Do vacation rentals hurt the housing market?
Like many stories, it started with a question. When I asked my landlord what he thought about Airbnb.com—the DIY vacation rental website—his response was more informed and impassioned than I could have imagined.
In his eyes, the town’s growing slew of vacation rentals takes away valuable housing from the city, while also competing unfairly with established hotels and bed and breakfasts. Obviously, there are mom-and-pop vacation rentals on Airbnb, too, he says, conceding that those are the ones more in line with the site’s reputation.
“But that’s not always what’s going on,” adds my landlord, who requested his name be withheld due to the sensitivity of this topic. “There are realtors and other investors that are looking at the income stream they could have if they bought a property for tourists, which takes housing stock away from the city. If you’re in the system as a traditional inn, you’re getting nit-picked all the time by the city. You’re getting audited and taxed and inspected and sometimes fined. That doesn’t happen with Airbnb.”
In the new sharing economy, local governments across the country are trying to figure out how to deal with such websites. And of course, everyone has an opinion.
It isn’t difficult to see the appeal of Airbnb. For around $100 a night, a couple can live like royalty with an ocean view in a home they might otherwise never be able to afford. Meanwhile, homeowners, by posting an online listing, can rent out a spare bedroom for tourists to help with steep mortgage payments. Or they can rent out their entire home when they leave for weeks at a time to help finance a vacation of their own.
But there may be deeper issues embedded within online vacation rental sites like Airbnb—perhaps including the future of our neighborhoods. Santa Cruz Vice Mayor Cynthia Mathews says she is concerned about protecting the city’s housing supply and doesn’t want to see too many homes turned into vacation spots. She adds that locals worried about vacation rentals have been emailing to say that they don’t want their neighborhoods overrun by tourists.
“We have gotten a significant amount of correspondence from people who say that’s the real concern,” says Mathews. “I think both of those are real issues. These experiences of the community are part of a rapidly changing phenomenon, and we’d do better to get on top of it now.”
Santa Cruz County and the city of Santa Cruz have been looking at regulations for vacation rentals. The city may restrict what kinds of units may be used for short-term rentals. For instance, the city will discuss whether or not accessory dwelling units, or ADUs—converted garages and “granny units”—should be allowed to be rented out to tourists, as they currently are. Meanwhile, the county is looking to better track vacation properties and collect transient occupancy taxes (TOT)—the same ones hotels have to pay. In addition, the county has passed limits on the amount of vacation rentals allowed in certain neighborhoods.
The discussion doesn’t look to be over yet. From San Diego to Manhattan, communities have been grappling with a list of tough issues related to the DIY rental trend.
First is the issue of housing supply. Especially in expensive communities like the Bay Area, New York and even Santa Cruz—some of the least affordable rental markets in the country—government leaders like Mathews want to prioritize housing long-term renters over tourists.
The second concern is a land-use one. Santa Cruz homes are normally built in residential zones, while hotels and motels are usually in commercial ones. When someone starts a de facto bed and breakfast, one could argue that the host is essentially running a commercial enterprise—with all the impacts that come with it, parking and otherwise.
The last piece of this political puzzle is that traditional inns must abide by a long list of guidelines—almost none of which apply to Airbnb listings. For example, a new inn has to go through an exhaustive public process, including public hearings and pricey applications. And once open, they’re subject to a different level of public scrutiny.
Susan, a popular host on Airbnb, started renting out a wing in her Westside home almost two years ago and couldn’t be happier. “We love it. I think it’s a wonderful company,” says Susan, who requested that her last name not be used. “They have our backs. They give us $1 million in insurance. It’s the only vacation rental site I’d participate in.”
Susan charges about half of what a motel might on a busy summer night, and also collects TOT, which she pays to the city. She says she never would have rented out the space for a long-term tenant, so her operation isn’t taking away any housing. But still, she sympathizes with anyone looking for an affordable place to live. “I feel their pain. This is a hostile rental market,” she says.
A company spokesperson from Airbnb says that when it comes down to it, Airbnb is providing an important tool to everyday homeowners.
“Home-sharing allows people to turn what is typically one of their greatest expenses into a tool to help make ends meet,” Airbnb’s Alison Schumer says in an emailed statement. “While most hosts use Airbnb to pay the bills, their guests generate sustainable local economic activity that supports small businesses. We look forward to working with the Santa Cruz City Council on common-sense rules and enforcement that enable people to share their homes.”
Providing reasonable housing prices in a tourist town is no small task. That’s why the Santa Cruz City Council has been working for the past few years to encourage more people to build back units, or ADUs, to create more housing.
In order to protect that housing supply, the council heard a proposal during a May meeting to forbid such units from being used as short-term rentals. At public comment, homeowners pleaded with the council not to adopt that change—many of them explaining that they would not have been able to afford buying a home in the first place if they had known they couldn’t use the ADU for Airbnb. They told the council their stories. Joe Collins, a local philanthropist and author, has donated $40,000 in vacation rent collected from the unit behind his house. Collins says he would never rent the unit out long-term, because he likes family and friends to stay there sometimes.
The council chose to delay the vote.
Some councilmembers want to forbid short-term rentals in any new ADUs, while grandfathering in any existing units, as long as the owners had been paying their TOT.
The unincorporated area of the county is no stranger to these issues, either. In the past few years, the county’s Board of Supervisors has implemented caps on the amount of vacation rentals in the Live Oak, Aptos and Seacliff areas. Vacation rentals won’t be allowed in more than 15 percent of each of those areas or in more than 20 percent of one block.
Also last month, the county board voted to require Airbnb hosts to list their TOT certificate number on their webpage, as a way to keep track of who’s up-to-date on their taxes. First District Supervisor John Leopold hopes that will make it easier to find any problem rentals.
“It will be a lot easier to identify those people that are not playing by the rules, who are operating as an illegal hotel or lodging facility,” Leopold said at the meeting, “and we’ll be able to take action.”
PHOTO: Hotels and motels pay transient occupancy taxes. It’s something vacation rental owners are required to do, too, but some of them don’t.