Six Ways That Short-Term Vacation Rentals Are Impacting Communities

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Short-term vacation rentals have created a good deal of controversy since the start of their existence about ten years ago and have been growing at an incredible speed ever since. Short-term vacation rentals are flying under the radar less and less, but there are a variety of factors to consider when developing an ordinance or updating existing regulations.  Here’s six of the key ways short-term vacation rentals are impacting communities.

1.   Positive ECONOMIC IMPACT

Short-term vacation rentals can bring a positive economic impact to a city or county in several ways. For example, they can provide a city with an additional income through tax revenues.  At the same time short-term vacation rental guests can benefit the community as a whole in terms of economic benefit because guests will spend their money in other visitor related amenities such as restaurants, bars and museums. Research in San Diego showed that $86.4 million was spent on such activities by visitors staying in short-term vacation rentals. The total economic impact in San Diego has been estimated at $285 million.  Additionally it can help local residents make ends meet or enable young families to go on a holiday while retirees stay in their home.

 

2.  Less Long-Term Rentals Available

The scale on which short-term vacation rentals are operating is ever growing and not only designated to large urban areas anymore. Currently there are over 100 unique short-term vacation rentals in more than 1500 cities and counties in the United States.

Since short-term vacation rentals are mainly located in residential areas, by renting a short-term vacation accommodation, tourists are using up space that otherwise might be used for living. In some places this is resulting in in a decrease of long-term housing availability. This effect is especially strong in large cities that are already facing problems with affordable housing like New York and San Francisco. Stories about tenants being evicted from their apartment, only later finding out they were making way for permanent short-term vacation rentals, are starting to pop up in places all over the United States. In Los Angeles several tenants have been suing their landlords and Airbnb for evicting them out of apartments and in Burnaby, Canada, three students were forced to leave in order for the landlord to run a full-time Airbnb rental business.

The scarcity this creates could eventually contribute to increasing housing and rental prices. For Los Angeles, a report on the relation between short-term rentals and LA’s affordable housing crisis has shown that the density of Airbnb listings overlaps with higher rental prices and lower rental vacancy. In New York short-term vacation rentals reduced the available housing stock with at least 10%. Besides these major cities, many smaller coastal cities and mid-size cities like Long Beach City and Madison are starting to express concerns about this issue as well.

 

3.  Neighborhood changes

Living next door to a short-term vacation rental can range from mildly concerning to completely life altering. Visitors usually rent the accommodation only for a couple of days, thus neighbors see new people coming and going every few days, especially when the density of short-term vacation rentals in the area is high. Related complaints about trash, parking issues and noise disturbance continue to worry local governments. A recent article about Los Angeles exemplifies this with stories about short-term vacation rentals being turned into party houses with nightmarish results for neighbors.

At the same time local residents worry the penetration of short-term vacation rentals in their neighborhood will change the character and transform the quality of life of the area. This has already led to heavy protests in the past in big cities like New York and San Francisco. Smaller cities such as Santa Monica are also dealing with such complaints. This leaves local governments with the incredibly difficult task of finding ways to regulate short-term vacation rentals in such a way that they protect neighborhoods while balancing a home-owners property rights.  

 

4. IncreaseD Tourism Activity

For some cities, Airbnb and other short-term vacation rental platforms are a way to boost the local tourism sector. Because of the price advantage of those rentals, less popular tourist destinations become more attractive with the arrival of short-term vacation rentals. The City of Brevard recently announced that it is going to approve short-term vacation rentals in the hope to attract tourists as they currently lack a good amount of hotels. And even cities that already have an established tourist industry are benefiting from short-term vacation rentals. A study on the effects of the sharing economy in Idaho found a direct correlation between short-term rentals and job creation in the tourism sector. In San Diego short-term vacation rentals are helping to support 1,842 jobs.

 

5. Unfair Playing Field for Traditional Lodging Partners

On the other side of the argument, short-term vacation rentals are considered disruptive for the traditional lodging industry. The hotel industry claims that the business models of short-term vacation rental platforms offer unfair economic advantages in two distinct ways. First of all, short term vacation rentals have do not have to pay for staff and aren't regulated like hotels which increases costs substantially. This allows short-term rentals to offer lower rates compared to traditional tourist accommodations. A second factor is that short-term vacation rentals are usually not charged with tourist taxes which is further deepening the unequal competition. A report from the American Hotel & Lodging Association shows that in cities like Portland, Airbnb-style rentals have increased vastly both in revenue and the amount of hosts with multiple units. Because short-term vacation rentals are not treated as similar businesses this could form a threat to the hotel industry. A study from scholars at Boston University and the University of Southern California showed that mainly lower-end hotels in Texas are already suffering from the increase in short-term vacation rental listings.


6. Missed TAX Revenues

Since short-term vacation rentals are not taxed in many cities, local governments are missing out on millions of dollars. When allowing but regulating short-term vacation rentals, local governments can increase their revenue through taxes, permits and business licenses.  For example, Mill Valley, a small California community and a Host Compliance customer requires hosts to purchase a business license and pay a registration fee. As a result the city has collected nearly $96,000 in taxes since the program began, in addition to registration fees. On the other side, it’s estimated that Boston is currently missing out $4.5 million in tax revenues.

 

Conclusion

It’s important to know how short-term vacation rentals are impacting your community. Even though this new accommodation brings substantial economic benefits to communities, when unregulated, Airbnb-style rentals can put pressure on communities and the accommodation industry. With the immense growth of short-term vacation rentals in every community, ignoring the impact, whether positive or negative, is not an option anymore. Local governments need to work towards effective and enforceable regulations to protect communities, neighborhood character and housing availability.s.

If you are looking for ways to effectively identify and regulate short-term vacation rentals in your community, Host Compliance offers a comprehensive suite of solutions used by local governments across North America to solve their short-term vacation rental problems. You can learn about our solutions and request a complimentary short-term rentals assessment here.

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