Special Report: Are short-term rentals spurring island’s housing collapse?

||| FROM THE NANTUCKET INQUIRER AND MIRROR |||

The home at 2 Mayflower Circle, a small cul-de-sac off Evergreen Way near Nantucket Memorial Airport, has come to symbolize the worst fears about the effects of short-term rentals on the island.

Rachel Devine, who traces her lineage on Nantucket back at least four generations, obtained the property from her mother, who had gotten it from her father, Walter Glowacki, who developed the Cedar Crest subdivision that includes Mayflower Circle.

Yet, when Devine went through a difficult divorce, she said the court ordered the property to be sold. Heirloom, a company that runs high-end short-term vacation rentals on Nantucket and in several other markets around the country, bought it in December 2020 for $1.15 million.

“I know for a fact that other island families were interested in buying it, and I would have preferred it go to another island family, but it went to a short-term rental company,” Devine said.

Heirloom now advertises the home as a “luxury compound,” which rents for an average $5,871 per night in the summer. It features a pool, hot tub, main house, carriage house and guest cottage. It has 10 bedrooms, 17 beds, 7.5 bathrooms and space for 27 guests.

Is the transformation of 2 Mayflower Circle an outlier, or a sign of what’s happening on Nantucket? Is it a single real-estate transaction, or an indication that, if Nantucket continues to allow short-term rentals to operate without restriction, the island will ultimately lose its housing and turn into a giant de facto hotel?

The Big Question

The tradition of islanders renting to summer visitors is now entangled in a big question confronting the island: Is the long-time practice of renting out homes, given the accelerant of online platforms like Airbnb and VRBO, taking the cost of housing to levels so high that it’s changing life on this island?

“It’s ruining Nantucket,” said Meri Lepore, a school nurse who grew up on the island. “Nobody can afford to buy a house. The schools, the police department, the fire department, they can’t keep employees to take care of the town because nobody can afford to buy houses.”

A house built near her parents’ home, geared toward summer renting to large groups, sits vacant most of the year, she said.

“We have all these people who can’t find housing. Yet we have this huge, empty seven-bedroom house. It doesn’t make sense,” Lepore said.

Her husband, Matt Peel, who runs a shipping company on Nantucket, said one of his employees lost the home she had been renting for five years when the landlord converted it to a short-term rental. “Why would anybody want $3,500 a month when they can get $2,000 a week?” he asked.

On the flip side, there is a long tradition of renting to summer visitors as a way to make ends meet, as well as an essential ingredient in the island’s seasonal economy.

Robin Nydes, the co-founder of Nantucket Together, a local group formed last year to advocate for short-term rentals, said Nantucket is different from other vacation destinations because of the lack of hotels and resorts. The island banned new hotels in the 1980s, and only has 800 hotel rooms, compared to more than 2,200 short-term rentals.

“That’s been part of the secret sauce of Nantucket,” Nydes said. “It looks, feels and smells like a residential community, whereas it’s a tourist town. So many tourists are housed in single-family homes. That maintains the residential character. That’s been the way, going back to whaling times.”

Nydes, a semi-retired investment banker who lives in Santa Monica, Calif., spends up to six weeks each summer at his Nantucket home, “Pilgrim’s Bliss,” and otherwise rents it out for up to $50,000 a week.

Although he does not fit this profile, he said most operators of short-term rentals “are grandparents effectively fighting for their homes to remain affordable and the ability to bring their children and grandchildren here.”

Causing a Nuisance?

In addition to highly-contested opinions over how to balance the island’s traditional vacation rentals against its need for middle-class and affordable year-round housing, there is also the issue of complaints about short-term rentals causing a nuisance in the neighborhoods, largely around noise, trash, traffic and parking.

“I have six new neighbors every week,” said Andy Lowell, a contractor who grew up on Nantucket and lives at the end of Main Street, just outside the old historic district. Lowell said he’s often awakened by parties, the crashing of wine bottles into the trash, and the beeping of car doors opening and locking. “I have seen a certain level of disrespect.”

The complaints have even led to lawsuits, including one making its way through Massachusetts Land Court.

Andrew Vorce, the town’s planning director, said his staff analyzed noise complaints logged by the island’s police department. The data showed that of 557 calls related to noise between May 1 and Oct. 1, 2020, 66 were to addresses registered as short-term rentals, accounting for 11.8 percent of all violations. They found that 97.1 percent of short-term rentals were not the subject of a noise violation.

The town should not have to restrict short-term rentals simply to deal with noise violations, he said, when police can respond to those calls just as easily.

Lowell, however, suggests the police statistics don’t tell the full story. In addition to the noise, he complains that his street is often blocked by the cars of service workers constantly coming and going from the properties, and people draining swimming pools into town streets. Even if people acknowledge his complaints and rectify the situation, it starts all over again when the next renter moves in the next week, he said.

“I don’t want to be one of those pests who calls the police for minor incidents,” Lowell said. “They have bigger things to deal with than noise.”

Runaway Housing Costs

Whether short-term rentals can be tied to Nantucket’s affordable housing crunch is up for debate, but the crunch itself has been an accepted fact for years, as endemic to Nantucket as fog over the moors.

“The undeniable shortage of workforce housing stems from the island’s 2021 median home price of $2.7 million and the lack of land available for development,” according to the website for the nonprofit group Housing Nantucket. “Homeownership is prohibitive for 90 percent of year-round residents, and reasonably priced rentals have become nearly extinct.”

“You have to be a household with an income of $550,000 a year to afford the median home price. That’s out of reach for the vast majority of the year-round community,” town housing director Tucker Holland said.

Realtor Edward Sanford, a partner in Great Point Properties, said five houses on his street, Doc Ryder Drive, near Miacomet Golf Course, have sold in recent years to off-island owners, but they’re not short-term rentals. The owners are wealthy enough that they don’t feel the need to rent them out.

Sanford acknowledged that housing for community residents is being lost, but said it’s not because of short-term rentals. In some cases, it’s because the rich are getting richer, interest rates were low, and Nantucket is incredibly desirable, a victim of its own success, he said.

Julia Lindner, executive director of ACK•Now, a political group formed in 2019 that’s been leading the charge to establish strict regulations for short-term rentals, said that housing occupied by year-round residents has decreased on Nantucket, while housing the U.S. Census Bureau identifies as “vacant” – meaning it’s owned by someone off-island and not occupied year-round – grew.

Those vacant, off-island-owned units far outnumber the occupied units.

Data from the Census Bureau shows that overall housing units on Nantucket increased from 2010 to 2020, to 12,498, but the number of units that are occupied dropped to 3,709, or 30 percent. Meanwhile, the vacant units grew to 8,789, or 70 percent.

“We can’t tell simply from looking at that data which ones are seasonal homes, commercial STRs or someone’s third or fourth home that hardly gets used,” Lindner said. “But what we know is that the commercial short-term rental market has exploded.”

Nydes argued that, given the roughly 2,200 short-term rentals registered with the state, three-quarters of the vacant houses “are owned by part-time owners who don’t rent,” which he called “the key driver” in housing loss.

Corporate Rentals vs. Mom and Pop

AirDNA, a company that provides data on short-term rentals, said that the number of Nantucket properties rented on Airbnb and VRBO has actually dropped, from 1,295 in August 2019 to 908 in July 2022, a decline of 30 percent.

That data only looks at the platforms, and not at local real estate offices, which manage hundreds of local rentals. For instance, Great Point Properties has between 800 and 1,000 rentals, its partners say. William Raveis’ website has pages and pages of listings, ranging from a few hundred dollars a night to $65,000 per week.

Most of those renting on the platforms are individuals, according to AirDNA, with only a few companies or property managers, such as Raveis and Heirloom, appearing on the list of largest managers.

Corporate off-island ownership is one of the biggest concerns of people calling for restrictions on short-term rentals.

According to a report from WGBH, citing data from the Warren Group, “on Nantucket, business entities purchased 193 single-family homes last year, making up more than half of all such sales in the island community where the median price is more than $2.2 million.”

But those who defend the current situation note that many investors, particularly those with high net worth, form limited liability corporations, or LLCs, when buying real estate as a way of protecting their assets. It doesn’t necessarily mean they’re a corporation in the conventional sense.

“I advise every owner who’s going to rent their property, even if it’s only for two weeks in the summer, to put the property in an LLC for liability protection,” said Arthur Reade, a longtime attorney on Nantucket. Reade’s clients include the Copley Group, which owns 12 luxury rental properties on Nantucket.

The Biggest Owners

The Copley Group manages more than 1,000 apartments and 200,000 square feet of commercial space in greater Boston. Copley is owned by Norman Levenson, a longtime summer resident on Nantucket. Its “flagship property” at 32 Nonantum Ave. has six bedrooms, seven bathrooms, a heated pool, a view of the ocean, and rents for $4,500 a night and $38,000 a week in the summer.

Reade, Copley’s attorney, said the company has a year-round manager living on the island to respond to any complaint stemming from a property.

“A short-term renter like the Copley Group, with a year-round manager, is a better situation for the community than someone who leaves the island and has a succession of tenants in there for the whole summer, and doesn’t have anybody there to deal directly with problems,” Reade said.

Another growing off-island owner is Heirloom, which has nine properties for rent on Nantucket. According to Heirloom’s website, the company is owned by brothers Frank and Dan Glaser and has 300 high-end listings across the country. New Orleans City Business reported earlier this year that Heirloom was moving its headquarters from Boston to New Orleans.

Heirloom is apparently still buying on Nantucket. The sale of a home at 5 Surfside Road for $1.75 million in May listed the buyer as 5 Surfside Road LLC. According to the Secretary of the Commonwealth’s office, the partners in that LLC are Frank and Daniel Glaser, the owners of Heirloom.

Torn Between Two Worlds

Rachel Devine, who had to sell her family’s home at 2 Mayflower Circle, used to help her mother manage short-term rentals on the island. She sees how the rentals are needed, both by visitors to the island and by Nantucketers who need the income. She understands the tradition.

“Short-term rentals allow islanders to sustain their property,” Devine said. “You don’t go in as a first-time homebuyer at this point without knowing you’re going to rent out a basement or something.”

“They’re not bad, the short-term rentals. They are needed,” she said.

She waxed philosophical. “Like anything in life, it serves a purpose, but we find a way to corrupt it. It’s used and abused for greed.”

Devine was particularly miffed at what Heirloom has done to her family’s former home.

“The consortiums pack as many people in as they can,” she said. “They cater to party crowds who come here to have fun and who don’t care about people’s rights and noises in family neighborhoods. Heirloom purchasing 2 Mayflower Circle will change the dynamics out there. I know the neighbors are not overly excited about the situation.”

Next week, Part 2: The search for a political solution.

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