The morality of short term rentals
Boise, ID · Member since 2020 · 84 posts · 87 votes
The morality of short term rentals
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Quote from @Robert Frazier:
This is just a question I’ve been wondering as we deal with a huge housing crisis in our city.
is it moral to convert properties to short term rentals in a city with a deep housing crisis?
if a city has 500 units converted from long term to str, then the average occupancy is 70%, we have lost 54,000 nights of housing per year.
If vacancy is less than 1%, those 500 units of housing could be responsible for a significant amount of upward pressure on housing prices.
with the high cost of management for str, wouldn’t the world be better off with less of them?
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I’m working through it myself.
People can do what they want with their properties, I love helping people invest in properties. But my question is, is it good?
Using Kant’s categorical imperative, you could say clearly no.
We don’t ask enough questions about what is good here, we ask: ‘what’s our highest return?’ Instead. As people we have moral responsibilities to each other, even as soulless real estate investors we have to think about the cost our choices have on others.
So I'm actually going to answer this, Robert. Are short-term rentals good for keeping the cost of local housing markets down? No, as you've clearly demonstrated.
But you can't get to any sort of categorical imperative this way.
1. STR units cost more to manage. Yes. They give local people jobs.
2. STR units encourage overnight tourism versus in-and-out day trips. They give local souvenir sellers money, local restaurants new business, local tour operators expanded client lists.
3. STR units help local businesses by housing short-term local workers in a more cost-effective and desirable alternative than hotels.
4. STR units, when taxed effectively, add more to local tax bases.
5. STR units provide competition to hotels, especially during peak seasons/festivals/major events, which redistributes profits from hotel stakeholders (who are often not local) to locals.
114 Replies
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes4y
Quote from @Joe Villeneuve:
I agree, but doesn't that also mean the SF rentals are also a business operating in a residential Zone?Quote from @Chris Seveney:
While I have a STR, I do think depending on location they can be problemmatic. There is a reason communities have commercial business zoning and residential. STR's are businesses operating in a residential zone.
It does mean that, and courts have consistently held that cities/counties/states have the right to regulate rental property regardless of the format (short or long term) because it is a form of commerce. Same for HOAs and other housing operators. Right to regulate doesn't necessarily mean ban, and some states have pre-emptively prohibited cities from banning STRs or requiring rental inspections or licenses or similar. There's also some case law where a valid public purpose had to be shown for prohibiting certain types of rental activity.
Skyline Properties - 4yTroy GandeeBusiness MemberReal Estate Broker · Charleston, SC · Member since 2013 · 795 posts · 454 votes
@Robert Frazier I don't think the categorical imperative comes into play on this one. Kantian ethics are a stretch for something like this. It's usually applied when you're doing direct harm to another group or party. It's way too black and white for the modern world. That's the same simulation that posits if an axe-murder asks you if your family is home because he wants to kill them, you must answer honestly because lying would be immoral. I appreciate the reference as a philosophy major is college, but it doesn't really apply to this argument.
I operate a couple of STRs and I stand by the owners' right to use their property to it's highest and best legal use so long as it doesn't violate any state or local regulations. However, it's clearly created huge pressure on affordable rentals. This creates longer term economic issues because it drives away your work force. We see it really significantly in my market. My biggest issue is the number of out of state investors who operate these STRs. The majority of the proceeds don't stay in the area they affect. If you're going to inadvertently drive away the work force, the income from the property should at least stay in that market to be recirculated.
I'm in favor of tight local regulations to thin the herd. The good owners that take the time to work within the rules tend to be much better in the long run.
- Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes4y
One thing to consider is that the housing shortage was not caused by short term rentals and they exacerbate only a tiny bit. To put it in perspective, there are about 660,000 AirBNB listings and a total housing stock of 83.3 million single family homes.
https://www.stratosjets.com/bl....
https://www.urban.org/sites/de...
And many of those airbnbs are for renting someone's home while they're not there or an extra room or what not.
In the same way I don't think a motel owner is under any moral obligation to convert to a motel I don't think there's anything wrong about using your own property as a short term rental despite the housing shortage. The market has clearly dictated there is also a demand for short term rentals. The only way to get out of this housing shortage is to build more.
@Robert Frazier
The root cause of the housing shortage is politicians that keep the price of housing high via regulations and taxation. They do this a bunch of different ways - by discouraging development of middle class homes and low end homes (only high end homes make sense for builders to build), opposing increased density, opposing building in a lot of areas (due to pressure from environmentalists and NIMBYs), and letting deadbeat renters get away with squatting on and even vandalizing a property. All of these raise the cost of housing and make it impossible for landlords to offer affordable housing.
- Boise, ID · Member since 2020 · 84 posts · 87 votes4yMorality doesn't stop with certain activities.
Quote from @Christina Johnson:
@Robert Frazier It is business. Morality and business so not work together. We are facing a local housing shortage here in Galveston, Texas where I am a Realtor BUT so many have been so blessed with increased equity and a chance to grow their retirement.
- 4yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votesCorrect. But what does that have to do with the conversation?
Quote from @Robert Frazier:
- 4yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
So Robert, what you're saying is those that don't believe what you wrote are somehow immoral? You realize that when you throw that word into this discussion, you are insulting everyone that you feel that word applies to...which are the ones that don't agree with you.
This reminds me of all the times I hear a cause preceded by the words, "..making you/people aware...", which is just as insulting, but for a different reason. In this case, am I to believe that I was so oblivious and stupid as to somehow be "unaware" of this cause/situation that I needed this person make me "aware" of it?
- 4yPatrick DruryBusiness MemberReal Estate Agent · Columbus, OH & Cleveland OH · Member since 2021 · 1k+ posts · 2k+ votes
Piggybacking on STR's. In Columbus OH the house committee actually recently passed a bill that blocks towns and counties from passing ordinances to prohibit businesses or people from renting property for less than 30 days. This is the first state I have heard of doing this or moving in this direction. Not sure if anyone else has seen a similar thing happen where they live locally. Here is the article I am referencing- https://bit.ly/3NNByyh.
- 4yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Arizona has a similar law in place. Protecting property rights is a good thing.
Texas supreme court has ruled in favor of preventing municipalities from banning STR's as well:
I've had several neighbors recently move and convert their properties to STR's and it has definitely changed the character of the neighborhood for the worse. We used to know everyone here, our kids played with the neighbor's kids everyday, we looked after each other's properties when folks were out of town... great sense of community. Now there are different people coming and going all the time, nobody says "Hi", loud music late at night, pot smoke smells drifting into our yard, random people sitting in their car in front of our house running their engines for hours while they talk on the phone, permanent dumpster on a residential street etc. None of it is even legal, we have an STR ban here but it isn't enforced that well recently. I have an STR myself (in a different area where they are still allowed), so I paradoxically find myself on both sides of this argument. I've seen how they harm neighborhoods first hand but I also benefit from increased profits at our property that we rent short term. It's hard to pass up the chance to rent a place for $10-30k/month when the most you can fetch as an LTR is $6,500.
Everybody loves to talk about how great property rights are until it effects them negatively in a personal way. We can look at a place like Belize which has no zoning or property laws whatsoever. Sounds dreamy until your neighbor ruins your little slice of paradise by building a night club in a residential area, or a pig farm, toxic waste dump, blocks your view, etc. and in the absence of any government regulation, neighbors often end up settling disputes with guns or machetes there.
I find many of the people advocating for property rights actually complain the loudest and fight the hardest when something effects them negatively. Just like people who complain about high taxes then also complain when their street isn't plowed quickly enough. We all just look out for our own self interests at the end of the day.
This is one thing I like about the US: we have individual rights but they are often superseded by the common good. Finding the right balance between protecting the public interest and maintaining personal rights can prove difficult, and Short Term Rentals are one area where there is a lot of tension between the two. With only a few exceptions like AZ, TX, OH, most courts have determined that nightly rentals are more akin to running a hotel than a rental property i.e. a commercial activity that can be limited to commercially zoned areas or taxed and regulated like a business, which seems right to me.
Quote from @Steve K.:
I've had several neighbors recently move and convert their properties to STR's and it has definitely changed the character of the neighborhood for the worse. We used to know everyone here, our kids played with the neighbor's kids everyday, we looked after each other's properties when folks were out of town... great sense of community. Now there are different people coming and going all the time, nobody says "Hi", loud music late at night, pot smoke smells drifting into our yard, random people sitting in their car in front of our house running their engines for hours while they talk on the phone, permanent dumpster on a residential street etc. None of it is even legal, we have an STR ban here but it isn't enforced that well recently. I have an STR myself (in a different area where they are still allowed), so I paradoxically find myself on both sides of this argument. I've seen how they harm neighborhoods first hand but I also benefit from increased profits at our property that we rent short term. It's hard to pass up the chance to rent a place for $10-30k/month when the most you can fetch as an LTR is $6,500.
Everybody loves to talk about how great property rights are until it effects them negatively in a personal way. We can look at a place like Belize which has no zoning or property laws whatsoever. Sounds dreamy until your neighbor ruins your little slice of paradise by building a night club in a residential area, or a pig farm, toxic waste dump, blocks your view, etc. and in the absence of any government regulation, neighbors often end up settling disputes with guns or machetes there.
I find many of the people advocating for property rights actually complain the loudest and fight the hardest when something effects them negatively. Just like people who complain about high taxes then also complain when their street isn't plowed quickly enough. We all just look out for our own self interests at the end of the day.
This is one thing I like about the US: we have individual rights but they are often superseded by the common good. Finding the right balance between protecting the public interest and maintaining personal rights can prove difficult, and Short Term Rentals are one area where there is a lot of tension between the two. With only a few exceptions like AZ, TX, OH, most courts have determined that nightly rentals are more akin to running a hotel than a rental property i.e. a commercial activity that can be limited to commercially zoned areas or taxed and regulated like a business, which seems right to me.
I can respect your argument. The original OP was trying to make it sound like Short term rentals were the reason for the housing shortage.
- Investor · Longmont, CO · Member since 2016 · 185 posts · 156 votes4y
Quote from @Steve K.:
I've had several neighbors recently move and convert their properties to STR's and it has definitely changed the character of the neighborhood for the worse. We used to know everyone here, our kids played with the neighbor's kids everyday, we looked after each other's properties when folks were out of town... great sense of community. Now there are different people coming and going all the time, nobody says "Hi", loud music late at night, pot smoke smells drifting into our yard, random people sitting in their car in front of our house running their engines for hours while they talk on the phone, permanent dumpster on a residential street etc. None of it is even legal, we have an STR ban here but it isn't enforced that well recently. I have an STR myself (in a different area where they are still allowed), so I paradoxically find myself on both sides of this argument. I've seen how they harm neighborhoods first hand but I also benefit from increased profits at our property that we rent short term. It's hard to pass up the chance to rent a place for $10-30k/month when the most you can fetch as an LTR is $6,500.
Everybody loves to talk about how great property rights are until it effects them negatively in a personal way. We can look at a place like Belize which has no zoning or property laws whatsoever. Sounds dreamy until your neighbor ruins your little slice of paradise by building a night club in a residential area, or a pig farm, toxic waste dump, blocks your view, etc. and in the absence of any government regulation, neighbors often end up settling disputes with guns or machetes there.
I find many of the people advocating for property rights actually complain the loudest and fight the hardest when something effects them negatively. Just like people who complain about high taxes then also complain when their street isn't plowed quickly enough. We all just look out for our own self interests at the end of the day.
This is one thing I like about the US: we have individual rights but they are often superseded by the common good. Finding the right balance between protecting the public interest and maintaining personal rights can prove difficult, and Short Term Rentals are one area where there is a lot of tension between the two. With only a few exceptions like AZ, TX, OH, most courts have determined that nightly rentals are more akin to running a hotel than a rental property i.e. a commercial activity that can be limited to commercially zoned areas or taxed and regulated like a business, which seems right to me.
Steve,
Other than people saying hi to each other I think all of your concerns regarding the legality of the STR are very valid. And those issues are why many cities should regulate STR's. Not ban them, not impose Owner occupied requirements, etc. just regulate the existing housing laws (dumpster that you mentioned, noise ordinance) Hosts have an obligation to be good hosts. If I were you, I'd find the STR owner and contact them about the issues; if nothing changes call the city, find the platform they operate on and report them.
I'm very Pro STR, but anti-bad STR owners. That's what's ruining neighborhoods.
It's interesting to think about what's good and what isn't, but no matter what any of us say, short term rentals are probably here to stay. I'm not sure I would consider it a moral issue. Personally I'd probably advocate government regulations against STRs in extremely tight rental markets. But that's just me.
- 4yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votesWhy should the property owner have to tolerate Government restrictions just because the rental market is screwed up (probably by said Government)? Doesn't make sense....
Quote from @Mike D.:
Personally I'd probably advocate government regulations against STRs in extremely tight rental markets. But that's just me.
- 4yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Quote from @Steve K.:
I've had several neighbors recently move and convert their properties to STR's and it has definitely changed the character of the neighborhood for the worse.
That is just one case study. The last STR we bought was in a nice family neighborhood (albeit a bit run down). The neighbors came over asking what we planned to do with the house. When we replied 'AirBnBN' they were thrilled. The block had already had another STR go in a little earlier and it spruced up the neighborhood considerably. When we were done with ours, the whole block became a better place to live......safer, more friendly, higher property values, etc.
So it can work both ways.....
- 4yJordan MoorheadBusiness MemberReal Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
STR not existing won't fix the housing crisis. Your city making it easier to build and giving tax credits to builders will!
The Moorhead Team5140 Reviews - Real Estate · Southern New Jersey · Member since 2014 · 78 posts · 31 votes4y
@Jim K. Amen and hallelujah
- Rental Property Investor · Concord, NC · Member since 2016 · 1k+ posts · 3k+ votes4yNow I feel bad. I don't allow pets and I'm pretty sure they had a donkey.
Quote from @Jim K.:
Oh my brothers and sisters, let's fast track this thread to where it's going. Someone must have owned the cave/stable/shelter that Mary and Joseph sought refuge in on Christmas Eve. Without a rented roof to be born under, our Lord and Savior would have died of exposure "on a cold winter's night that was so deep." Ergo sum, rent is not evil.
Can I get an amen? Can I get a hallelujah?
- Professional · Canton, MI · Member since 2016 · 296 posts · 230 votes4y
Quote from @Austin F.:
I've thought about this a lot, and the answer I've come up with is no. STR's hurt locals, especially in small markets like ski towns. They force the cost of housing up, and detract from any sense of community in neighborhoods. These issues are magnified greatly in small population high pressure markets, in bigger cities there is so little sense of community that it doesn't matter so much, also there are generally low cost neighborhoods the displaced people can filter out to.
I'm personally a big freedom guy, but I believe this is one place where local government needs to step in and draw up regulations. My local market has a cap on the number of licenses they will grant, 225 total units, and only one STR per block face, the waiting list is about 2 to 3 years long. As frustrating as it is (I have a property that would make a great STR) I believe it is what is best for the city.I can see your point, but time and again I've seen desirable cities with heavily entrenched NIMBY (Not In My Back Yard) populations that purposefully keep antiquated zoning policies in place in order to halt development, even well thought/planned development. They want to limit STRs (understandable) but also try to stop other types of development that would decrease the need for STRs.
I don't think people can cry "immoral" when entrenched interests are making no efforts to relieve demand pressures and, in fact, are doing just the opposite.
- Investor · Chicago, IL · Member since 2016 · 81 posts · 81 votes4y
The question is what is “morally right”? It depends on your perspective which is developed over time by the experiences you have had.
I saw this STR issue first hand in San Diego. The housing issue was first created by all the red tape that gets in the way for developers and then the problem was exponentially grown by STR's and then the mass movement of money during Covid. I set a record in my old condo neighborhood when I sold for 565k(2bd 2bs 984sqft w/garage and ocean view 2 miles from the ocean) in 2021. One condo just sold for 765k a week ago which is absolutely insane.
Where do “morals” come into play though? Is it moral to create so many hoops for developers to jump through? Is it moral for condos that deal with raw sewage water from the Tijuana river to sell for 1mm?
Maybe the government should have stayed out of the way in the first place?
- 4yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Quote from @Lucien Perreault:
Maybe the government should have stayed out of the way in the first place?And there you have it folks.....the best example of immorality we have. (Not you Lucien, the Government)
Quote from @Account Closed:
Quote from @Austin F.:
I've thought about this a lot, and the answer I've come up with is no. STR's hurt locals, especially in small markets like ski towns. They force the cost of housing up, and detract from any sense of community in neighborhoods. These issues are magnified greatly in small population high pressure markets, in bigger cities there is so little sense of community that it doesn't matter so much, also there are generally low cost neighborhoods the displaced people can filter out to.
I'm personally a big freedom guy, but I believe this is one place where local government needs to step in and draw up regulations. My local market has a cap on the number of licenses they will grant, 225 total units, and only one STR per block face, the waiting list is about 2 to 3 years long. As frustrating as it is (I have a property that would make a great STR) I believe it is what is best for the city.I can see your point, but time and again I've seen desirable cities with heavily entrenched NIMBY (Not In My Back Yard) populations that purposefully keep antiquated zoning policies in place in order to halt development, even well thought/planned development. They want to limit STRs (understandable) but also try to stop other types of development that would decrease the need for STRs.
I don't think people can cry "immoral" when entrenched interests are making no efforts to relieve demand pressures and, in fact, are doing just the opposite.
I have no debate with this statement, local government caused the housing crisis. But that doesn't mean two wrongs make a right- 4yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Quote from @Austin F.:
Nor does regulating one of the 'wrongs' out of existence. And owning/operating a STR is not a wrong anyway.....WTF?
- My original post on page 1 had more info. I don't think owning an STR isn't morally wrong, but I do think that government should impose restrictions on them such as saturation limits, or units caps in some markets.
Quote from @Bruce Woodruff:
Quote from @Austin F.:
Nor does regulating one of the 'wrongs' out of existence. And owning/operating a STR is not a wrong anyway.....WTF?
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