September 15, 2022.
That shifts the buyer's question. It is no longer whether a grandfathered rental survives a deadline. It is whether the property was ever grandfathered, and whether that status has been kept alive since.
How the Town of Highlands Got Here
Highlands' two main single-family zoning districts, R-1 and R-2, cover most of the town's residential neighborhoods. In September 2022 the town amended its Unified Development Ordinance to prohibit new short-term rentals, defined as rentals of fewer than 30 consecutive days, in both districts. Rentals already operating on September 15, 2022 were allowed to continue as nonconforming uses.
On September 19, 2024, the Board of Commissioners voted 4-1 to go further and phase out those grandfathered rentals through amortization, a zoning tool that sets a future date for a lawful use to end. The Planning Board had recommended against the change, and Mayor Pat Taylor did not support it. Attorneys on both sides told the board that no other North Carolina local government had tried to apply amortization to short-term rentals in single-family homes, according to Plateau Daily News coverage of the September 2024 hearing.
The vote revived a lawsuit property owners first filed in 2021, brought by the group Save Highlands. In December 2025, The Highlander reported that the town had settled the case through a consent judgment in North Carolina Superior Court, voiding the amortization amendment.
The Highlands Neighborhood Coalition, the residents' group that pushed for amortization, published a summary of the settlement terms dated December 20, 2025. According to that statement, the town agreed to remove the amortization amendment from its ordinances, pay $70,000 toward the plaintiffs' legal fees, and pay an additional $150,000 if it attempts amortization again, in which case the plaintiffs may revive their original claims. The coalition's statement also says the town cited advice that state law supersedes the amendment.
The coalition's statement is explicit on one point that matters to buyers: the settlement did not touch the 2022 prohibition. New short-term rentals remain barred in R-1 and R-2.
Where Vacation Rentals in Highlands NC Are Allowed
The use table adopted in the September 2022 UDO amendment sets out where short-term rentals may operate inside town limits.
R-1 (single-family residential) | Not allowed, except grandfathered rentals operating on September 15, 2022 |
R-2 (single-family residential) | Not allowed, except grandfathered rentals operating on September 15, 2022 |
R-3 | Limited use, subject to operating standards |
B-1 through B-4 (business districts) | Limited use, subject to operating standards |
GI | Not allowed |
Source: Town of Highlands UDO text amendment, revised September 14, 2022, Section 6.2.2. Confirm the current version of the ordinance and the zoning map with the town before relying on it, since ordinances are amended over time.
A physical description tells you nothing about this. Two similar houses on the same road can sit in different districts, or one can hold grandfathered status and the other not. The zoning designation, not the floor plan, determines what the property can legally do.
What Keeps a Grandfathered Highlands Vacation Home Rental Alive
Grandfathered status is not permanent by default. Under the town's nonconformity rules in the same amendment, a nonconforming use cannot be re-established after it has been discontinued for 12 consecutive months. The ordinance states that uninterrupted utility service without documented occupancy does not count as active operation. Seasonal pauses are permitted if the use resumes within that 12-month window.
A nonconforming use also cannot be enlarged, expanded, or intensified, including into any part of the building or property not in that use when the nonconformity was established. A historically occasional rental cannot be turned into a year-round principal use.
Every short-term rental in town, grandfathered or permitted, operates under the standards in Section 6.5.18:
- Overnight occupancy is capped at two persons per bedroom plus two, and the bedroom count cannot exceed what the property's septic improvement permit allows or, if none exists, what the tax record card lists. Homes on public wastewater are capped at the lesser of that formula or 12 persons.
- Special events or gatherings larger than the overnight occupancy limit are not permitted.
- Every rental contract must include a town-provided addendum, and guests must sign an acknowledgment of it before taking possession.
- The owner, operator, or an agent must be reachable at all times during a rental, with contact information posted inside near the main entrance.
The occupancy rule is where marketing and law can diverge. A listing that advertises five bedrooms on a septic permit for three is advertising rental capacity the ordinance does not allow.
Why a Coastal Case Still Shapes Mountain Rental Rules
North Carolina towns have regulated short-term rentals carefully since the Institute for Justice won Schroeder v. City of Wilmington. In April 2022, the North Carolina Court of Appeals held that Wilmington's rental registration requirement violated state law. The city refunded roughly $511,000 in registration fees with interest and was ordered to pay about $306,600 in the plaintiffs' fees and costs, Port City Daily reported.
The appeals court decided that case on registration, not amortization. Highlands' 2022 amendment cites the decision directly, which is why the town regulates rentals through zoning districts and operating standards rather than a registration program. Neither case ruled on the amortization question.
Town Limits Decide the Rules, Not the Plateau
The UDO applies inside the Town of Highlands' planning jurisdiction. Property outside town limits, including much of the surrounding plateau, falls under county rules instead. Highlands also sits mostly in Macon County with a portion in Jackson County, so tax records, deeds, and GIS data for a given parcel may come from either county even when the address reads Highlands. For how the rest of the plateau compares on other buying factors, see our look at Highlands vs. Cashiers.
What This Means If You Are Buying Vacation Homes in Highlands NC
For owner-occupied buyers and long-term rental investors, none of this changes anything; rentals of 30 days or more are not short-term rentals under the ordinance. If your offer depends on short-term rental income, the questions below belong in your due diligence period, not after closing.
- Zoning. Confirm the parcel's district with the Town of Highlands Planning and Development Office rather than relying on the listing.
- Proof of the 2022 date. Ask the seller what records show the home was operating as a short-term rental on or before September 15, 2022, and whether the town has recognized that status.
- Continuity since. Ask for booking history through the present. A home held off the rental market for a year or more, including while it sat listed for sale, may have lost its status under the 12-month rule.
- Bedroom count. Compare the marketed bedrooms against the septic improvement permit or tax card. A septic inspection can confirm what the system is actually permitted for.
- Legal review. Have your closing attorney review the zoning question and any representations the seller makes about rental use.
Price follows the answers. A grandfathered rental in R-1 or R-2 carries a right that cannot be created for the house next door, and a buyer is paying for that right only if it can be documented and has been maintained.
This article describes public ordinances and reported events. It is not legal advice. Zoning determinations belong to the Town of Highlands, and questions about a specific property should go to the town and to a North Carolina real estate attorney.
Frequently Asked Questions
Are short-term rentals allowed in Highlands NC?
Short-term rentals are allowed in parts of Highlands but not in its R-1 and R-2 residential districts. Rentals operating in those districts on September 15, 2022, may continue as grandfathered nonconforming uses. R-3 and the business districts allow short-term rentals as a limited use under the town's operating standards.
Is the Highlands short-term rental ban still taking effect in 2027?
No, the 2027 phase-out of grandfathered rentals was voided when the Town of Highlands settled the lawsuit in December 2025. The separate 2022 ban on new short-term rentals in R-1 and R-2 was not part of the settlement and remains in the town's ordinance.
What county is Highlands NC in?
Highlands is mostly in Macon County, with a portion of the town in Jackson County. That split matters when buying, because property tax records, deeds, and GIS data come from whichever county the parcel sits in, even when the mailing address says Highlands.
Can a new owner keep renting a grandfathered Highlands vacation home?
Grandfathered status attaches to the property's use, not to the owner, so it can continue after a sale if it has not lapsed. Under the ordinance, it is lost after 12 consecutive months of discontinued use, so buyers should verify rental activity right up to closing.
How many guests can a short-term rental in Highlands hold?
A Highlands short-term rental may host two guests per bedroom plus two more. The bedroom count cannot exceed the septic improvement permit or, without one, the tax record card. Homes on the public sewer system are capped at 12 overnight guests regardless of size.
Who should a buyer contact to confirm a property's zoning in Highlands?
The Town of Highlands Planning and Development Office confirms zoning districts inside town limits, and Town Hall can be reached at 828-526-2118. For property outside town limits, contact the county where the parcel is located. A closing attorney should review any rental representations before closing.
You May Be Interested In
- Buying a Luxury Home in Highlands From Out of State — how remote buyers handle inspections, closings, and timing.
- Walkable Highlands Living in Condos and Cottages — in-town property types near Main Street.
- Highlands, NC Neighborhood Guide — the town, its setting, and current property search.
- The Due Diligence Process — what happens between contract and closing, and what to verify.
- NC Real Estate Commission: Due Diligence Questions and Answers — the state regulator's guidance for buyers.
If you are weighing vacation homes in Highlands NC and the value case depends on rental income, talk with Vignette Realty before you write the offer, and Start Your Mountain Story with the parcel-level facts in hand.
Vignette Realty is a licensed North Carolina real estate brokerage with offices in Franklin and Highlands. This article is general information about public ordinances and reported events, not legal advice. No compensation arrangement exists with any outside party named. Equal Housing Opportunity.
