David Malcolm is a real estate professional and a philanthropist. He is on the San Diego Rescue Mission’s Board of Trustees and previously served on the board of St. Vincent de Paul for 34 years.
Short-term (vacation) rentals (STRs) are an innovation. Since VRBO and Airbnb came on the scene, this is a new sub-sector of the lodging industry, just as Uber and Lyft were a new sub-sector for the transportation industry.
But, at least for STRs, there is a downside.
Unintended consequences often accompany innovation, mostly during early adoption. STRs rely on existing homes and apartments. The more there are, the less housing there is for residential. As a result, rental prices can soar, sometimes pushing residents out of an area.
My concern, because homelessness is one of our greatest crises and something I have been personally involved in addressing for decades, is that exacerbates the problem. Less stock and higher prices and/or rents are only going to cause more people to become homeless, especially if they have an unexpected financial setback and are already living on the edge.
Let’s look at how this is turning thing upside down, and what might be done about it.
Knee-Jerk Reactions Causing Chaos
With STRs, governments have allowed market forces to reduce inventory for housing, but that came at a price. As more homes were offered up as STRs, they impacted neighborhoods, sometimes becoming party centers. Visitors don’t always act like they live there with consideration for neighbors and neighborhoods. But STRs make a lot of money for a lot of people.
Among the knee-jerk reactions when things started getting a little out of hand were regulatory “experiments,” which are still ongoing. Some regulations cap the number of STRs allowed in a city. Others set conditions about length of rentals, restrictions on loud parties and other obnoxious behaviors, and even looking at visitor taxes similar to what hotels charge.
The city of Del Mar, CA capped STRs in the City at a total of 129. And on Nov. 5, Del Mar voters overwhelmingly approved a 13.5 percent transient occupancy tax (what hotels pay) on STRs, expected to bring the City $775,000 annually.
Barcelona, Spain went even further by planning to ban all STRs for tourists because of out-of-control increases in rental rates for residents.
Online maps of STRs in San Diego have stirred arguments linking the proliferation of STRs to the housing crisis.
Is there any basis for that? Well, some local tenants have claimed they were evicted so their apartments could be converted to STRs.
Another side of unintended consequences is playing out in Hawai’i. The island of Maui is considering phasing out 7,000 STRs which would lose the county “up to $91.8 million in annual tax revenue and up to $280.9 million in total tax losses.”
Not Going Away Any Time Soon
When the National Association of REALTORS (along with numerous other entities) issue guides about buying a property specifically to become a STR, you know that this issue is not going to fade away quietly.
And when an entire California coastal town sees itself at risk of its resident population being displaced by vacation renters, causing a post-tourist-season “ghost town”, we have to take this seriously and realize something is out of control.
To the extent that this is going to increase homelessness because of the increasing lack of housing stock, I am worried. As long as homelessness is a such a pressing social and societal ill, the debate how STRs impact availability of housing must continue.
Eventually, I believe, we will settle on some sort of balance between STRs and resident housing. In nature, this is called homeostasis, defined as, “a relatively stable equilibrium.” We are not there yet.
Residential zones should stay residential. How difficult is that to understand? STRs should definitely be charged a similar TOT.
We use the word homeless but we are really talking about misanthropic drug addicts. This is a disservice to the issue and prevents the solution from being implemented.
I have lived in South Mission Beach for fifty years. Short trm rental have ruined our community. 1100 units were converted to short term rental. Before you had short term rental during the summer months. Winter were used by student and they stayed in there unit for nine months. Then the three months they would go to their homes were they grew up. Those student moved to area by USD when short term rental started. They would rent for the full year even though they were gone the three months.
Plus numerous renter who lived in Mission Beach year round were kick out of the community.
Also Jersey City a suburb of New York of 250,000 people. Is probably the only city that had a city wide vote. They vote with 60 or 70% to have short term rentals capped at 90 days a year.
Its funny that the mayor is trying to build more adu. While he eliminate 1100 units in Mission Beach. Which mean the monthly rates go up.
Here something that was never discussed. If you had kids and live in South Mission Beach. You never know who the short term tenant is. They could be a pedaphile. You would not know this information. Hopefully there will never be a problem.
THANK YOU for writing this article, Mr. Malcolm. Something absolutely HAS TO BE DONE to curb and also REVERSE this trend. People who LIVE here are being priced out of their homes and apartments, not being able to live here anymore!
STRs may take some of the single family housing but the real problem these days are investors like Black Rock who are buying up homes. They will permanently take houses off the market and they will raise the rents. As of February 2024, investors bought 26% of the homes for sale in San Diego County. It’s not people who want to rent out a room or have one STR, it’s corporations. Corporations that buy the houses and corporations who open hotel-like STRs.
https://www.redfin.com/news/investor-home-purchases-q4-2023/
Mr. Malcolm is dead right. The growth of STR has removed tens of thousands of homes from the local rental housing market, and turned places like Mission Beach and PB in to even more loud and rowdy communities than they were when they were affordable neighborhoods filled with wealthy Arizona families
in the summers and college kids the rest of the year. I read that Palm Springs recently outlawed STRs and is seeing housing and rental prices moving steadily downward. Too bad the San Diego mayor and city council don’t have the nerve to stand up to the STR platform lobbyists or the city could do the same thing.
As long as STRs proliferate and city hall keeps upzoning the whole city, investors and developers will keep evicting people and pushing them out onto the street. The problem is only getting worse.
10s of thousands Don? I highly doubt it. Sure, it could be a problem as you say, but I think that number is exaggerated unless you are including long- and short-term rentals.
Hi David! My name is Kathleen and i was speaking to Lisa H about me being evicted illegally… they said their mom was moving in and she never did they just made my apt an air bnb with zero consequence. I really want to do something but I don’t have the money to hire a lawyer… do you think you could help with some resources? I’d apreciate it.