||| FROM HAWAII TRIBUNE HERALD |||
Two years ago, YouTube star Luan Palomera paid $1.5 million for a chic vacation home in Palm Springs.
Today, he’d be lucky to get $1 million for it.
As L.A. continues its crackdown on Airbnb, city officials can turn toward the desert for an example — perhaps a cautionary tale — of the potential side effects of curbing the short-term rental market.
In Palm Springs, a cap on short-term rentals in specific high-demand neighborhoods has all but frozen the market in those communities.
Sales are down. Homes languish on the market for months. And investors who bought up Palm Springs properties during the COVID-19 pandemic are facing hundreds of thousands of dollars in losses.
Airbnb has changed the face of the rental market since it launched in 2008, making it much easier for homeowners to rent out spare rooms or entire houses. But in the years since, cities have started to notice the downside of so much housing stock turning into short-term rentals.
Activists argue Airbnbs remove affordable housing from the market. Residents complain that the influx of tourists leads to loud, late-night parties and generally takes away from a place’s neighborly ambience. Disputes between hosts and renters lead to movie-level drama and months-long courtroom clashes.
As a result, some cities are limiting short-term rentals, and each one seemingly has a different strategy. New York City allows rentals only if the host remains present in the unit for the entire stay. L.A. adopted the Home Sharing Ordinance, a regulatory framework that requires a license that allows hosts to use only their primary residence — where they live at least six months of the year — to rent out for a maximum of 120 days per calendar year.
Let’s try that here. The housing prices on the islands are absurd, driven up by speculative investors.
My heart bleeds! Is this supposed to suggest that Air BnB improves the housing economy? Note that this article is about Palm Springs, but was published in Hawaii, which is desperately trying to regulate vacation rentals. Must have been written by the real estate industry. I don’t think anybody’s opposed to local folks renting out a room in their house. Buying a house on spec to use as an absentee vacation rental investment is something else entirely. Locals know that VRs need regulation. Airbnb go home and give back our housing!
Makes total sense. Regulate air b and b out of business and my ridiculous property taxes will “free fall”.
Brian, you state, “I don’t think anybody’s opposed to local folks renting out a room in their house. Buying a house on spec to use as an absentee vacation rental investment is something else entirely.”
As a hypothetical, I would agree, but what evidence do you have for the actual existence of these evilly, evil “spec” buyers? As you well know, buying a property on SPECULATION is the practice of purchasing a property with the intention of selling it later at a profit. To a large degree, that describes every owner of real estate. No one buys property expecting the value to go down. Do you hope your own home appreciates in value during your period of ownership? I would be shocked if you did not. My point is that purchasing property with the hope that it increases in value is an integral part of the real estate marketplace and is literally the main driver of commercial real estate. The implication that there are waves of buyers coming here to flip houses on speculation seems absurd to me; I literally have never had a single off-island client looking for a speculative house purchase. Not one in 20+ years.
What I actually have seen are younger people buying a vacation home/future retirement home for themselves and renting it out on Airbnb to defray the considerable expense of purchasing and owning real estate in SJC. The only difference between this group of people and the previous generation of vacation home buyers is this cohort cannot afford to own both a house where they live/work AND a vacation home unless they generate income from the vacation home. The era of generous defined benefit retirement plans is long dead; most working people hoping to retire on Orcas someday MUST make their vacation home “work” for them or they simply cannot afford to buy here.
The fact is YOU MOVED HERE TOO and brought retirement income and savings earned elsewhere into the real estate marketplace of Orcas Island, driving prices up and out of reach of local working people. Castigating the next generation of wannabe islanders for the very same behavior you yourself have participated in sounds a whole lot like, “Pull up the drawbridge behind me…”
Ken, you and I agree on many things, but this is clearly not one of them. I disagree with everything you say here; and you clearly have a personal interest at stake. But rather than extending the whole debate once again in the public marketplace, I’ll message you separately. I’ll just make two points: A home is an investment, yes; but buying a vacation home here and expecting to pay the mortgage via vacation rentals is most definitely speculation, and an unrealistic expectation which, IMO, should not be rewarded. 36% of homes in the county are considered “empty,” which makes our market essentially a house of cards. On a personal level, the cabin we used when we bought our place 20 years ago, and until we built our main house (standing of our tip-toes), is now a year round rental to a contributing member of our community. ‘Nuff said.
Brian – I intended no personal insult, I’m sorry you appear to have taken my comment that way.
“A home is an investment, yes; but buying a vacation home here and expecting to pay the mortgage via vacation rentals is most definitely speculation, and an unrealistic expectation which, IMO, should not be rewarded.” – BW
The above statement is simply wrong. Speculation is the purchase of something with the hope of selling it at a profit at some future date. Real estate speculation is typically associated with land purchases and typically associated with doing little or nothing to improve the subject property. It is also an American tradition since before the Revolution. But I ask you again: Show me the evidence of residential “spec” buyers on Orcas, because I have not seen a single one. Buying a vacation home that will become one’s retirement home is a classic way for middle class families to plan for their golden years. Tell me exactly why that is any different if the vacation home is subsequently rented out nightly or is exclusively used by family and friends.
Real estate markets are driven by DEMAND. Orcas is and has always been, a desirable place to live, especially for retirees like yourself and most of our friends. If someone is looking for a “spec” property, there are FAR more lucrative locations than Orcas Island. Only a fool would buy a vacation rental house for speculative purposes here. VR incomes are nowhere near enough to pay a mortgage on the kinds of properties that are listed on airbnb. Nor were those properties ever going to be “affordable housing”. You may have sufficient retirement income to afford to subsidize the rent for a “contributing member of our community” but most people do not have that luxury.
To claim that “spec” buyers are driving up real estate values without any credible evidence is disingenuous and ignores the REAL driver of island real estate demand, which is retirees who have fallen in love with Orcas and want to spend their golden years here. And what is so wrong with that?
Affordable housing is an issue nationwide, not just here. Blaming VRs for a lack of cheap rental properties is simply misguided scapegoating. The real reason there are no rentals being built is property values are high. This is primarily due to demand, zoning and construction costs. Retirees moving here drive up values, voting to preserve open space (which I also support) also raises property values, cramming all development into UGAs increases prices for the remaining real estate and insane building code requirements simply puts a cherry on the top of the affordability problem.
Perhaps SJC should tax out-of-county income and put the revenue towards building subsidized rental buildings? MY retirement income comes from a rental property on Orcas and I pay outrageous taxes to conduct my business in this county. Why should pensions be exempt from taxation for affordable housing when the recipients are directly responsible for stratospheric property values?