Short-Term Rentals: A Vacation Perk or a Housing Problem?

Being able to rent an entire house instead of a small hotel room is awesome.  Myself along with friends and family are frequent users of services like Airbnb or Vrbo to find these places that are typically privately owned and available for rentals for as short as one night.  It is great to have a kitchen, living area, private bedrooms, and generally much more space and quality of accommodations at a price often similar to a hotel.  These types of short term rentals are available nearly everywhere and are easy to find.  The internet and widespread usage of technology has really enabled people offering these rentals and people looking for them to find each other and do business.  It really is like an Uber model but for housing and certainly has changed the historical way the lodging business has functioned.

Everything about having short term rentals sounds positive, and for the consumer looking for a variety of lodging options, better rates, and better value I think it is.  That being said there are unintended consequences and one of them is undoubtedly first time home buyers in Northern Wisconsin and the Upper Peninsula.  Our area is a frequently visited area by people of all walks of life from all over the country, especially in the summer months and winter months.  This is great and it helps the full time residents and businesses of our area survive.   All of us that live here year round need a place to live.  Rental options are few and far between and housing pricing has soared in the last 24 months.

Those that are looking for entry level or first time home buyers are the hardest hit.  With a significant supply of existing housing now involved in short term rentals, the availability of permanent housing is as low as ever.  New construction is very expensive and depending on who you talk to, may be 1 – 5 years out.  Gone are the days where a person with their first job and a little savings can go and find a $75,000 or $100,000 home that is both affordable and move-in ready.    One of the biggest culprits in this is short term rentals.  You can’t blame owners and investors for doing this.  They can rent a house for a long weekend or two a month and likely get the same amount they would command for a month’s rent to a long term renter.   Anything over that turns into a much better return on investment and profit for the owner.  Even in the slower months these places are making money for their owners.

It is impossible to fault a property owner or investor for this mindset but it does cause bigger problems on a more macro scale.  Many of our businesses hunger for employees and employees need places to live.  Even to get seasonal folks here requires they have a place to stay.  Housing may in fact be more of a challenge than labor itself in our area.  As the world evolves it’s never easy to predict unintended consequences with inevitable change.  With the amount of involvement and investment our government has in the housing industry in this country I find it very likely that increased regulation and concern from state and federal level is inevitable on this topic.    

For most of us, owning a home is the most significant way we accumulate wealth in our time on earth.   Making the path to initial homeownership and homeownership to all people attainable has been a focus of the government for years.  Economists, psychologists, & sociologists would agree that widespread homeownership is a benefit to all people.  That benefit is harder to attain, especially initially, by the widespread prevalence of short term rentals.  How this eventually plays out will be of particular interest to me.  It is widespread enough now where the bury the head in the sand approach won’t work any more.