The housing crisis we’re in now is causing vacation towns to limit short term rentals, with their number growing more over the past year.
Short term or vacation rental properties, like those listed on Airbnb, are quite popular among both real estate investors and travelers looking for an alternative to cookie-cutter hotel rooms. In many ways, the short term rental industry provides livelihood to vacation towns and contributes to their economic growth.
However, in a recent report from NBC News, residents of Steamboat Springs, a ski town in Colorado, are struggling to find affordable housing in the vacation town. A lot of them are forced to rent out small motel rooms because that’s all they can afford at the moment.
Take, for instance, Steamboat Springs local Marc McDonald and his wife. McDonald does maintenance for a local golf course during the day and bartends at night to make ends meet. His wife is undergoing treatment for thyroid cancer and Hepatitis E.
Because short term rentals are causing housing prices to skyrocket in the vacation town, they must settle for a 500-square-foot motel room at $2,100 a month. They anticipate they will be homeless when rent and utilities increase to $2,800 in November. And they’re not alone.
The 42-year-old McDonald describes it as living in a stationary RV. Locals in a similar plight are crammed into small rooms with a refrigerator and a six-foot-wide kitchen. Some prefer to live in mobile homes for the time being.
The short term rental industry is putting residents in a position where they are not the primary beneficiaries of affordable housing. The focus of vacation towns is turning to visitors who bring business and livelihood to the town.
Other Vacation Towns Crack Down on Short Term Rentals
Such a situation now begs the question, “Is Steamboat Springs, CO an isolated case, or is this type of housing crisis more common across the country?”
Real estate investing in vacation towns are promising business opportunities because of the popularity of short term rentals. In a lot of cases, owners of vacation homes get to offset the costs of owning an out-of-town property by getting them rented out when not in use.
However, the popularity of short term rentals caught on a little too fast. Property investment companies also started digging their teeth into the $74 billion industry, causing a housing crisis of sorts in small vacation towns in the US. The towns’ residents feel they are neglected in favor of tourism and the economy.
However, such a type of housing crisis isn’t isolated only to Steamboat Springs. In fact, a lot of states put limits on short term rentals to avert a similar problem. Las Vegas, for instance, enacted very specific laws in place to regulate short term rentals to protect their local communities and residents.
Other Western vacation towns are finding themselves in the same boat. Mountain towns like Jackson Hole in Wyoming and Crested Butte and Breckenridge in Colorado are also struggling with limited supplies of affordable housing. They are now working on new short term rental regulations. Aspen and a few others recently passed moratoriums to address their own housing crisis.
Ban on New Vacation Rentals
Because of the current housing crisis in Steamboat Springs, the vacation town’s city council recently passed a ban on new vacation rental properties. In addition, the local council is also considering imposing more taxes on vacation rental property owners.
Council member and 20-year resident, Heather Sloop, said she supports the measures taken by the council because of the sheer number of locals struggling with finding affordable housing.
She says, “I see people that have worked here as long as I have, having to find alternative housing sources or leaving this valley because of the economic strain that is having on them.” There isn’t a day that goes by without her hearing someone say that they need to move because they can no longer afford the rent, according to Sloop.
The new regulations, especially the proposed tax changes, are being contested by a coalition of property owners and businesses. Robin Craigen, the coalition’s VP and a co-founder of a property management company, says that the tax might make Steamboat Springs lose its edge over other Rockies resorts.
Craigen says, “The short-term rental industry brings people to town, funds the city, and you want to tax it out of existence?”
Steamboat Springs generate an estimated $250 million in revenue from visitors who booked through platforms like Airbnb. According to the coalition, if tourism drops by 10%, the town’s local businesses will lose $25 million.
Larger Airbnb destinations with stricter regulations, such as NYC, Boston, and Denver, are quite understandable. However, in the case of smaller towns, they need to strike that delicate balance between supporting the lodging industry without creating a housing crisis.
Affordable Housing Program
The demand for short term rentals and the increase in supply are growing at such a rate that it is displacing local residents of the towns they are supposed to serve.
Margaret Bowes, Colorado Association of Ski Towns executive director, says that the perfect solution to the crisis is still not within reach. “The trajectory of the number of properties becoming (short-term rentals) is not sustainable,” according to Bowes. She adds that at the current rate, no one working in the said communities will be able to live in them.
The affordable housing program run by local officials is a good way of addressing the crisis. The only problem is that the demand is far greater than the supply. According to Yampa Valley Housing Authority regional property manager Alyssa Cartmill, around 1,200 individuals showed interest in the new subsidized housing development with only 90 apartments.
Affordable housing is already a crisis in itself. As more and more homes are finding their way to short term rental listings, more and more people are being displaced from what could be homes to them. It creates a conundrum with long term rentals. The increase in short term inventory is creating a shortage in long term housing, resulting inn an increase in rental prices.
What All This Means for Real Estate Investors
As a real estate investor, it presents some sort of conflict in values. On one hand, you would want to own an investment property that will allow you to earn some money on the side as a rental property. Generally, most rental property owners are opting to go with starting an Airbnb business because it is more financially rewarding than a traditional rental.
On the other hand, you also don’t want to contribute to the housing crisis. So what’s an investor to do?
At present, there really is not much you can do. Until construction catches up with the intense demand for affordable housing, we will never find a way out of the crisis.
Perhaps, as an investor, you can consider investing in traditional rental properties instead of vacation rentals. Doing so will help add to the number of traditional rentals actively listed. That’s enough to take away the housing problems of one household.
If you already offer a vacation rental unit or two, you can also consider renting one out (or both of them) as a long term rental for the time being. The choice is up to you.
Finding Affordable Properties to Rent out Long Term
If you’re an investor and you’re considering buying an income property to rent out as a traditional rental, you can find great deals using a website like Mashvisor.
Mashvisor is a real estate website that helps investors find the best rental properties in the most profitable neighborhoods all over the country. Signing up for the platform’s services will give you access to a wealth of information and valuable real estate investment tools (like a real estate heatmap and an investment property calculator).
Whether you’re looking for a traditional rental property or a vacation home, Mashvisor will help you find the best property that fits your needs.
There’s one thing to take note of, though. If you’re investing in short term rentals, make sure you find out first what the local regulations are to avoid any legal issues in the future.
To learn more about the short term rental regulations in different locations, click here.
Wrapping It Up
Vacation towns will most likely regulate short term rentals to help address the housing crisis. Investors can help avert the crisis by investing in traditional rental properties. To find the most affordable properties in the best traditional rental locations, visit Mashvisor.com. You will find the website to be a one-stop shop for your real estate investing needs.
To access Mashvisor’s real estate investment tools, sign up for a 7-day free trial today, followed by 15% off for life.