I’ve been fighting to keep rentals levacationgal for about 7 years now and in that time I’ve learned quite a bit. But if there’s one key takeaway it is that the people who want to see short term rentals banned will grasp on to any issue and tell any falsehood or exaggeration to make it happen. When I first got involved as a vacation rental advocate the complaint those against vacation rentals had was that they were disruptive to their neighborhoods, but that argument didn’t get much sympathy because there just wasn’t any support for it and the neighborhoods the complainers came from were actually really nice neighborhoods. So when that argument didn’t work they started saying that vacation rentals decreased the value of their homes, but their homes were mostly in the coastal and touristy areas and among the most expensive in any city.
So when that argument that home prices were falling didn’t work they finally came upon one that would gain steam, as the economy continued in one of the largest runs of growth in history from one of the biggest recessions housing prices were naturally rising and so the very same people who said vacation rentals were reducing the price of their homes now started crying that vacation rentals caused home prices to increase and become unaffordable. This argument has gained a lot of traction and with no evidence to support it, we’ve even seen some vacation rental proponents agree to the premise of the argument. Well, I’m here to tell you that vacation rentals don’t meaningfully increase housing prices and anyone who says they do just hasn’t done their research. Here are some of the main arguments against this fallacious argument:
- In the vast majority of cities where vacation rentals are popular there’s not really much new land for development and even where there is only one building can be built in the place of a single building. What I mean by that is that if a piece of property is available for development a developer can turn that property into an apartment complex, a hotel, office, etc. So when any developer decided to develop a building they look at where the demand is and where they can get the est ROI. If we suppose for a second that if we banned vacation rentals that everyone who visited a city and would have stayed in a vacation rental instead stayed in a hotel (this has generally been proven to be an incorrect assumption and there is actually very little overlap between vacation rental customers and hotel customers, but let’s suppose it just for the sake of argument) then banning vacation rentals would cause a massive rise in demand for hotels. Hotel rates would skyrocket and occupancy rates at hotels would drive even higher from their all time highs. So developers in turn would see the massive need for hotels and instead of building new apartment buildings or condos for residents, they would instead use their property to build hotels which would now be extremely profitable. The result would be a net zero gain in long-term residential units were vacation rentals to be banned.
- In cities like New York and San Francisco, which actually passed de facto vacation rental bans (where they limited the number of nights annually a unit could be rented short term or the conditions under which a unit could be rented short term such that vacation rentals were essentially banned) subsequent to banning vacation rentals home and rent prices in both cities rose dramatically sending both to all time highs. Those cities still rank amongst the most expensive cities to live in terms of housing affordability in the US even today. So if banning vacation rentals should bring down home prices, why hasn’t that happened anywhere where vacation rentals have been banned?
- Many people who own vacation rentals, especially in coastal and touristy areas, own them as second homes which they themselves use and often plan on retiring to. A significant number of these units would never go back on the market and would instead just sit empty year round only being used a few times during the year. Take for example the Hamptons, specifically East Hampton. The Hamptons is one of the most desirable vacation spots on the east coast and according to the 2010 US Census (before AirBnb was a thing) there were 21,038 housing units in East Hampton with 12,628 of them vacant! More than 50% of the housing units in this desirable tourist destination sat empty most of the year so that their owners could visit this beach mecca just a few times annually. Short term rentals encourage more efficient use of property allowing those owners to fill their space when they’re not there.
- In the only credible study to date on this issue, UCLA, USC, and the National Bureau of Economic Research found that a 1% increase in AirBnb listings correlated to a .018% increase in rents. (https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3006832) Now, as we all know correlation isn’t causation and it could very well be that there just tended to be an increase of AirBnbs in neighborhoods where housing prices were going up because those areas were just more desirable. But if we suppose that causation is the cause and the converse would be true as well (again, this is a supposition because this study didn’t prove causation) then eliminating 100% of vacation rentals would decrease rent a mere 1.8%. Not exactly enough to have any real impact on housing affordability in cities where a one bedroom can run in the multiple thousands a month.
- The housing crisis put plainly and simply is driven by supply and demand. When enough units weren’t developed prices went up. Here’s an article about the crisis in San Diego (http://www.sandiegouniontribune.com/news/politics/sd-me-housing-plan-20180627-story.html) which shows how the shortfall was in development, not vacation rentals. You can find similar articles for almost every city where a housing crisis exists.
Housing affordability is a real crisis in many cities, but we do a disservice to the people affected by it when we pretend like banning vacation rentals will give them any relief because the two quite simply have no meaningful relationship. So the next time someone cites affordable housing as a reason why vacation rentals should be banned, you should do them a favor and educate them on the facts.