20 Comments
Feb 18, 2022Liked by Dan DeWitt

Important piece. One of the issues we are struggling with here, and in many cities across the nation, is that the lack of available housing isn't just a classic affordable housing issue. The red-hot market for investment properties means that investors with available cash can move much more quickly than folks looking to purchase for year-round living. Many properties that can only be generously labeled as fixer-uppers sell sight unseen and are then lightly rehabbed and flipped into the STR market. What this means is that there is little housing available for renters OR buyers who wish to make a life here. I have had conversations with realtors as well, and they have said, quietly, that they could sell houses to individuals and families who wish to live here full time if those buyers could move quickly enough to compete with the real estate investors who see a bargain for the taking. The math is important here. The last time I checked, the average nightly STR rate was around $289, but for easier math let's make that $250. At an occupancy rate of 85% that generates a gross monthly income of roughly $6400 ($250x30x.85). Let's say that costs to run an STR are 50%, including mortgage costs (they aren't, but to head off the naysayers let's go with that), then the STRs owner clears $3200. 2-bedroom 2 bath long term rentals seem to be renting between $1650 up to $1800 gross right now. So, the math seems to show that STRs will always out compete market rate long term rentals, by a very large margin. I know of STRs that rent for $300/night. That's why investors with cash can snap up anything from marginal 2/1 fixer uppers all the way up to the new $450,00 houses, flip them into STRs, and make a nice net profit. If you use the $289/night at 85% occupancy ($7400/mo.) and a more nuanced monthly expense cost ($2400 mortgage on $450,000 + $1000 cleaning and building maintenance) then the investors net could be as high as $4000. With those kinds of returns affordability is unavailable to someone who wishes to live here across the income spectrum. Do we have a classic affordability crisis - yes. Ask anyone who is trying to hire someone to work in the service economy. But we also have an affordability crisis up to 130% AMI, probably even higher. The math on all this matters, a lot. The decision we are facing is whether we, Brevard, want to be a community where people across the income spectrum can live full-time and accommodate, within reason, a largely tourism-based economy that still allows for small business entrepreneurs, artists, crafts persons, teachers, public safety and service economy workers to build a life here. Or will we become an ungated vacation rental real estate development.

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Good points about the impressive potential income of well-equipped, properly managed and favorably located short term vacation rentals. I do have a couple of questions, Do monthly tenants not pay for the utilities they are using in Brevard? (so additional costs to the short term vacation owner when comparing with the long term rental income) Is the quoted 85% occupancy rate on an annual basis (that'd be 310 nightly rentals per year) and at those peak rates? Really? The period from 2019 through 2022 may be anomalous . What if rate of demand for short term vacation rentals reverts to more of a historical mean? Long term permanent housing is a consistent necessity rather than a discretionary expense. What if economic conditions dampen or curtail discretionary spending? What are the annualized expenses for furnishing and equipment replacement which aren't a comparable expense for long term rentals which are usually unfurnished. Is anyone getting appropriate liability riders on their homeowner's policies? A slip and a fall away from financial disaster! In most vacation rental markets and probably the Brevard area market as well you might find that nightly rates for short term vacation rentals are much higher tit for tat or bedroom for bedroom than nightly rates for weekly vacation rentals and are often almost double those of weekly rentals on a nightly basis. A practical reason for this is the much higher costs for "turning over" the property several times during the week instead of just once or sometimes every 2 weeks for longer vacation stays. What happens if the demand for vacation rentals tilts back more toward lower rated weekly rentals that are often more affordable on a 7 night basis? How can anyone know whether those blocked off dates were actually rented? Speaking of statistics does Airdna have access to actual Airbnb individual owner ledgers and statements? I'm not so sure that when we find out what a " normal" vacation rental market looks like in the future that there won't be a practical turn back to the dependability of longer term rentals for some who are currently giving the short term vacation rental market a go.

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Feb 23, 2022Liked by Dan DeWitt

Good article!

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Feb 20, 2022Liked by Dan DeWitt

Insightful as always, Dan. It would be interesting to know of the AirDNA map of STRs in and near downtown how many are "entire houses or entire apartments" vs. how many are "private or shared rooms" in an owner-occupied home. While the former certainly contributes to diminishing affordable housing, the later represents residents tapping opportunity from this trend.

On that point, entrepreneurial residents have a wide range of opportunities to start-up businesses around the STR market and family vacationers and wellness / outdoor enthusiast travelers' attraction to our region. My gut instinct is that most STR owners are not do-it-yourselfers, and they can not afford to let maintenance slip on their properties. They need professional plumbers, electricians, handymen and women, remodelers, builders, painters, hot tub repair and maintenance services, chimney sweepers, roofers, landscapers, interior designers, garage door services, locksmiths and home security installers, furniture retailers, pest control technicians, arborists, lawn services, snow plowers, private trash and recycling pickup. The list goes on. Our area is also ripe for cottage-industry startups catering to home rental tourism. Things like cleaning services, concierge services such as grocery shopping and delivery, hiking, biking and fishing guides, babysitting and car services are just a few that come to mind.

I'm not suggesting any of this solves the diminishing affordable housing issue (and I get it...we need places for people to live to provide these services), but with the trend does come new opportunity for lucrative businesses to start up and grow.

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But there really isn't all those service opportunities because of lack of affordable housing-- unless those people are pushed way out, with long commutes, maybe substandard housing.

It increases the divides between the Haves and Have Nots.

And what kind of COMMUNITY is a small town with so many STRs? Soon the ambiance that tourists came for will disappear.

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Dan's original story on the density of STRs in the city of Brevard was eye-opening for me. Gracie, we're in agreement that community requires year-round residents who put roots down. We also agree there is a lack of affordable housing.

My primary residence is in Tampa. Home prices are increasing here at a higher rate than almost anywhere else in the country. I have two full-time employees who commute to our office daily from 1 hour north (Hernando County) because of the cost of housing. And our employees are very well compensated.

I hate that I'm implying the answer is to move away from town. That's not my intent. But beyond the saturated STR neighborhoods in Brevard that are walking distance to downtown there are hundreds of rural STRs all over the region, many of which are second homes that would otherwise sit vacant a great deal of time if not offered as vacation rentals. A service provider catering to rural STRs is going to be coving some miles regardless of where they live. Entrepreneurs will find the opportunity.

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Are there really 100s in more rural areas? I don't recall.

While there may be entrepreneurs that will provide the services, they are still just making out a living, usually unable, like so many more now, to be able to afford their own home, in part because STR has skewed supply/demand where supply was already lacking, which has caused prices to skyrocket.

And I still think STR are destroying communities.

But I think there can be creative solutions, such as tax them at high enough rates to support building new low to middle income neighborhoods (although suitable land is still a problem in Brevard).

Or maybe offer a lesser tax if the rent with 6-9 month leases...that could help put some renters, while giving those with vacation homes some income. (I myself used to rent rooms for minimum 6 months in Raleigh--huge demand.)

Or maybe there are other solutions...build an Airbnb "neighborhood" then restrict the traditional neighborhoods. Or offer a switch--build new neighborhood, allow all those in old one to switch from old to new.

(They have done that in hazardous waste and other places ...in Cary, a neighborhood unhappy with a freeway and encroaching businesses banded together to sell entire neighborhood at once.

I think Raleigh approved "granny flats" recently. If those could be restricted to LTR leases, they could help homeowners with income and the LTR crises.

...Not saying these are feasible, but need to think outside the box, because there are many people who think STR are ruining the community that everyone came for to begin with, and I think those that are a full time part of that community should have a greater say in it than investors.

I know the Berkshires in MA are grappling with the same issues.

Has ANYONE done a comprehensive study of how communities around the country have dealt with (and possibly solved) this issue? Seems a good project for a college or university. Or NC League Municipalities.

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Feb 20, 2022Liked by Dan DeWitt

Well written on a topic much under discussion in our community.

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Appraise properties used for short term rentals at their investment value not as residential properties. Use the tax revenues to subsidize long term rental investors and make that investment more attractive.

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I like this idea!

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author

Right, Brady. There are shortages of rentals across all prices points, but one reason this story focused on affordable and workforce -- that's what numbers generated by Bowen report focused on.

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Not sure if this comment was meant for me but what is often missed in the discussion around housing cost and housing choice is that soley focusing on classic affordable housing misses the more complex issues around housing as a continuum for personal economic growth and wealth building. If there is worker housing created with no ladder up the housing continuum, then the worker would have to leap from a basic liveable wage to making over 130% AMI to afford to purchase a home or condo. In essence STRs are wiping out the ability of persons across the income continuum from accessing permanent housing. The elimination of permanent housing for second vacation-oriented homes and STRs and how that will radically change the character and culture of our city and our county is the bigger issue here. Focusing only on "affordable housing" is too narrow an approach in my opinion. A living, breathing city needs permanent housing choice across the continuum, with STRs and accessory dwelling units allowed to enhance the affordability of permanent residents, not to create a Truman Show town that looks like a vibrant small town but is in essence a horizontal hotel.

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It is so unfair and unfortunate that they want to do this, I’ve only been here in North Carolina for 9 years and dislike the way Transylvania county is turning out to be , people are having trouble finding affordable housing for rent now

We don’t need short term rentals and higher rates.

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I would burn my properties before I done long term rentals

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I would be curious to know what the average low income rental prices are.... I think that there may be a concern about renters not paying rent during the Covid 'crisis that may have possibly lead landlords to think twice about long term rentals....maybe this can also be looked at? I do see changes in our town that need addressed and some that have been addressed poorly ie. Dave Service station being closed down... I think that would be a great article to explore in the near future; part of Americana being phased out, thus taking the "home" out of "home town".

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Excellent article. These issues are not things those of us who rent short term think about.

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One thing for sure, the planners of brevard couldnt give a rip about the young adults who would like to stay and live here. It seems to be composed of tourists who are molding brevard into a tourist hot spot and a non resident business opportunity. In the meantime, the people who service these tourists wont be able to find a place to live in brevard. Maybe THEN it'll all break down and brevard economy collapse? Nothing is sustainable without the young generation. Everybody under 30 always have been and always will be the most important people on the planet. Those who deny that will have their communities die along with themselves

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Could Brevard increase short term housing taxes or surcharges to cover costs of providing land, infrastructure low and middle income neighborhoods, units? Say to 50% of nightly, weekly room rate? 25%? That would decrease the number quickly while raising funds.

Raleigh limits number of unrelated people in a house/unit; could concept be expanded to be not just how many at one time, but over course of year?

Also, wouldn't this use fall under laws covering boarding houses (if still on books) or hotels, requiring sanitation and other requirements, inspections, etc? Would this be an avenue to pursue?

Has ANY tourist community solved this yet?

City council will have to show some balls, be ready to put the town before re-election interests to do something. (What we used to call integrity).

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author

Don't know, Gracie. You can reach out to members of the task force, including Aaron Baker. I do know state laws place a lot of restrictions on what cities and counties can do, though some have taken action.

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Affordable apartment projects should prohibit short term rentals. Neighborhoods and condos with homeowner associations can prohibit vacation rentals in their Rules and many do so because they don’t want to deal with transients coming and going.

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