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Do short-term rentals raise rents? Plus, we've got the latest rental numbers for you.
Summer brings higher rents, especially for new studios. And we’re looking at the impact of short-term rentals. Many of you have reached out to let us know our data is helping you and your organizations advocate for affordable housing. Well, that warms our robotic data-crunching hearts. If you find this work useful, please consider dropping us a donation here.
The total average asking rent in Hampton Roads came in at $1,769 / month. The breakdown by unit type:
Studio: $1,430 / month
1 bedroom: $1,521 / month
2 bedrooms: $1,756 / month
3 bedrooms: $2,199 / month
4+ bedrooms: $2,664 / month.
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CityWork director, Alex Fella, was recently featured in a new report from WHRO on Hampton’s proposed short-term rental laws. If you haven’t read Nick McNamara’s excellent piece yet, you should do so here. In short, Hampton is dividing the city into 51 zones and capping the amount of short-term rentals (STRs) at 1% of any given zone’s housing stock. Also, no short-term rentals are allowed to be within 500 feet of each other.
Though anxieties about rents lagged behind residents’ fears of rude vacationers, it’s worth asking what impact this bill might have on Hampton rents?
Do Short-Term Rentals Increase Rent?
Globally, nationally, and in cities across America, a wide body of research shows an increase in STR listings does lead to a decrease in available rental housing. What is harder to tease out is the effect they have on rent. A nation-wide study found a 10% increase in Airbnb listings lead to a 0.42% increase in rents. Another study at the zip code level found 1% increase in Airbnb listings lead to a 0.018% increase in rents. A more recent study out of New York found Airbnbs contributed 1% of New York’s 32% aggregate rent growth in the last decade.
Part of the reason we don’t see a clear impact on higher rents is because STRs tend to concentrate in neighborhoods that already have higher rents. What rent increases we do see from Airbnbs tend to happen at the already-expensive end of the rent spectrum.
Data from Wheelhouse finds around 350 STRs in Hampton. BnBVestor shows 469 STRs in Hampton. While data from AirDNA lists 729 STRs in Hampton. We can’t base the amount of STRs in Hampton on the city’s permitting data, because many cities have STRs operating under the table. Additionally, Hampton’s GIS department lists 321 “suspected” short-term rentals.For the sake of argument, let’s take the average and say there’s 516 STRs in Hampton. That’s around 0.8% of Hampton’s total housing stock. The majority of Hampton’s STRs are concentrated in the Buckroe Beach and Phoebus neighborhoods.Let’s zoom in on those two neighborhoods. Buckroe and Phoebus share two zip codes: 23664 and 23663. Combined they have a total of 10,636 housing units. Public data lists 218 STRs across these two zip codes. So, 2% of housing stock in Buckroe and Phoebus are short-term rentals.Given that Buckroe and Phoebus already had some of Hampton’s highest rents, it’s likely that any rental increases as a result of short-term rentals in these neighborhoods are: One, already baked into current rental prices. And two, probably tinkering with the high-end of the rent spectrum.Or maybe not. Only around 20 of those 218 STRs are apartments. In other words, short-term rentals in Buckroe and Phoebus have probably not significantly diminished the supply of multifamily housing. And it’s unlikely that Hampton’s new rules will impact the supply of apartments or their rents in the near future.
The 1% cap on STRs in each zone is, to put it mildly, a head scratcher. If implemented, it seems some STRs will have to shut their doors in popular tourist destinations like Buckroe. Or move underground into the booming industry of bootlegged rentals. One shudders at the thought of even more unsupervised, unscrupulous, landlords. But there’s a better a way!
One effective policy implemented in other cities involves capping the number of nights an STR can be rented, rather than limiting the number of rentals in a specific area. For example, London limits short-term rentals to 90 days a year. Amsterdam has a 30-day limit. This allows travelers to book during peak travel seasons (i.e. the summer), thus giving occasional hosts extra income, without incentivizing investors to convert housing into short-term rentals
Doing something similar in Hampton would allow STRs, especially those at the beach, to benefit from seasonal tourism industry while ensuring the entire neighborhood is not taken over by out-of-town investors.
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In yet another sign of the growing madness of America’s rental economy, a Sedona, Arizona, city council voted to establish the Safe Place to Park program. The grant-funded initiative sets aside a parking lot for 40 Sedona workers to sleep, shower, and live during the evenings. Sedona’s mayor says it’s not an answer to the housing problem, but “it’s one of many answers.” The logic -- which is rather like making murder legal after a bump in serial killers – sets the new standard for bare minimum.
The grant funding the program is for $875,000. There are spots for 40 cars. Let’s imagine it’s one worker per car. If Sedona just gave each worker the money that’s an extra $21,875 a year. Or $1,822 a month. The median rent in Sedona is $1,223 a month. There would be money left over if Sedona just gave housing to 40 workers rather than commandeering a parking lot only open from 10:00 PM to 8:00 AM.
In the words of Robert Lowell, "the light at the end of the tunnel is just the light of an oncoming train.”
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