The morality of short term rentals

[Robert Frazier]

This is just a question I’ve been wondering as we deal with a huge housing crisis in our city.

is it moral to convert properties to short term rentals in a city with a deep housing crisis?


if a city has 500 units converted from long term to str, then the average occupancy is 70%, we have lost 54,000 nights of housing per year.


If vacancy is less than 1%, those 500 units of housing could be responsible for a significant amount of upward pressure on housing prices.

with the high cost of management for str, wouldn’t the world be better off with less of them?

[Joe S.]

Quote from @Robert Frazier:

This is just a question I’ve been wondering as we deal with a huge housing crisis in our city.

is it moral to convert properties to short term rentals in a city with a deep housing crisis?


if a city has 500 units converted from long term to str, then the average occupancy is 70%, we have lost 54,000 nights of housing per year.


If vacancy is less than 1%, those 500 units of housing could be responsible for a significant amount of upward pressure on housing prices.

with the high cost of management for str, wouldn’t the world be better off with less of them?

 So it looks like you’re selling turnkey to investors. So am I reading this correctly are you cool with investors owning rentals for long-term tenants, but not owning Short term rentals?

It’s not clear if that’s your stand or you’re simply trying to start a debate for debate sake with the smartest turnkey provider in the world being at the top of the thread. 😉

[Robert Frazier]

I’m working through it myself.

People can do what they want with their properties, I love helping people invest in properties. But my question is, is it good? 

Using Kant’s categorical imperative, you could say clearly no.

We don’t ask enough questions about what is good here, we ask: ‘what’s our highest return?’ Instead. As people we have moral responsibilities to each other, even as soulless real estate investors we have to think about the cost our choices have on others.

[Joe Villeneuve]

OK.  Using that same "logic", if the people that rented out those short term rentals through out the food they didn't eat in the fridge when they left, how many people could that food have fed if they didn't waste it?

[Jim K.]

Quote from @Robert Frazier:

This is just a question I’ve been wondering as we deal with a huge housing crisis in our city.

is it moral to convert properties to short term rentals in a city with a deep housing crisis?


if a city has 500 units converted from long term to str, then the average occupancy is 70%, we have lost 54,000 nights of housing per year.


If vacancy is less than 1%, those 500 units of housing could be responsible for a significant amount of upward pressure on housing prices.

with the high cost of management for str, wouldn’t the world be better off with less of them?

-----------------------------

I’m working through it myself.

People can do what they want with their properties, I love helping people invest in properties. But my question is, is it good?

Using Kant’s categorical imperative, you could say clearly no.

We don’t ask enough questions about what is good here, we ask: ‘what’s our highest return?’ Instead. As people we have moral responsibilities to each other, even as soulless real estate investors we have to think about the cost our choices have on others.

 So I'm actually going to answer this, Robert. Are short-term rentals good for keeping the cost of local housing markets down? No, as you've clearly demonstrated.

But you can't get to any sort of categorical imperative this way.

1. STR units cost more to manage. Yes. They give local people jobs.
2. STR units encourage overnight tourism versus in-and-out day trips. They give local souvenir sellers money, local restaurants new business, local tour operators expanded client lists.
3. STR units help local businesses by housing short-term local workers in a more cost-effective and desirable alternative than hotels.
4. STR units, when taxed effectively, add more to local tax bases.
5. STR units provide competition to hotels, especially during peak seasons/festivals/major events, which redistributes profits from hotel stakeholders (who are often not local) to locals.

[Joe Villeneuve]

Quote from @Jim K.:

Quote from @Robert Frazier:

This is just a question I’ve been wondering as we deal with a huge housing crisis in our city.

is it moral to convert properties to short term rentals in a city with a deep housing crisis?


if a city has 500 units converted from long term to str, then the average occupancy is 70%, we have lost 54,000 nights of housing per year.


If vacancy is less than 1%, those 500 units of housing could be responsible for a significant amount of upward pressure on housing prices.

with the high cost of management for str, wouldn’t the world be better off with less of them?

-----------------------------

I’m working through it myself.

People can do what they want with their properties, I love helping people invest in properties. But my question is, is it good?

Using Kant’s categorical imperative, you could say clearly no.

We don’t ask enough questions about what is good here, we ask: ‘what’s our highest return?’ Instead. As people we have moral responsibilities to each other, even as soulless real estate investors we have to think about the cost our choices have on others.

 So I'm actually going to answer this, Robert. Are short-term rentals good for keeping the cost of local housing markets down? No, as you've clearly demonstrated.

But you can't get to any sort of categorical imperative this way.

1. STR units cost more to manage. Yes. They give local people jobs.
2. STR units encourage overnight tourism versus in-and-out day trips. They give local souvenir sellers money, local restaurants new business, local tour operators expanded client lists.
3. STR units help local businesses by housing short-term local workers in a more cost-effective and desirable alternative than hotels.
4. STR units, when taxed effectively, add more to local tax bases.
5. STR units provide competition to hotels, especially during peak seasons/festivals/major events, which redistributes profits from hotel stakeholders (who are often not local) to locals.

...and those are just some of the details that explain my answer.

[Austin F.]

I've thought about this a lot, and the answer I've come up with is no. STR's hurt locals, especially in small markets like ski towns. They force the cost of housing up, and detract from any sense of community in neighborhoods. These issues are magnified greatly in small population high pressure markets, in bigger cities there is so little sense of community that it doesn't matter so much, also there are generally low cost neighborhoods the displaced people can filter out to.

I'm personally a big freedom guy, but I believe this is one place where local government needs to step in and draw up regulations. My local market has a cap on the number of licenses they will grant, 225 total units, and only one STR per block face, the waiting list is about 2 to 3 years long. As frustrating as it is (I have a property that would make a great STR) I believe it is what is best for the city.

[Tanner Glenn]

If this is a morality issue for SFRs, then it must also be so of LTRs. As I understand it, an increase in demand in excess of supply leads to an upward price change. In this thread, we are discussing the increased demand caused by the STR business model being deployed in areas that had equilibrium prices at one level, but are now experiencing increases in price due to this new demand. There are certainly small markets that have been disrupted in this way across America. However, I don't understand how this price increase differs from the price increases in other markets, like San Francisco, where demand has regularly outpaced supply even before STRs were a thing. If it is an issue of morality in the one instance then it must also be so in the other. Or it is not an issue of morality in either case, but merely an inconvenient and undesirable (by some) phenomenon. To which, I agree, would be an item for local governments to address and manage according to the desires of the citizenry.

[Jay Hinrichs]

county and city government are addressing this all over the country and have been for years.

I was talking to a government employee in a little county we own property.. this county has NO zoning None.. they have land division rules that regulate growth but not what you can put on them.

it falls on this person to decide and he is the building inspector for the county..  and he brought up the fact there are zero rentals to be had and he has to live in an RV in an RV park. So when i

asked him what the rules were if I wanted to create a STR for my property thats where the conversation led he cant regulate it but he does not like it.

[Jim K.]

Oh my brothers and sisters, let's fast track this thread to where it's going. Someone must have owned the cave/stable/shelter that Mary and Joseph sought refuge in on Christmas Eve. Without a rented roof to be born under, our Lord and Savior would have died of exposure "on a cold winter's night that was so deep." Ergo sum, rent is not evil.

Can I get an amen? Can I get a hallelujah?

[Tanner Glenn]

Quote from @Jay Hinrichs:

county and city government are addressing this all over the country and have been for years.

I was talking to a government employee in a little county we own property.. this county has NO zoning None.. they have land division rules that regulate growth but not what you can put on them.

it falls on this person to decide and he is the building inspector for the county..  and he brought up the fact there are zero rentals to be had and he has to live in an RV in an RV park. So when i

asked him what the rules were if I wanted to create a STR for my property thats where the conversation led he cant regulate it but he does not like it.

 Sleepy little towns can move very slowly at times. It sounds like a failure of government to address the issue. Either free up supply, or regulate the increase in demand. Rentals are scarce in my area too. Much of our demand comes from people being priced out of Atlanta and moving down to Macon. Many of them are commanding greater salaries than others in Macon by working remotely. Now many native to Macon are being priced out. This is my point. Not all demand increases are from STRs. We also have a strong medium term rental market because of the shortage of nurses. All of these changes in demand are disruptive to the status quo. I think many in Macon are excited by the influx of new residents because Macon has been down for decades and seems to be getting revived. I am sympathetic to those who see the changes coming to their towns as being for the worse. However, I don't see the situations being different at their cores. Progress leads to change.

[Joe S.]

It goes back to an underlining rule of human nature that has lasted much longer than we have been alive.… The “have Nots” want what the “Have’s” have.

So if it comes down to a popular vote then if more of the popular opinion have nothing they will vote to take what the “Have’s” have. The problem with this activity of trying to take away and shame people that have more is that so much of our country heritage was based upon free enterprise and not some sort of socialist or welfare mentality that so many people are trying to promote. Even the Movement that says,  “you’ll have nothing in you’ll be happy” is simply a moment that wants to take what you have because they are not happy that you have it. 

Come on folks do you really want to turn our nation into a socialist or communist country? Our country was built on free enterprise not by a bunch  lazy jealous bums wanting  free rent and handouts

[Robert Frazier]

Quote from @Joe S.:

It goes back to an underlining rule of human nature that has lasted much longer than we have been alive.… The “have Nots” want what the “Have’s” have.

So if it comes down to a popular vote then if more of the popular opinion have nothing they will vote to take what the “Have’s” have. The problem with this activity of trying to take away and shame people that have more is that so much of our country heritage was based upon free enterprise and not some sort of socialist or welfare mentality that so many people are trying to promote. Even the Movement that says,  “you’ll have nothing in you’ll be happy” is simply a moment that wants to take what you have because they are not happy that you have it. 

Come on folks do you really want to turn our nation into a socialist or communist country? Our country was built on free enterprise not by a bunch  lazy jealous bums wanting  free rent and handouts

 Me Thinks thou dost protest too much.

[Eric Bilderback]

If the pencil necks Apple can put trillion dollar plant in China, you can invest in vacation rentals.  Maybe you could buy some stock in in the defense contractors and get some of that $40 billion action the politicians are sending to Ukraine to keep their war going.  

[Adam Martin]

Just remember for every looser there is also a winner.  Some people looking to enter the market may be priced out and that is unfortunate for them.  In that same market there is someone looking to sell their home and through appreciation are going to make a great return on their house which they could use to retire early, upgrade, cover assisted living for the elderly, give to charity, or make it rain at the club.  Why should the current homeowners growth be stifled due to a perceived unfairness of someone looking for a cheaper house, wouldn't this be unfair to the current homeowner looking to maximize their profit.  

[Bill B.]

Ok. I’ve fallen for the troll. We must protect the hotels and motels, we don’t want them to go out of business and be turned in to apartments or condos. 

Let’s start with people who have 10x the power. Is every building restriction, zoning regulation, government building fee, every green space, every conservation area, every small home ban, every restriction on how many people can live in a property morally wrong? What should we do with these evil politicians if we can’t just vote them out because the evil morally wrong people keep voting for them in California and New York where housing is the most expensive and the homeless problem the worst? Do we disband the states? Do we have the federal government take them over for being morally wrong? 

What’s the next step? Much stricter penalties for drug dealers? No more foreign aid? Definitely open up the oil pipelines and drilling leases so we aren’t sending money to morally wrong countries. What’s the penalty for politicians who MAKE UP health rules and regulations for the people but not themselves? We definitely start building nuclear plants like crazy as it’s morally wrong that we’re banning them while decrying the fossil fuels that saved us.  

Etc etc etc. Once you give the government emergency powers they’ll create an emergency to access those powers. 

[Garland Best]

I don't think that it is fair to put a morality tag on one tiny aspect of capitalism at the exclusion of the rest of it.

[Chris Seveney]

While I have a STR, I do think depending on location they can be problemmatic. There is a reason communities have commercial business zoning and residential. STR's are businesses operating in a residential zone.

[Eric James]

The idea that because some people don't like something (STRs) that makes it "immoral" is modern snowflake morality. City planning isn't an issue of morality.

[Josh C.]

New question. Is it moral for politicians and local groups to routinely vote no against denser housing? The people in big cities complaining of housing costs still vote to make building so hard. That’s immoral in my opinion.

My local historic society complained that there aren’t enough low income people and few minorities living in the neighborhood then immediately voted that I had to use cedar siding and wood windows to match the old ways adding $80k to my budget. So of course we have to charge 2k a month in rent where only rich people can live. Lol. That’s the underlining issue which would actually make a difference. Not more regulation on what people do with their currently property. Less regulation on what people do with their land would actually move the needle.

[Joe Villeneuve]

Quote from @Chris Seveney:

While I have a STR, I do think depending on location they can be problemmatic. There is a reason communities have commercial business zoning and residential. STR's are businesses operating in a residential zone.

I agree, but doesn't that also mean the SF rentals are also a business operating in a residential Zone?

[Alex Breshears]

I'm going to be a bit more on the laissez faire economics side of things. Some major cities are becoming oversaturated with STR's. The lower occupancy and lower nightly rate will eventually make these an unattractive way to run the property, and they will be sold or converted to long term rentals. Change is inevitable. Our discourse comes from wanting things to remain the same, when everything around is is impermanent. I live not too far away where STR's have made the local population move elsewhere for housing they could afford, but this same market is facing that saturation point I mentioned earlier. Occupancies are waning as gas prices go up, nightly rates are going down because of competition with other properties. It's cyclical and not permeant like everything else.

[Joe Villeneuve]

I'm not so sure nightly rates are low enough to make them unattractive.  Also, they aren't going away, they will just take the same path as the buggy whip business.

[Bruce Woodruff]

Quote from @Robert Frazier:

 Says the guy who started this whole whiney topic....

[Bruce Woodruff]

Quote from @Robert Frazier:

This is just a question I’ve been wondering as we deal with a huge housing crisis in our city.

is it moral to convert properties to short term rentals in a city with a deep housing crisis?

with the high cost of management for str, wouldn’t the world be better off with less of them?

There is no housing crisis on a large scale....people just don't get to live exactly where they want to. This is a free market issue and we have a free market economy (generally). @Jim K.was spot-on about the benefits so I won't reiterate, but STRs have far more benefits to society than they do negatives. Even if they didn't, it's really none of your business.....If you don't like it or it gets your panties in a wad, you are free to not participate. More STRs for the rest of us.....

[Henry Lazerow]

I am all for free markets and capitalism. There definitely are negatives to it but the positives out weight those negatives. Cities can choose to restrict how they see fit and I will operate to full extent of the law.

One thing I am for more regulation on is large corporations buying up single families. This is one asset class that is meant for home owners and should have atleast some limits for investment to keep neighborhoods from becoming all rentals.