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The first red flags were all the unfamiliar cars parked along the streets, sometimes even blocking driveways. Then, there were loud parties. Then one day, an 18-wheeler truck parked along the street — even though everyone who lived in Alamosa, Colorado knew that wasn’t legal on residential streets.
Mayor Ty Coleman said it finally got to the point where the elected officials in the small town, which serves as a main commercial hub near the Great Sand Dunes National Park, had to somehow address the number of short-term vacation rentals doing brisk business in their neighborhoods.
“It’s a beautiful place, with several hundred thousand people visiting on an annual basis. We have hotels, but not a lot. It is attractive to have short-term rentals as an option,” he said.
But as the city staff began to investigate the issue, they discovered that a handful of investors had begun buying up the already tight inventory of homes. That made it hard for locals to buy or rent their own.
“When there is a challenge for people to find housing, there is a challenge for employers to find people to work,” he said. “We want to recruit doctors, professors, and law enforcement officers. These bright minds don’t come to our community if they can’t find housing.”
Balancing the desires of full-time residents with the need to drive tourism revenue is a challenge in many U.S. cities. If a community borders a desired destination but doesn’t have an adequate amount of hotel rooms, short-term rentals can be a good tool for making sure that revenue doesn’t go to a neighboring town. However, as the tight housing market makes adequate affordable homes increasingly sparse, short-term rental platforms like Airbnb, and Vrbo may present more challenges than benefits.
Nearly 25 years ago in 1995, Vrbo — short for “vacation rental by owner “— launched in the ski town of Breckenridge just a short drive from Alamosa.
The business model gave travelers access to kitchens and more privacy than in hotels and motels while providing a “side hustle” for people with extra bedrooms, a second home, or unused real estate. An owner of a single-family house or condominium could list their property on the website and perform the entire rental transaction online. Popularity grew as people got more comfortable with online businesses and mobile applications.
In 2006, Vrbo was acquired by HomeAway and two years later, Airbnb launched their company. According to a report from Airbnb analytics provider, AirDNA, there are 2.4 million vacation rental listings in the U.S.
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The growing numbers highlight a growing demand. Visitors to towns and cities appreciate a private, homey experience. Short-term vacation rentals are often less expensive than hotel rooms and provide a more localized and unique experience. Sometimes, hosts will provide free snacks, coffee, and advice that enhance the guest’s time in the community.
For cities, short-term rentals increase their lodging inventory which can keep travelers in a specific community. For example, according to AirDNA data, Davenport, Florida has 16,954 short-term rental units. This helps the community of just over 13,000 residents compete with larger and more hotel-heavy cities like Orlando and Kissimmee for revenue from travelers to local attractions such as Disney World and Universal Studios. Davenport is part of an emerging tourism market in Polk County, Florida that drives $1.5 billion in tourist spending, according to Visit Central Florida.
While the demand declined in 2020 during the pandemic, the industry was still expected to top $109 billion in 2022 and continue growing 11 percent by 2030, according to a report by Grand View Research.
While the growth of the short-term rental market has drawn visitors to certain communities, it has impacted longer-term housing in others. Mayor Coleman said the town of Alamosa recently completed a housing stock analysis to discover they were 400 housing units short of the need. With local developers building around 40 houses a year, the situation in Alamosa is dire.
As short-term rentals reduce the available stock of rental properties in many areas, prices also rise in those areas leaving some without homes. According to the Housing Affordability Index measured by the National Association of Realtors, homes today are even less affordable than during the height of the housing bubble.
For context, a Housing Affordability Index value of 100 means that families have exactly enough income to qualify for a mortgage. The higher the value, the more affordable homes are per median income. In 2021, the index was 148.2 and over the previous 10 years the average index was 164.5. In 2022, the index dropped to 103.8, the lowest number since 2006 (107.1.)
Due to the impact of short term rentals on local residents, several international cities with housing shortages, including New York City, Paris, and Vienna, have taken a harder stance through new policies meant to limit the number of properties that can become short-term rentals. Small cities and towns are following suit.
In Burlington, Vermont, elected officials enacted new laws restricting short-term rentals that aren’t located in the host’s primary residence. The owners must register the property with the local government and pay for permits.
Chattanooga City Councilwoman Marvene Noel, whose historic district is close to the downtown commercial center, said she and her Orchard Knob neighbors only saw negatives like loud parties, non-compliant parking, and a less secure community because of short-term rentals.
While such rentals weren’t permitted in residentially zoned districts, many went under the radar by applying for renovation permits as if they lived in the home. After much discussion, city officials last year passed new ordinances forbidding absentee owners and only permitting new rentals along commercial corridors.
“Everything has a place, and single-family dwellings are not the place,” Councilwoman Noel said. “If you live in your home and stay there, you can rent that out. Otherwise, the neighborhood has to deal with whatever mess, and we don’t benefit from it at all.”
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Councilwoman Noel said she started the conversation with her fellow elected officials after attending her local neighborhood meetings. The staff researched ordinances in other cities. Eventually, they voted on stronger rules with a more stringent permitting process that stopped her district from feeling like a “dumping ground.”
In Alamosa, Mayor Coleman said the first step to address the concerns was to schedule a series of work sessions open to the public. They wanted to hear perspectives from both sides — from local business owners supporting tourist desires to parents worried about having a revolving door of tourists around their children.
At the same time, they put a moratorium on new short-term rentals until city staff could analyze the market and research solutions. They mapped the city’s four main residential wards and determined that certain areas had a greater density of offerings.
“If we have too many in certain areas, we can minimize the growth in those areas,” he said. “We didn’t want to eliminate the opportunity to have short-term rentals.”
Instead of “zero tolerance” on Airbnb and other short-term rentals, Alamosa added several deterrents. Mayor Coleman said the permitting fee was increased until they saw the number of applications dropping. Prospective hosts also must check that their street or ward hasn’t exceeded the maximum allowed. If so, they’ll have to wait until a permit is vacated or try a different location.
“We don’t get any complaints anymore,” he said. “Some business owners came to the table and helped us come up with solutions. There was common ground, and that’s where we ended up. It seems to be working well and seems to be fair.”
Elected officials know they can’t wait for the real estate market to regulate or incomes to rise. Even as they wish to support tourism and provide solutions to meet the evolving desires of modern travelers, many council members are discovering that proactivity is the best way to handle this complex problem.
Do new rules settle the controversy over short-term vacation rentals? In some places, the answer is yes — at least for now.
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