Are STRs evil?
A small favorite town of mine just announced a "moratorium" on issuing new STR permits.
Previously they had set a cap to control STR’s. People would join a waitlist. When permitted homes sold, their permits did NOT transfer to the new owners.
Apparently, the ‘wise’ elected officials found their own rules insufficient and continued to blame rising home prices on STR’s. Their illogical logic went something like this, "we have a workforce (affordable) housing problem. The wealthy second homeowners buying $2-$5mm + homes are the problem. They can offset their costs by running illegal hotels and ruining our neighborhood."
A few thoughts:
- by their own admission, no local hourly worker is buying or living in these $2-$5mm homes. So, they’ve identified a problem but are pointing to the wrong cause.
- these wealthy homeowners are providing a service to the community. Since there are no hotels to speak of, visitors must stay in a VRBO or Airbnb. Or, else there are no visitors.
- no visitors is a bigger problem. Without visitors, all the service businesses (restaurants, guides, tours, etc) and retail shops would go out of business as the small local population wouldn’t keep them afloat. And, without the lodging taxes, the community likely would have a budget shortfall and have to make some tough decisions, "do we not repair the roads or should we stop the public-school renovation?"
Now, maybe I’m imagining this… BUT… I have seen a large amount of single-family homes but the market since this surprise announcement. And, more worrisome, I’ve seen multiple price reductions! In this bull market, there are multiple price reductions!
This isn’t surprising.
A home that has restrictions is worth less than an unrestricted home. Pretty simple.
I recently filmed a video discussing "free optionality" and how that can lead to opportunities. The inverse is true too. Limited options is worth less.
However, these homes (unfortunately) are being sold to other wealthy homeowners. Those that are wealthy enough to not rent them out. Or share their wealth with others. So, when the owner isn’t in residence (11 months a year on average), the home is dark. No lights. No action. No restaurant spend. No retail spend. No services spend. No spend. Just dark.
I’m super curious and watching, learning from this. I’ll keep you updated!
What do you think will happen to housing prices due to this moratorium? How about to workforce / affordable housing?