Explosive Growth of Short-Term Rentals Transforms Neighborhoods, Disrupts Lives

Realtors and property owners say the boom in short-term rentals has little role in Transylvania's affordability crisis. But tenants are displaced and neighborhoods are inundated by Airbnbs.

A home on Brevard’s South Broad Street that is being converted to a short-term rental property, displacing three current tenants. Its owner says the income from visitors will allow him to make needed upgrades.

BREVARD — Katrina Irwin is the rare and lucky Transylvania County worker who pays a reasonable price for a decent apartment.

Her $750 monthly rent is affordable on the salary from her rewarding but not especially high-paying job as a manager of a nonprofit Christian camp. Though her unit is in a “pretty quirky,” 80-year-old house on South Broad Street, it’s roomy, close to downtown Brevard, and, after seven years of occupancy, “feels very much like home,” Irwin said.

But now her good fortune is coming to an end.

The home’s owner, Jackson County real estate broker Billy May, plans to offer its three apartments as short-term rentals and has told tenants they must be out by next month.

Unable to find a house or apartment she can afford, Irwin, 35, will move in with her grandparents. Though she is now resigned to what she hopes is a temporary arrangement, when she learned of May’s plans in December, “my initial feelings were disappointment, frustration and sadness,” she said. “I was hoping to live here until I could afford to buy a home.”

Stories like Irwin’s are being repeated again and again in Transylvania and Brevard, where the short-term rental business is booming.

As tourism has soared in Transylvania during the Covid-19 pandemic, an ever-growing share of visitors have stayed in the ever-growing inventory of short-term rentals — houses or apartments listed on Airbnb, Vrbo or by local real estate firms.

Occupancy tax collections from Airbnb more than doubled between fiscal year 2020 and 2021, when bed-tax income generated from all short-term rentals also surpassed that of motel rooms and other traditional accommodations for the first time.

A consultant hired by Transylvania County Tourism, meanwhile, counted 1,443 houses or apartments that were available for short-term rentals at some point during 2021 — a number that amounts to about 7 percent of the county’s total housing stock, according to the U.S. Census Bureau.

Transylvania has always been a haven for vacation homes and tourists, say Realtors and property owners, and many short-term rentals are high-end second homes that would neither be available to nor affordable for area workers.

Citing property rights, they also discouraged the city of Brevard from following the legally fraught path of other North Carolina cities that have sought to limit the expansion of short-term rental offerings.

But more units for visitors necessarily means fewer for workers, according to affordable housing advocates and residents, who say the short-term rental boom has helped push vacancy rates for long-term units to near zero and the costs of renting and buying far out of reach of a large swath of local residents.

And especially in Brevard — site of a disproportionate share of short-term rentals — once-lively working-class neighborhoods are now riddled with houses that alternately sit empty or host a series of strangers.

How many of these homes and how many of their transient occupants is too many? asked another of May’s tenants, Catherine Smith, who has been forced to find housing far from the city and far from the elderly mother she helps care for.

How soon before the peaceful, friendly town where she had hoped to spend the rest of her life becomes unrecognizable?

“Last summer, when I was driving through Brevard and it was packed and Covid was raging, I was thinking, ‘I hate this,’ ” said Smith, 60.

“It just felt like we were being invaded.”

Growing “Exponentially”

Chart provided by analytics firm AirDNA, showing dramatic growth of the county’s available short-term rentals in the past year.

Statistics from the Tourism authority’s consultant — vacation rental analysis firm AirDNA — provide a clear picture of the short-term rental boom, showing occupancy climbing or holding steady even as the number of units grows dramatically.

Vacation rentals often double as second homes and tend to go on and off the market, so the inventory of rentals available during any given month will never be as high as the year-round total cited above. And after taking the usual seasonal dip in December of 2019, the number of offerings countywide remained suppressed for more than a year, likely because out-of-town property owners took refuge from Covid in the mountains.

But starting a year ago, the numbers of open units in Transylvania have risen sharply, surpassing 1,000 for the first time in September and staying above that mark even during traditionally slow winter months, according AirDNA; 1060 units, for example, were available this January, 51 percent more than in January of 2019. They were also occupied 41 percent of the time, considerably more often than during the same month three years earlier. And in July 2021, occupancy rates for short-term units, most of which rent for between $100 and $500 per night, hit a three-year high of 85 percent.

Another measure of the industry’s growth: burgeoning revenue from the 5 percent tax the county collects on overnight stays.

Before the start of fiscal year 2021, Tourism forecast that the county would raise a total of about $1.2 million in these occupancy taxes from two main sources:  “traditional accommodations” such as hotel rooms, and short-term rentals, the homes and apartments listed on sites such as Airbnb.

Instead, the two categories generated a whopping total of $1.85 million in bed tax revenue — $607,000 of it just from Airbnb properties, compared to the previous record amount of $249,000 in fiscal year 2020.

Meanwhile, the approximately $1 million of this tax collected from all short-term rentals means they brought in about $20 million in total revenue.

Though the year-over-year gains in tax income are somewhat inflated by the dip in visitation to the county at the start of the pandemic in early 2020, said Tourism’s executive director, Clark Lovelace, “a disproportionate amount of that excess demand (in visitation) has been directed toward the short-term rental inventory we have here.”

“It was on an upward trend (before 2020). Throw in the pandemic and it’s grown exponentially.”

Squeezing out Residents?

This pool of vacation rentals is big enough that it dwarfs the number of apartments and houses needed to satisfy even Transylvania’s desperate demand for low-income and workforce units, according to a recent regional housing report written by Bowen National Research and commissioned by Dogwood Health Trust.

The report confirmed established markers of the affordable housing crisis in much of Western North Carolina, including sky-high home prices and a severe shortage of long-term rentals, including a vacancy rate of .2 percent in Transylvania, compared to the 4 and 6 percent found in a “healthy, well-balanced housing market.”

But the report also estimated a “housing gap,” the tally of rental houses and apartments needed to satisfy demand in each county. That number in Transylvania, 573, is less than half the total number of short-term units available to visitors in 2021.

The easy interpretation of this data — that vacation rentals have more than consumed units needed by permanent residents — is also inaccurate, said Isaac Allen, of White Squirrel Realty, who manages dozens of vacation rentals, many of them high-end mountain homes, and says “not a one” would otherwise be available or suitable for low-income or working residents.

Some of the owners he represents view their properties as investments designed to create long-term gains in value, not rental income.

“It’s almost like the house is an extension of their 401(k) plan,” he said. “But you can’t stay at your 401(k) and spend the weekend hiking.”

Others are prospective retirees who rent out homes to cover mortgage payments or maintenance costs until they can move to Transylvania full time. (Full disclosure: before relocating here in 2017, I was one of them.)

Both groups of owners occupy these homes at least occasionally, meaning they couldn’t serve as year-round residences. And almost all of these houses are too costly to address the need for modestly priced housing identified in the Bowen report.

“You can’t buy a $400,000 house and rent it for $1,200 a month,” Allen said. “The numbers don’t work.”

But if income from short-term rentals makes second homes available to more buyers, it means more of them are scooping up units that might have been bought or rented by permanent residents, said City Council member Aaron Baker, co-chair of the city’s Short-Term Rental Task Force.

They are also, almost certainly, helping to push home prices out of reach, he said.

“It’s simple supply-and-demand stuff.”

Fewer “Everyday Working Families”

Madeline Offen, a lawyer and a member of Brevard’s Short-Term Rental Task Force, outside her home on Maple Street

The impact of the short-term rental boom across the housing market is most obvious in Brevard, home to less than one quarter of the county’s population but 44 percent of its short-term rentals — many of them modest homes that until a few years ago were well within the reach of a wide range of residents.

Units near downtown that would be ideal for low-wage store clerks and restaurant servers with transportation challenges, are also prime destinations for visitors, said Hannah Morgan, a Task Force member who formerly worked in real estate.

“Airbnbs will always be more desirable if they are within walking distance of downtown,” she said.

The city’s Airbnb listings include the “Sweet Spot,” a 700-square foot cottage on South Johnson Street available for short-term rentals half the year at an average cost of $131 per night, according to AirDNA. It’s one of two dwellings on a property — which also includes a 1,200-square-foot house — that the county has assessed for tax purposes at $247,000.

It backs up against a three-bedroom home on South Rice Street that rents for an average of $187 per night, according to AirDNA. It is assessed at $319,000 and was purchased in 2003 for $100,000, country records show.

“Stay in downtown!” says its listing on Vrbo. “Park the car and enjoy Brevard on foot!”

Task Force member Madeline Offen pointed out similarly ordinary looking houses on nearby Maple Street, standing in front of her home and counting five neighboring properties listed on Airbnb or Vrbo.

The difference between this Maple and the “real family street” she remembers from growing up in Brevard is especially vivid at Halloween, when Maple’s string of illuminated and decorated homes was a major trick-or-treat destination.

“Halloween was a huge deal,” said Offen, 32. “But in the last few years, so many of the houses are dark on Halloween, and that’s sad. I brought my family back here because I wanted that sense of community and it doesn’t seem like there are a lot of everyday working families living here.”

More Money. More Work.

Climbing occupancy rates and the daily rental rates documented by AirDNA help explain this trend. Obviously, there’s money to be made.

 But it’s not easy money and it’s not a sure thing, said Allen and other Realtors and property owners.

Seasonal, sporadic short-term rental incomes don’t necessarily outstrip those earned from long-term rents, which are also rising rapidly. And higher turnover typically leads to more expense and work.

“I’m in my 60s and I don’t want to spend my Sundays dragging around a vacuum cleaner,” said Bill Carrington, part owner of a long-term rental property on South Broad.

Some owners of short-term rentals will likely come to a similar realization, Allen said, which makes him think the boom might not last.

“A lot of people don’t really do the math. They sort of jump into the short-term market as an impulse, like buying a red sports car when they turn 50,” Allen said.

“Ultimately, in a year or two, they look back and that and go, ‘Gosh, I’ve been paying all these utilities, and I’m cutting the grass and I bought all this furniture, and I’m no better off than I was with that person in there paying me on a regular basis.’ ”

Life Changes

Catherine Smith in the South Broad Street apartment she is leaving because the owner decided to convert it to a short-term rental

Billy May says he might end up being one of them.

He admits he hasn’t carefully analyzed potential profits from short-term rentals in the house on South Broad, partly because his decision to convert its use is about more than making money.

The property, which he bought in 2017 for $284,000, includes a small wood-framed cottage behind the main brick house where he and his then-wife envisioned staying on weekend visits.

That plan ended when she died 18 months ago, which also got him thinking about shifting the focus of a career he built on brokering land deals and owning long-term rentals, he said.

He expects vacation rentals will earn him enough money to carry out the creative work of upgrading the main house, which “needs some love,” he said. He plans to “piggyback” on the full-time cleaning and maintenance staff of a friend’s larger vacation-rental destination in Pisgah Forest.

“Financially, I can take this risk to see if I enjoy it,” he said. “If it’s a pain in the ass, I go back.”

But May’s casual if understandable decision, his tenants say, is creating big changes in their lives and contributing to bigger changes in the community.

Smith is a digital marketer who works remotely and has spent most of her life in major cities. But she has longstanding ties to Brevard, attending and working at nearby camps when she was young, and regularly visiting her mother, who has lived here since the 1990s.

After her mother was widowed in 2018, Smith moved back to help care for her. Smith is lucky, she said earlier this month, sitting in her apartment surrounded by boxes filled with belongings in preparation for her move to a house outside of Sylva.

May’s decision prompted her and her longtime boyfriend to move in together, which they had previously discussed, and they were able to find a home they can afford, she said.

But she will have to leave Brevard, which she has always loved, she said. And the drive to visit her 85-year-old mother in College Walk will grow from seven minutes to 90.

“”That was the main reason I moved here, to be close to her,” Smith said, “so it feels like a real loss.”

Both she and Irwin, who has spent most of her life in Brevard, also say the city feels less friendly and familiar than it once did. And to whatever degree short-term rentals are squeezing out workers in signature Transylvania industries such as summer camps, Irwin said, the squeeze is real.

Four other permanent employees of her camp, the name of which she asked to be withheld, “are looking for housing and are unable to find it,” she said earlier this month.

“We regularly have to house employees at the camp just to allow them to take positions . . . It’s a very big issue that we encounter all the time.”

What Should the City Do? What Can It Do?

AirDNA map of short-term rentals in and near downtown Brevard

Such concerns prompted the City Council to create the Task Force last year. At this point they are gathering information rather than considering restrictions on short-term rentals.

“We have to have all our ducks in a row and point to data that justifies whatever recommendation we make,” Baker said.

That approach is based partly on the advice of City Attorney Mack McKeller, who in October warned the City Council to tread carefully when considering zoning laws that would limit future short-term rentals. And in a recent interview, he cited language in a state statute forbidding local ordinances that “require any owner or manager of a rental property to obtain any permit or permission” covering the terms of lease from a local government.

Backed by property-rights advocates, even firmer state prohibitions on local controls were included in two bills introduced by state representatives this year. And though both ultimately died, it's widely expected that similar legislation will be proposed in the future.

But several North Carolina cities, including Asheville, have passed laws that restrict the creation of new short-term rentals — typically defined as open to stays of less than a month — in residential zones. Chapel Hill did it just last year.

These rules can be difficult to enforce and can encourage undocumented rentals, according to critics, and in 2020 a judge issued a ruling — now being appealed — that struck down a short-term rental ordinance in Wilmington.

But the law in Wilmington required owners to register short-term rentals and imposed rules on existing Airbnbs, according to a blog post written by Rebecca Badgett, a local government legal educator at the University of North Carolina’s School of Government.

State law, on the other hand, offers more support for the less ambitious aim of limiting new short-term rentals in specified zoning districts. 

“What we’re saying is that you can have a zoning permit that is not a rental registry,” she said in an interview. “You wouldn’t be able to require operators to register or fill out any paperwork with the city. But that doesn’t mean you can’t adopt a zoning ordinance and say no overnight lodging for periods less than 28 days.”

Offen, a lawyer for Pisgah Legal Aid, says she has nothing against owners earning money on short-term rentals. She also said the Task Force needs to nail down the connection between the growth in this market and the shrinking options available to both workers and the low-income residents she represents.

But the Task Force should gather this information with an eye on exploring restrictions.

“From my perspective, some control or regulation or some small step could be enacted to temper the short-term rental situation in Brevard,” she said.

“I think it could have a benefit and would have a benefit.”

Email: brevardnewsbeat@gmail.com