Are Short-Term Rental Investors Ruining the Arizona Housing Market?

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Short-term rentals, often associated with companies like Airbnb and VRBO, have grown in popularity in recent years as an accommodation option for vacationers and another way for homeowners to generate income. Some Arizona residents, however, believe that short-term rentals are a neighborhood nuisance that deprives families of places to live, while others believe people have a right to use their private property as they see fit. .

“Arizona has investors buying homes that would otherwise have been left to families and turning them into long or short term rentals. One in five homes is bought for rent across the country. Here in Arizona, 30% of homes bought are for rent, ”says Greg Hague, CEO of 72 Sold, a real estate company that aggressively markets homes before they are presented to buyers.


READ ALSO: Are Californians Ruining Arizona’s Real Estate Market?


The profitability potential of short-term rentals is significant, especially in cities dependent on tourism.

“At the end of May, there were only 17 single-family homes available in Sedona. I spoke to one of my agents and he told me that half of what was sold was going to investors for short term rentals – and normal buyers can’t compete, ”Hague notes.

Investors have a distinct advantage when competing with typical home hunters: abundant credit.

“An investor can find a house for $ 400,000 and finance it all with a line of credit. You couldn’t do that as a normal buyer, ”Hague says. “Investors are making so much money with these rentals that they can pay whatever they have to pay to outbid normal buyers, who need financing and appraisal.”

Impact of short-term rentals on communities

Jerome, a small town about 30 miles southwest of Sedona, has seen a similar trend of homes being bought and turned into short-term rentals. This has affected local businesses, the city’s tax base and the sense of community shared by locals.

“People who want to take zoned residential land and operate it commercially as a short-term rental is a nuisance, and they’re also breaking our zoning code. These people do not have unlimited property rights. They bought a residential home and are using it for commercial purposes without a license and without paying commercial taxes, ”comments Rebekah Kennedy, former Jerome board member and owner of Amore Pin Up Boutique and Amore Pin Up Accessories.

In 2016, the Arizona Legislature passed Senate Bill 1350, which prohibits communities from imposing zoning-like restrictions on homes purchased for short-term rentals. This has left communities like Jérôme with little recourse. Housing supply is tight, which means some residents can no longer afford to live in the city and descend the mountain that Jerome is built on and head to nearby Clarkdale.

Impact on the hospitality industry

The influx of rentals is also affecting the local accommodation industry. Andrea Prince, owner of Surgeon’s House Bed & Breakfast, has been in business for 28 years. Two years ago, she noticed a decline in business and contacted the other five people with locally owned and operated accommodation facilities in Jerome.

“I started the meeting by saying that my numbers are going down and if you all tell me you have record years that tells me that I am doing something wrong. But everyone’s numbers were going down, and the only thing we could figure out was that it had to do with short-term rentals, ”says Prince. “Sure, if you have a family of five, we can’t beat the prices to rent a house, but we should be able to control and tax this industry,” she adds.

People who choose to stay in a short-term rental, Prince argues, are more likely to bring their groceries and cook for themselves, depriving the city of extra tourist dollars. For homeowners like Kennedy – who lives near seven short-term rentals – the holidays are a constant bore.

“Sometimes when you say, ‘Hey, stay the course,’ they throw beer cans at you. Then you have to call the owner of the vacation rental and he says, “Well, why did you call me, call the police,” notes Alex Barber, former mayor of Jerome and current member of city council.

Kennedy adds, “I know we’re a tourist town, and people tell us all the time how thankful we should be for being so popular that everyone wants to be here. However, there must be a balance. What we are asking for is respect for the line that we must draw in order to have good relations between residents and tourists. We need a place to live.

The promoters of private property

The Arizona Vacation Rental Association (AZVRA), which advocates for the rights of short-term rental owners, understands that there is a coalition of Arizonans who want to see the short-term rental market more tightly regulated – and representatives of the legislature listen. Recently, House Bill 2875 and Senate Bill 1554 sought to limit some of the protections afforded to short-term rental landlords in Senate Bill 1350. Both attempts failed in part to because of the AZVRA campaign.

But just because AZVRA has fought against change does not mean it ignores the communities’ call to action. The association promotes a “good neighbor” policy among its members that encourages owners to provide neighbors with 24/7 contact information, enforce local noise ordinances and ban major parties. , among other good practices.

“We have created an association with the owners of these rentals and put in place a process of standards that they can adhere to. By joining the association we can communicate with each other, we can listen to each other’s issues and focus on the “good neighbor” policy, ”says Barry Goldwater Jr., former congressman American and member of the AZVRA management team. “But we hear the complaints, and I think the industry is doing everything they can to try to clean that up and shut down some of these party houses.”

Tim Scarpino, executive vice president of global growth at Parsons Villas and a member of the management team at AZVRA argues that troublemakers are a fraction of operators. “Our data director, Mark Beauvais, did our first real economic impact study. With the data he obtained using the City of Scottsdale police reports and the number of vacation rentals currently displayed in the AirDNA database, he discovered that bad actors make up half of 1%. operators in the market ”, explains Scarpino. Airbnb recently deregistered 50 properties that have received regular and repeated complaints, Goldwater adds.

Nuisance or good-to-have?

AZVRA argues that the emerging short-term rental market is a boon to the state. According to the association’s study, short-term rentals generated $ 350 million in tax revenue for Arizona in 2020, total visitor spending in Arizona topped $ 3 billion in the same year, and the industry supports 40,000 jobs. “The average Airbnb customer stays five nights compared to 2.8 nights for traditional hotel customers. Airbnb customers spend around 2.1 times more money in the local community than typical visitors, ”comments Scarpino. “The growth in hotel occupancy has mirrored the growth in short-term rental occupancy, which means that we are not cannibalizing each other’s prospects, but rather bringing more tourists into state and more revenue for Arizona’s tourist budget. “

When it comes to housing supply, Scarpino maintains that short-term rentals are not contributing significantly to the current supply shortage. “If we look at the numbers before the pandemic, short-term rentals are down by around 10% in 2020, whether they have become long-term rentals or have been sold. But I haven’t seen any statistical evidence that shows that short-term rental purchases contribute to the lack of supply. “

Arizona’s appeal drew in new residents from across the country who caused a supply strain, according to Goldwater. “It doesn’t just happen here, but it happens in places like Boise, Idaho, as well as Florida and Texas. People are trying to get away from the high taxation and heavily regulated and poorly managed cities of New York and California. There is more demand than supply, but that will eventually pick up, ”he says. Scarpino adds that the lack of supply is evident in cities across the country, even in places like Pittsburgh that don’t have a high concentration of short-term rentals.

Goldwater concludes, “We feel privileged to have this opportunity to provide service to people who wish to travel. We try to work with the local government and with the landlords who rent out their properties to make it a better and friendlier neighborhood. But that’s part of freedom. It’s part of the free market system. We just want to provide a service and get a return on our efforts. At the same time, we don’t want to step on other people’s feet. We are very attentive to the problem. And we are working diligently to improve it.


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