Short Term Rentals... Are they the root of our housing issues?

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Short Term Rentals... Are they the root of our housing issues?

Real Estate Agent · Denver CO and Summit County, CO · Member since 2015 · 74 posts · 43 votes

STR... good, bad, or depends?

I live in Frisco, CO nestled between 5 ski resorts, lovely Lake Dillon, and a 1.5 hour drive to the growing metro area of Denver.

We are not alone here, but in Frisco, there is a big workforce housing issue as prices rise, so much so that our Town Mayor considered declaring a state of emergency. https://www.cpr.org/2021/05/27...

In Summit County, and communities surrounding Frisco, there have been some recent developments in the investment space to address the workforce housing issues by limiting Short Term Rental licenses, saying that will restore more community feel and provide more supply to workers and long term renters.

Breckenridge is proposing to stop issuing STR licenses until their proportion gets down to a smaller % of the overall housing supply. Some say this will take 3 years. This hasn't passed yet, but has had a first reading, so we will see how that plays out in the coming month. There is a lot of discussion about exceptions.

Unincorporated Summit County (like Blue River, the area just south of Breck that was the next best option) is proposing a moratorium on issuing new licenses. They are currently proposing 12 weeks of not issuing licenses. Again, this hasn't passed but is in discussion.

As investors, it is safe to say we don't like to see this. As a community member, I am torn. I hate seeing "Now Hiring" signs on every business.

Question for all of you: Do you think Short Term Rentals are causing the problems in resort towns (or elsewhere)? Do you think limiting them will solve the problems?

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Bruce WoodruffPro Member

Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes

No, STRs are just another business. The problem is government. Too many restrictions, fees, Etc....

Add environmental regulations in states like California and it becomes near impossible to build housing as needed.

STRs the problem? Nope.....

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Bruce WoodruffPro Member
Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
5y
No, STRs are just another business. The problem is government. Too many restrictions, fees, Etc....
Add environmental regulations in states like California and it becomes near impossible to build housing as needed.
STRs the problem? Nope.....
8 Reply
Steven McnuttPro Member
Pompano Beach, FL · Member since 2016 · 12 posts · 16 votes
5y
:puts on flame retardant pants:

it looks like you posed three questions. one in the topic title, two at the end of your post.

1. are str's at the root of housing issues? that's going to depend on the market/neighborhood. not useful to generalize.

2. are strs csusing problems in resort towns & desirable vacation areas? yes absolutely
3. should str's be limited in some way? if it's creating issues yes.

here's my viewpoint and experience:
during high season str guests are most definitely nuisance in the beach neighborhood I live in. They steal stupid stuff like people's flip flops. they party late into the night on weekdays. they behave as if residents are there solely to facilitate their good time and buttonhole them for information and directions when they're out walking their pets. they tailgate at the beach access because the hosts are too cheap to pay the association dues. they trespass on resident's property to fish and sightsee then become belligerent when asked to leave. etc etc etc.

It really does degrade the character of the neighborhood and the experience of living here during the high season. I think it's a numbers issue; there are so many of them even if it's one out of a hundred problematic guests it means issues weekly. since the investors don't live in the neighborhood they don't have to live with the issues so they don't care.

I'm also an str owner who been on the receiving end of resentment over the coming and going of strangers in a neighborhood.

I think this is a classic example of the need to balance the rights of property owners with the common good. too much str can destroy a neighborhood, living through it. As a result I'm in favor of reasonable limits.
7 Reply
John UnderwoodPro Member
Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
5y
Generally STR'S are not the cause of the housing shortage.
That said in certain areas such as large tourist areas they could certainly contribute heavily to the issue.
2 Reply
Carolyn Fuller
Cambridge, MA · Member since 2015 · 652 posts · 736 votes
5y
I don't live or host a STR in a resort town but I do live & host a STR in a city with a serious housing shortage. When Boston restricted STRs to owner adjacent or owner occupied and forced Airbnb to remove illegal listings off their platform, it took 3000 units off the STR market. That is 3000 units that could now become LTRs and most of them have. That did not fix our housing shortage but it sure did help. There is no question in my mind that local zoning laws are a core cause of housing shortages but unregulated STRs are not helping.
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Mason Hickman
Real Estate Agent · Sandwich, MA · Member since 2014 · 974 posts · 636 votes
5y
@Candice De
I don’t think you can point to one thing as the sole cause of another. I live on Cape Cod, a beach vacation area and there are many STRs here. The vacation rentals have existed here for many years before Airbnb and Vrbo ever entered the scene.
There is a large workforce housing issue in our area and we see numerous “now hiring” signs all over the Cape, which has only been exacerbated by the J-1 Visa ban. The recent surge in home prices has also pushed out many lower income families who can no longer purchase “starter homes.”
Many of the affordable housing problems stem from the cost of construction, zoning restrictions, and local legislation. If housing were more affordable to build and multi family properties were easier to get zoned, many of the housing issues would work themselves out through supply and demand. Additionally, local legislation has been restrictive in the past (although it is improving in some areas!) about adding ADUs and other ways for new housing stock to be created. Rather than allow more units to be built, legislation was forced on the type of tenants and tried to solve a supply issue with legislation.
All in all, the STRs are contributing to the affordable housing issue but there is much more at play, at least in our local environment.
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Bruce WoodruffPro Member
Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
5y
Originally posted by @Steven Mcnutt:
:puts on flame retardant pants:

it looks like you posed three questions. one in the topic title, two at the end of your post.

1. are str's at the root of housing issues? that's going to depend on the market/neighborhood. not useful to generalize.

2. are strs csusing problems in resort towns & desirable vacation areas? yes absolutely
3. should str's be limited in some way? if it's creating issues yes.

here's my viewpoint and experience:
during high season str guests are most definitely nuisance in the beach neighborhood I live in. They steal stupid stuff like people's flip flops. they party late into the night on weekdays. they behave as if residents are there solely to facilitate their good time and buttonhole them for information and directions when they're out walking their pets. they tailgate at the beach access because the hosts are too cheap to pay the association dues. they trespass on resident's property to fish and sightsee then become belligerent when asked to leave. etc etc etc.

It really does degrade the character of the neighborhood and the experience of living here during the high season. I think it's a numbers issue; there are so many of them even if it's one out of a hundred problematic guests it means issues weekly. since the investors don't live in the neighborhood they don't have to live with the issues so they don't care.

I'm also an str owner who been on the receiving end of resentment over the coming and going of strangers in a neighborhood.

I think this is a classic example of the need to balance the rights of property owners with the common good. too much str can destroy a neighborhood, living through it. As a result I'm in favor of reasonable limits.

Fine, but you really don't address the MAIN question, which was related to housing shortages.....

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Tsvetomir "C" NikolovPro Member
Rental Property Investor · Bar Harbor, ME · Member since 2016 · 20 posts · 13 votes
5y
Hello all!
Complete honesty it is hard to claim one business strategy as wrong vs the other.
We are all in here to do business. Saying my STR's affect the local rental market will be false....
I do only mid to higher end properties, no living been will be willing to pay me 2500 per month that barely covers my expenses.
STR do affect our local rental market and this is a fact. But how, they provide business and feed a lot of the local families who contribute even further to the local economy.
Not many folks run their rentals from out of state, majority leave near by and they rent out their secondary homes, manage them selves.
Certain percentage even moves in campers on the property or out to campgrounds for the simple reasons to make it trough and get more income.
Just laying points of view.
Living in a seasonal tourist town near national park is a challenge on its own...
To begin with house prices have never been cheap...
Curently your "starter homes" are in the 300k range and in my eyes a lot of them are full gut remodels....
I can't say when was the last time numbers for LTR made sence around here...
Anyhow you can make it with vacational rental and you can cashflow.
You can possibly do employee housing, get your property trashed once a season and do it all over again, ans still be in loss.
At the same there is abundace of work, not all extremely well paid, BUT your better paid 20$ per hour employees can't afford to buy a home around here...
Plenty of unemployed folks too, that like to rave for the ****** tourist ruining the town...
So many points of view...!
Who is right?
I somewhat agree with and earlier post.
Mild enforcement and have all comply with code regulations and licensing.
That is a fair game and we all need rules to be able to play.
Best C
[email protected]
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Ryan MoyerBusiness Member
Property Manager · Orlando Kissimmee Davenport Salt Lake City, Park City · Member since 2019 · 996 posts · 1k+ votes
5y
I'm benefiting from it as much as anyone else here, but I think we'd really have to be putting our heads into the sand to think that STR's are not majorly contributing to these problems in touristy areas.

Two major and obvious problems they create.

1) Fewer LTR's available. A lot fewer people would prefer to make a few hundred bucks a month with a LTR when they could make 5x-10x that (sometimes even with a property manager so it's hands off for them) as an str AND get to use it themselves sometimes.

2) Drives the price of houses so high that low wage workers can't afford to buy and so it doesn't make sense for people to buy as a LTR (or keep rates reasonable). This is doubly obvious when you compare the price of homes in areas where STR's are allowed versus zones in the same location that STR's aren't. A similar house with an STR license (or zoned where STR is allowed) goes for 2x-3x as much in some markets just because it can be used as an STR. In one market I'm in in Southern Utah a neighborhood called Dixie Springs only has limited STR permits and you can buy a 3/2 that doesn't have a permit for $300k or the exact same house across the street with an STR permit will cost almost $900k. You can see similar things in Tahoe comparing areas where STR's are allowed versus not, in Panama City Beach, etc.
Obviously home prices have gone nuts just about everywhere but by far the most in touristy spots where STR is big.

I also live in a resort area where a major ski resort is flumoxed that they can't hire employees even when offering $15/hr which seems like a nice wage. But the problem is over the same period that wages have doubled, home values or rent have almost 10x'd. The kind of people that work for $15/hr just can't afford to buy a million dollar home or pay the rent that anyone that has a million dollar home in the area is going to be asking for, so those people just don't exist in the area anymore.

Obviously selfishly I hope the market will correct via ways other than legislation. Some ski resorts provide subsidized employee housing which seems to work well. But that is assuming a ski resort nearby and not just a nice touristy town that doesn't have a main commercial attraction for whom it makes sense to offer that subsidized housing.
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Max T.
Investor · Philadelphia, PA · Member since 2015 · 3k+ posts · 3k+ votes
5y
@Candice De
Not the root. But certainly they are a reducer when it comes to housing supply.
1 Reply
Brett Rosenbauer
Rental Property Investor · Fort Collins, CO · Member since 2019 · 36 posts · 20 votes
5y
I'm in Fort Collins and own/operate two STR's here. I think the bigger problem is the U plus 2 rule. Those not familiar, it can be you + 2 other unrelated people under one roof.
So say I have a 5 bedroom rental house, I can only rent it out to 3 people who are not related. This I believe will be challenged moving forward as the Front Range is getting nuts here too.
https://www.fcgov.com/neighbor...
https://medium.com/beyond-the-...
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Dale Desmond
Property Manager · St. George, UT · Member since 2020 · 48 posts · 37 votes
5y
I feel it's purely a supply/demand issue. Pre-COVID, we were probably saturated in STRs IN Southern Utah. Then during COVID, nobody could go on cruises, couldn't go to Hawaii, Mexico, Disney, etc. So they flocked to Southen Utah. Then everyone said, "This place is awesome! Let's buy a STR!" Couple that with the limited number of STR permits, basic economics. Perfect storm for a price spike.
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David M Trapani
Rental Property Investor · Franklin, TN · Member since 2019 · 160 posts · 125 votes
5y
Government has no place regulating private property unless it is causing a legitimate and proven nuisance. Nuisance would include things limited to noise, traffic, trash and crime. Again, there must be hard evidence. Not news stories by media with a political bent, false wolf-crying nimbies or other fraud by people exaggerating a problem that doesn't really exist. Government has no business telling private property owners who may stay, for how long or for how much. That's why it's private property. Property owners work extremely hard to save the down payments, locate, analyze, acquire & operate their investment properties. They already pay the government property tax, income tax, capital gains tax, business license tax, sales tax, etc. ad naseum. Government should not regulate property unless it causes a legitimate nuisance. Government is not a nanny fascist controller of any "housing supply". Governments have laws telling them to build affordable housing. If government fails to do so (which they often fail to do) it is inappropriate illegal and unconstitutional to blame investment property owners & to seek to tax and regulate those private property owners to protect the "housing supply". Not the job of government. If we want to live like Communist China, North Korea, Russia or other similar countries (Just look at Venezuela and Cuba and see what happens) then the government can seize private property and socialism / communism will take root. Government should never interfere with private property ownership absent true nuisance situations.
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Alex S.
Investor · Metro East of St. Louis (Illinois) · Member since 2016 · 259 posts · 211 votes
5y
Thank you @David M Trapani!
Private property rights are an individual freedom...which is the only kind of freedom there is!
When you live in a neighborhood, you do not own the lot next to you. If you want to be undisturbed, move out into the country. If STR guests violate the law (trespassing, noise violation, etc)...call the police.
Capitalism is a beautiful thing...it will work itself out. For example, in Gardiner, MT, housing is exorbitant! It is a vacation launching spot to western Yellowstone National Park. The STR hosts there can't find labor, so you know what they do...THEY PROVIDE THEIR OWN WORKERS HOUSING! IF there is demand for STRs, the market will adjust to make sure the right number of laborers can live there.
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Ryan MoyerBusiness Member
Property Manager · Orlando Kissimmee Davenport Salt Lake City, Park City · Member since 2019 · 996 posts · 1k+ votes
5y
Originally posted by @David M Trapani:
Government has no place regulating private property unless it is causing a legitimate and proven nuisance. Nuisance would include things limited to noise, traffic, trash and crime. Again, there must be hard evidence. Not news stories by media with a political bent, false wolf-crying nimbies or other fraud by people exaggerating a problem that doesn't really exist. Government has no business telling private property owners who may stay, for how long or for how much. That's why it's private property. Property owners work extremely hard to save the down payments, locate, analyze, acquire & operate their investment properties. They already pay the government property tax, income tax, capital gains tax, business license tax, sales tax, etc. ad naseum. Government should not regulate property unless it causes a legitimate nuisance. Government is not a nanny fascist controller of any "housing supply". Governments have laws telling them to build affordable housing. If government fails to do so (which they often fail to do) it is inappropriate illegal and unconstitutional to blame investment property owners & to seek to tax and regulate those private property owners to protect the "housing supply". Not the job of government. If we want to live like Communist China, North Korea, Russia or other similar countries (Just look at Venezuela and Cuba and see what happens) then the government can seize private property and socialism / communism will take root. Government should never interfere with private property ownership absent true nuisance situations.

Originally posted by @Alex S.:
Thank you @David M Trapani!
Private property rights are an individual freedom...which is the only kind of freedom there is!
When you live in a neighborhood, you do not own the lot next to you. If you want to be undisturbed, move out into the country. If STR guests violate the law (trespassing, noise violation, etc)...call the police.
Capitalism is a beautiful thing...it will work itself out. For example, in Gardiner, MT, housing is exorbitant! It is a vacation launching spot to western Yellowstone National Park. The STR hosts there can't find labor, so you know what they do...THEY PROVIDE THEIR OWN WORKERS HOUSING! IF there is demand for STRs, the market will adjust to make sure the right number of laborers can live there.

I mean, I agree in principal and nothing irks me more than not being able to do something I want to do on my own land, but I'm wondering how exactly the two of you would see this playing out in practice. The neighborhoods you describe only even exist in the first place because of zoning laws. Otherwise someone could build a landfill or a loud warehouse nextdoor to you and tank your property value by 80%, which would leave some people in financial ruin.

The reality with STRs is our entire business model is based on a loophole. We often operate in residentially zoned areas with residential financing even though we are clearly operating a commercial business. Don't get me wrong I am happy to ride that wave for as long as it lasts and hopefully it will be forever, but the reality is that is what it is for most of us.

Of course in my experience with council/zoning meetings the irony of this kind of thing is that it is often the "don't tread on me" types that are in favor of STR restrictions because the idea of a "transient" population in their living area terrifies them.
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Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
5y
I think it depends on the town and number of STR. In some areas, like tourist towns, yes it can be a problem. In those areas it might be a good idea to limit the number of short term rentals (eg anything rented for under 1 month).
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Steve K.
Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
5y
As an STR owner I appreciate the sentiment in some of these comments, but let's be realistic. Of course the government can regulate private property. Our legal system recognizes the importance of balancing individual rights with common good, and often limits individual liberties in order to protect public interest. That's why we have zoning laws, building permits, architectural standards, even eminent domain when the government can take possession of private property. Owning property comes with a "bundle of rights" but doesn't grant absolute rights. This is a good thing. Check out Belize if you don't believe me. There are no zoning laws there, which is all well and good until your neighbor opens a night club that plays loud music until 4am, or turns their property into a pig farm or a trash dump or a brothel, or you name it, which lowers your property's value and renders it impossible to sell, and there's nothing that you can do it about.
There is plenty of case law that demonstrates how local government can restrict business activity (such as running an STR) in residentially zoned areas. It would be naive to be in this business without recognizing that.

As far as the OP's original question, I think a large number of STR's in one area can be a contributing factor to housing issues, but rarely the root cause.
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Joe SplitrockPro Member
Moderator
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
5y
Everyone loves property owner rights until your neighbor does something you don't like, haha. The truth is you can't do whatever you want with your property. Every city has some regulations and zoning.

@Ryan Moyer hit the nail on the head. Would you like it if your neighbors house was turned into a homeless shelter, allowing 20 people to live in a single family house? What if someone demolished four houses and put up a hotel next door? Most anyone would cry foul, because it would be "destroying the neighborhood" and therefore destroying your property value. Sorry to tell you all, but people feel the same way about short term rentals. Individual and property owner rights can be controlled when they infringe on the rights of others.

Also keep in mind it is important to differentiate short term vacation rentals from short term rentals in residential neighborhoods. If you are renting cabins or a lake house, vacation rental is the purpose of the structure. If you are in a residential neighborhood, the zoned use is completely different.

I operate a short term rental in a residential neighborhood and it of course it takes away housing that could be occupied by a local resident. Is this the root of the housing problem, probably not the main reason. However, it is one factor and may be a stronger factor in some cities than others.

@Brett Rosenbauer I am a fan of the U plus 2 rules in residential neighborhoods. Every adult generally has an automobile, so at a minimum this is needed to control parking and traffic. It is even worse in older neighborhoods, because in the 1950's and before, the average family had one car. Now you have 3+ cars at these houses, where the neighborhood wasn't designed for it. A better solution is redeveloping downtown areas to allow larger apartments and condos. This places people closer to where they work and more easily facilitates public transit. That all being said, my city has the same rule and I can tell you that people rarely follow it. Is there actually enforcement in your city - just curious?
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Brett Rosenbauer
Rental Property Investor · Fort Collins, CO · Member since 2019 · 36 posts · 20 votes
5y
Originally posted by @Joe Splitrock:

@Brett Rosenbauer I am a fan of the U plus 2 rules in residential neighborhoods. Every adult generally has an automobile, so at a minimum this is needed to control parking and traffic. It is even worse in older neighborhoods, because in the 1950's and before, the average family had one car. Now you have 3+ cars at these houses, where the neighborhood wasn't designed for it. A better solution is redeveloping downtown areas to allow larger apartments and condos. This places people closer to where they work and more easily facilitates public transit. That all being said, my city has the same rule and I can tell you that people rarely follow it. Is there actually enforcement in your city - just curious?

@Joe Splitrock
You are correct it's typically the older neighborhoods that have a 1 car garage, your typical 3/2 ranch and a 8K lot or smaller. You can get 2 cars in the driveway and 1 in the garage. We are in a college town and it's literally the few remaining older people who bought their homes in the 50's/60's mixed in with college rentals. Many homes were bought by investors in the 80's and 90's when everything was super cheap and depressed here...they finished the basements and added 2-3 bedrooms. There is only enforcement when someone calls, then an investigation happens. I don't own any of these homes/rentals, but I have researched a few neighborhoods with bigger/acreage lots that would work for rent-by-the-room (if the city ever lifts u plus 2) but I've never pulled the trigger as I don't want to break the law.

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Nik Moushon
Architect · Wenatchee, WA · Member since 2018 · 843 posts · 907 votes
5y
Anyone that is screaming "I can do whatever I want with my property! The gov can't tell me what to do with my property!" is an idiot and does not truly understand how the country is governed. There is a reason you can't put up a pig farm or a paper mill in the middle of residential neighborhood. There's a reason you can't have a gun store or a porn shop within a certain distance of schools. There a reason that this the greatest country in the world and thats because of the law & restrictions we have in place. Obviously, the laws and restriction need to go through the proper channels to get put in place. But if there were no law and restrictions in place this country (any country) would tear itself a part from the inside out in no time. I'm not saying the government doesn't go to far in regulating things. They do all the time. but we also have processes that help regulate that. It might not be instant change but we have those checks and balances that come into play.

Now, on to the OP's questions:
1 - STRs are not a root problem of either affordability or the housing shortage. We have had this growing problem for 50+ years. STRs, to the extent they are now, haven't been around for more than a decade and really havent seen their spike until the last 5 years.

2 - STRs are making the housing crisis worse in resort towns that have no regulations in place. BUT there are PLENTY of cities that have been doing STRs for a long time and have the regulations in place that have help regulate them and make sure there is enough housing for the work force that is need for resort/vacation towns. The town that have the biggest problems with them, from what I've seen, are stemming from two main things (again this is my opinion, no data to support it).
One, towns that have out-right banned STR in the city limits have pushed people wanting STRs to the county zoning area which traditionally are less regulated and never thought STRs would be an issue. This is also where, traditionally, the working force would live. Just outside the resort towns with a short commute to work. But now all the STR owners are forced to take their business to the county zoning and buying up what would be the working forces typical housing market. Thus driving up costs of housing. Now there would be more housing inside the city limits for the work house but because this would be very limited. Either rich people are buying second home in the resort town (driving up costs) or the existing work force is staying in place because they can't move anywhere else (driving up costs).

The second reason is location. Most resort/vacation towns are very small and, more than likely, farther out from the bigger towns and cities. Thats just their appeal. Not all are like this but most fit into this category. This means that land is very scarce to begin with. Either determined usually by the geography (mountains and valley) or restricted in size because of other small towns or other restrictions like national forests or rivers/wetlands etc. So because of restrict land and the distance from additional towns to supply more housing, the cost of housing goes up.

3 - I do believe that STRs need to be regulated. Mostly because I think bigger companies or out of town owners are buying up large number of houses and trying to capitalize on the STR boom market right now (and by out of town that would be anyone that at least doesnt live in the same county). I have been studying/reading different ways different towns deal with regulation and there isn't one that I like as a whole. There are usually more restrictions, that come from good intentions, that will, in the long run, cause more harm to the housing market than good. I foresee a small dip in prices from these restrictions but a long term spike because the demand is still there. For example, my county just put in a blanket out right ban on renting anything but a house as a STR. That means no tent camping, no glamping, no RV or trailer rentals, no tiny home renting. Now this is where regulations have gone too far and will cause a massive spike in demand, not only for STR but for traditional hotel lodging. Causing the prices for both to spike.

I will expand a bit on item #1 and add that STRs are not taking as big of a chunk of the housing out of the market for traditional home buyers as it first appears. For example, Leavenworth WA has about 15% of the homes, in its zip code, noted as legal STRs. Now at first glance that just looks like a straight 15% of the houses are taken away from people who want to buy them a their primary residence. But you have too look into several key factors for these numbers. Like, whats the average cost of these homes? If they were to all flood the market at once (or even over a couple years) how much would their price drop and would they even get to be in the definition of affordable housing? More than likely, even with another huge 30%+ market crash (that aint happening) the prices would still be WELL out of the reach of the work force that needs them. You also have to look at inflation and that the cost of housing has almost tripled in the last 50 years. But even the tripling of the housing cost is a bit untrue as well because you also have to take into account that the average house size has gone from about 1400sf to over 2400sf and that the avg sf per person per house has more than doubled. So in effect, not only are we not building as many houses as we use to but we are building them bigger and there are less people per house. So as you can see we are having a huge supply problem for new homes along side the cost sky rocketing and that would be here regardless of STRs. So ya, STRs are playing a natural part in inflating prices but its a small portion of the price increases.
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Cliff H.Pro Member
Rental Property Investor · Nashua, NH · Member since 2014 · 610 posts · 486 votes
5y
Yes. Anytime you subdivide in order to increase profitability as an investor, prices increase for those who are not investors and not subdividing. This is particularly true of STRs because GROSS profits look so much higher than with a standard rental, further driving prices beyond what a LTR investor would reasonably spend, which is closer in line to what an owner occupied buyer can afford. If enough investors are competing with regular owner-occupied buyers competition rises and supply demand gets out of whack.
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Loren Clive
Residential Real Estate Broker · Paia, HI · Member since 2016 · 479 posts · 311 votes
5y
Maui has grappled with this question for ages and enacted all kinds of laws to restrict short term rentals. Unfortunately most of these laws go unenforced, yet locals still blame the tourists for everything . . . including the housing shortage which is in fact created by OVERREGULATION and restrictive zoning laws. Studies have shown restrictive zoning, in particular related to density, does adversely affect low-income families. https://www.brookings.edu/blog...

I agree that vacationers get a bad rap for "spoiling neighborhoods" and late night parties when in my experience these complaints are equally true of local families, be they homeowners or long-term tenants. I should know. I live down the street from an illegal cockfighting operation, which creates lots of noise and parking problems, and let me assure you there are no tourists involved in that.

Does it bother me? NO. Would I ever dream of turning my neighbor in? NO. Actually I'm kind of proud that this remnant of local culture survives, and aside from the illegal aspect it does fit in with the AG zoning. Bottom line, you can't control what your neighbor does unless you want to live in a Communist society.

We should hold our leaders accountable for this housing shortage, which again on Maui is totally the result of it being so hard to develop, rather than letting them pass it off onto the short term rentals. I can't tell you how many affordable housing projects have been rejected by the County Council who continues to gripe about the housing shortage THEY created. Now their big idea is to phase out the areas already zoned for short-term rental!
2 Reply
Alex S.
Investor · Metro East of St. Louis (Illinois) · Member since 2016 · 259 posts · 211 votes
5y
@Ryan Moyer @Joe Splitrock @Nik Moushon

All of the examples you give of "doing whatever you want" (i.e. pig farms and industrial) are things that literally take away the individual freedom of the property owner nearby by subjecting them to awful smells and noise. They are the definition of the exception. So, they do and should require special permits by a municipality to build. STRs don't infringe on the neighbor next door.

STRs are just people living in houses. If they do something to break the law, call the cops...just like you would with a LTR. I operate STRs in a medium-sized city in IL with a couple hospitals, a military base, and some local farming/business. My guests have absolutely no affect on my neighbors. My neighbor is a LTR and he put a plastic table and chair in his front yard. He sits out there shirtless (he's no Ryan Reynolds) and drinks. There are no less than 15 different people that cycle through that house every week. Here's the thing...none of that violates the law and it certainly doesn't infringe on my personal property rights. One day, they parked a car in my 4-plex lot across the street. Now they're violating my rights. I asked them to move it and they did and all is well.

Using a property the way it was intended (sleeping, eating, sitting around the backyard firepit) is not a "loop hole." It is the highest and best use of property in many occasions.

Ryan Moyer, I love your comment about the irony of the council meetings blocking STRs! That is so true. Don't tread on me...until I think my neighbors should be regulated the way I want.
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Joe SplitrockPro Member
Moderator
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
5y
Originally posted by @Alex S.:
@Ryan Moyer @Joe Splitrock @Nik Moushon

All of the examples you give of "doing whatever you want" (i.e. pig farms and industrial) are things that literally take away the individual freedom of the property owner nearby by subjecting them to awful smells and noise. They are the definition of the exception. So, they do and should require special permits by a municipality to build. STRs don't infringe on the neighbor next door.

STRs are just people living in houses. If they do something to break the law, call the cops...just like you would with a LTR. I operate STRs in a medium-sized city in IL with a couple hospitals, a military base, and some local farming/business. My guests have absolutely no affect on my neighbors. My neighbor is a LTR and he put a plastic table and chair in his front yard. He sits out there shirtless (he's no Ryan Reynolds) and drinks. There are no less than 15 different people that cycle through that house every week. Here's the thing...none of that violates the law and it certainly doesn't infringe on my personal property rights. One day, they parked a car in my 4-plex lot across the street. Now they're violating my rights. I asked them to move it and they did and all is well.

Using a property the way it was intended (sleeping, eating, sitting around the backyard firepit) is not a "loop hole." It is the highest and best use of property in many occasions.

Ryan Moyer, I love your comment about the irony of the council meetings blocking STRs! That is so true. Don't tread on me...until I think my neighbors should be regulated the way I want.

STR are not just "people living in houses". They are not residents at all. They are guests staying for days or a week in a furnished property. A better comparison of STR is a small hotel. It is a commercial businesses. Prior to the advent of AIrBNB and VRBO, bed and breakfast were licensed, inspected and regulated just like hotels. Cities who are moving to regulate are just catching up with new technology. (Just like Uber and Lyft are a taxi, even though they try to claim it is just someone bumming rides, haha.) The legislation catches up eventually. Anyone buying STR should be aware of this risk.
It is illogical to claim that a short term occupant uses a property the same way as a long term occupant. The definition of sleeping and eating would qualify a hotel as an apartment building. People traveling for business or vacation have different usages of a property. Some of these STR are packing 10+ people into a house that normally would have houses a family of 4. Maybe the house has a pool, which a family would have used mostly on the weekends and throwing a party once every few months. Now you have guests throwing pool parties multiple times a week, even on school/work nights. You have more alcohol consumption by people vacationing, which leads to noise and poor judgement. On a residential street with families, you have STR guests speeding down the road, without regard for where kids may live and play. If someone lives on a street, they are less likely to speed, because they know the neighbors and they have accountability. A STR guest could care less, because they are gone in a few days. If you dig even deeper into the concept of neighborhood and community, people want to live in a great neighborhood with neighbors they know. Community is based on relationships and people helping people. When a tornado hit my city, neighbors walked next door and helped neighbors clean up the mess. People with kids want other kids on the street, so their kids can make friends, play in the neighborhood and walk to school together.
Looking at it from a city wide level, cities want residents to attend their schools, churches and work at local businesses. If your city transforms into a city full of transient residents, you lose your community. As residential population decreases, schools need to close and consolidate. Police are dealing with a transient population that is less familiar with local laws and ordinances. The distributed nature of AirBNB and VRBO management makes this even harder, because you now have thousands of owners and managers. Many of these people are new and don't understand or follow the laws. Over half the STR in my city are not registered with the city. Many advertise and rent beyond occupancy limits and rent basements illegally.
The "best use" is different than "intended use". A cabin in the mountains or lake house was intended for short term occupancy. A house in the suburbs was intended for long term residency. "Best use" of land is highest dollar, which doesn't always match with community objectives. Cities protect their community through zoning laws. Commercial zoning is almost always located closer to main roads and hotels have always isolated visitors outside of residential neighborhoods.
I respect your perspective and I understand owners want to maximize profits. I think part of the problem is STR owners fail to consider the perspective of residents in the community. They dig their heals in claiming "property rights" and the community fights back. I think a better approach is working together. Limiting density and registering properties are common sense ways to find middle ground.
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Nik Moushon
Architect · Wenatchee, WA · Member since 2018 · 843 posts · 907 votes
5y
@Alex S.

Laws are what gives you your freedom. Without them theres just chaos.

You are right. There is a reason that pig farms and heavy industrial are not next to residential zones. This is one of the many reasons zoning laws came about. Residential zoning, by definition, is for people to live (be that renting or owning a home), like you said. That very same zone also outlaws a company buying up half a block and building a 5 story hotel next door to you. Why? Because 'Lodging' is restricted to other, usually, more commercial oriented zones. Whats the definition of 'Lodging' according to zoning/city codes? The vast majority of jurisdictions define it as any rental unit (be that a house or a room) that is rented for any time less than 30 days. So, by the very definition of the zoning code, STR are 'Lodging' and not for 'Living'.

So by your very own argument, that a pig farm and industrial building infringe upon YOUR rights and freedom because they would be outside their own allowed zoning, is the very same argument used to justify banning STR in residential zones. Because by definition and by zoning code, you are breaking the law by have a Lodging business in a Residential zone. So you are infringing on your neighbors freedoms. Again, by YOUR definition. Even if your STR isnt smelly or noisy, it doesn't matter. Because if you can try to justify that the people you rent to are quiet and keep to themselves and dont bother the neighbors...then why cant a 5 story hotel do the same thing? The vast majority of the noise coming from a hotel is kept inside. Have you ever been at a restaurant or in a office building that is next to a hotel? Rarely, do you ever hear any noise associated with the hotel itself. I could keep going but I think my point is clear. Everyone that is claiming "my freedoms" or "my rights" like to cherry pick the narrative to just their own point of view even though that exact same logic is what is used to justify the regulating in the first place.

Now, I want to be clear, I am not against STRs. I'm not against them being in residential zones. I am for regulating them though. Just like any industry in any zone. There needs to be regulating before it gets out of control and you get to outright bans all over the place. All you have to do is look at what has happened to unregulated industries in the past to see what will happen. The feds gets to a point where they cant ignore it anymore and they step in. And when that happens they always overreach. If we dont take initiative to come to an agreed upon set of rules at a local city/county level, where STRs can survive and local full time residents can live together, we risk letting the states make rules that apply everywhere. We don't want that and I can see that happening. Especially with how political the topic of affordable housing has become. Regardless of whether STRs are a major cause or not, they are the easy political scape goat.

We do need to fight back, even at the local level though, on over reach in regulating. My county, for example, just passed new STR laws. Most of it isn't too bad and if your smart enough you can still do a STR business in most areas. But the one thing I think is a complete overreach, and hopefully will be contested in the courts, is that they completely banned renting out anything that is a permitted house. So no renting out tent, RVs, trailers, tiny homes, etc. Anything along those lines. Not only do I think this is wrong but it makes the affordable housing issues even worse.
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Alex S.
Investor · Metro East of St. Louis (Illinois) · Member since 2016 · 259 posts · 211 votes
5y
@Joe Splitrock @Nik Moushon
Great thoughts, thanks for the input! I can't get on board with the idea that STR guests affect a neighborhood that much (at least not in mid-size cities in middle America). I think there is a big difference between things that are nice to have (cool neighbors that help you clean up after a storm) and rights/freedoms. After all, you could get my LTR neighbor. I assure you, he won't be helping when the next storm comes.
That said, of course, you are both absolutely right that regulation is coming. It always does in disruptive industries. We'd all be wise to invest in STRs with eyes wide open in that regard.
Thanks for your thoughts!
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