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?

[Bruce Woodruff]

Quote from @Austin F.:

but I do think that government should impose restrictions on them such as saturation limits, or units caps in some markets.

 Why? What's your end game? What if a City wants all STRs?

[Robert Frazier]

Thanks everyone for jumping in. I think the decisions we make as individuals, as investors and citizens have effects on others, and it is right to consider the cost to others that our choices make. Housing is difficult to develop. It takes 2-3 years to get a project from purchase to providing housing. It cost thousands of man hours of labor and cannot be easily created to deal with inefficiencies in the market. I live in a city with .5% vacancy and a STR on every block. There are families who are homeless who could afford an apartment if it was available.

It's not an all or nothing proposition. We can agree with personal property rights and also think deeply about what our choices mean for others. We don't have to be soulless bottom line leaches like wall street. What we do is provide housing. We can do that in a humane way.

[Matthew McKee]

A point I haven't seen brought up is that the clients of STR's are more likely to be visiting the location in which the STR is located. Visitors often are one of the highest contributors to local economy with very low draws from the economy I.e. visitors earn, draw and make from their local economy and grow, spend or support the visiting economy.

As for morality I think we can all agree that STR are not immoral in a resort ski town because they add to a market which doesn't have much need for LTR because of lack of jobs but high demand for STR because of the geographical accommodations which provides economic stability, allowing for individuals to reside there outside of retirement or remote working.

[Eric Bilderback]

Quote from @Steve K.:

I've had several neighbors recently move and convert their properties to STR's and it has definitely changed the character of the neighborhood for the worse. We used to know everyone here, our kids played with the neighbor's kids everyday, we looked after each other's properties when folks were out of town... great sense of community. Now there are different people coming and going all the time, nobody says "Hi", loud music late at night, pot smoke smells drifting into our yard, random people sitting in their car in front of our house running their engines for hours while they talk on the phone, permanent dumpster on a residential street etc. None of it is even legal, we have an STR ban here but it isn't enforced that well recently. I have an STR myself (in a different area where they are still allowed), so I paradoxically find myself on both sides of this argument. I've seen how they harm neighborhoods first hand but I also benefit from increased profits at our property that we rent short term. It's hard to pass up the chance to rent a place for $10-30k/month when the most you can fetch as an LTR is $6,500.

Everybody loves to talk about how great property rights are until it effects them negatively in a personal way. We can look at a place like Belize which has no zoning or property laws whatsoever. Sounds dreamy until your neighbor ruins your little slice of paradise by building a night club in a residential area, or a pig farm, toxic waste dump, blocks your view, etc. and in the absence of any government regulation, neighbors often end up settling disputes with guns or machetes there.

 I find many of the people advocating for property rights actually complain the loudest and fight the hardest when something effects them negatively. Just like people who complain about high taxes then also complain when their street isn't plowed quickly enough. We all just look out for our own self interests at the end of the day.  

This is one thing I like about the US: we have individual rights but they are often superseded by the common good. Finding the right balance between protecting the public interest and maintaining personal rights can prove difficult, and Short Term Rentals are one area where there is a lot of tension between the two. With only a few exceptions like AZ, TX, OH, most courts have determined that nightly rentals are more akin to running a hotel than a rental property i.e. a commercial activity that can be limited to commercially zoned areas or taxed and regulated like a business, which seems right to me. 

 100%.  

I don't think it is immoral to buy an AirBNB however it is also not immoral for a city council or HOA to say no to AirBNBs.

There is almost no business/investing where you can not operate for maximum profit and make it over the long-run.  So for all you youngsters out there go do what you got to do.

[Bruce Woodruff]

Quote from @Robert Frazier:

Housing is difficult to develop. It takes 2-3 years to get a project from purchase to providing housing. It cost thousands of man hours of labor and cannot be easily created to deal with inefficiencies in the market.

And there is your problem. Get it back to where I can come in and build a nice house for a nice price in a few months and your 'problem' is solved. If you really care, go fight City Hall instead of railing against private property owners who are trying to make a buck.

[Nicholas Misch]

Quote from @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.

Wow, no offense but if your feeling this way you may want to choose another line of work. Let's possibly talk about the intuitional hedge funds that are backed by billions that buy up homes by the dozen at whatever price because they can, before we worry about the average STR (which is still primarily owned by the little guy's and girl's) and other rental owners.

[Bruce Woodruff]

Quote from @Nicholas Misch:

Quote from @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.

Wow, no offense but if your feeling this way you may want to choose another line of work. Let's possibly talk about the intuitional hedge funds that are backed by billions that buy up homes by the dozen at whatever price because they can, before we worry about the average STR (which is still primarily owned by the little guy's and girl's) and other rental owners.

Yeah, this has been a fun thread, but when you see 'Kant's Imperative' in a thread about STRs, you know you've gone off the rails..... :-)

[Scott Mac]

Hi Robert,

"Over thinking, over analyzing, separates the body from the mind. Withering my intuition, missing opportunities..." (TOOL, Lateralus)

"The richest 1% of this country owns 1/2 the country's wealth (9% own the other half). 1/3 comes from their own hard work, 2/3 comes from inheritance, stock speculation and real estate. 90% of the American public has little or no net worth (lives paycheck to paycheck)..." (Gecko, Wall Street Movie)

To that I will add:

[1] Highest and best use.

[2] Opportunity only knocks once.

Just my 2 Cents.

{When I was 12 years old, I was riding with my Grandfather in his car, and along side of the road was a large bill board that said "Highest and Best Use".

I asked him what that meant, and he explained it to me. 

I walk with that knowledge to this day--which is why I included it above.

The bill board was from a bank hawking loans for Highest and Best Use conversions.

If you are not familiar with it, you can learn about it by Googling it.}

TOOL referenced above: https://www.youtube.com/watch?v=IQS5jCUuz38

[Bonnie Low]

I hear what you're saying and I appreciate the question. It's something I've thought a lot about. No doubt housing is scarce is many areas. Nationwide, the actual amount of housing units needed is said to be so large it will take years for builders to catch up with new home builds. That said, I don't believe it is the responsibility of the individual homeowner or small investor to compensate for this nationwide shortage and here's why. We can make a small difference one house at a time, certainly. However, when the deficit is this large, it needs to be shouldered by builders, developers and municipalities. Real estate continues to be one of the few avenues for small holders to grow their personal net worth and provide financial security for our families. We need the flexibility that multiple real estate investment strategies can provide in order to flex or pivot as the market changes. Pensions are largely a thing of the past. Retirement accounts like 401ks take decades to build and are subject to the volatility of the stock market. Housing prices continue to increase so turning your property into a short term or even medium-term rental is one of the ways homeowners can actually afford to stay in their properties in many cases. Throw in the argument for private property rights and I firmly believe we need to be able to maintain this option for our properties (albeit in compliance with local regulations.) And, ultimately, there is market demand for short term rentals. It feels like a bit of a craze right now, but like all things, I believe it will level out in due time. Bottom line, there is room for all types of housing including vacation housing. But as a nation and as individual jurisdictions we need to take a hard look at the need for more housing and more affordable housing and take real, measurable action to address this on a grand scale.

[Remington Lyman]

Quote from @Lauren Sennet:

In my primary market, Columbus, OH, we have an ever growing housing shortage. We have some areas that prohibit STR's and others that do not. While we're not a major tourist destination, between business travel and the attractions we do have, new hotels and STRs continue to be added. The affordable housing here tends to be in areas with less attractions and more crime. STRs tend to be in higher priced, attraction rich areas here.

Developers try to build in Columbus and the neighboring areas, but wherever they go the community comes out to decry the percieved hardships schools and city services will face due to more homes of any kind (SF, small MF, and large MF). They also almost always complain they want the original character of the neighborhood homes built many decades ago to be maintained in any new construction. Think brick, stone, wood siding, and other costly aesthetic requirements.

Even some low income/elevated crime parts of the city have revised their building requirements to ban vinyl siding. It's like anywhere an individual or developer attempts to add housing it's defeated by the community or made so expensive and legally cumbersome that the investors cannot afford to sell/rent at the desired affordable price point.

For anyone who feels compelled to ease the housing struggles in markets they see great need, why not find like minded investors to work with you to bring more affordable housing to these places? Your motivation to alleviate this hardship may be the difference maker in communities that would otherwise not be supportive.

 There is a group here in Columbus, Ohio that goes around to all the local zoning meetings and supports anything that provides additional housing. 

[Stefan D.]

Nothing wrong with questioning if what we're doing is right or wrong - all the comments calling the OP a snowflake or a virtue signaler are out of line.  Robert's asking a good question.

I one one Airbnb property and several long term rentals, and I think about this a lot too.  It brings money into the rural town where I own it: my PM was able to quit her job at the coal mine once she took my property on.  But, Airbnb's like mine make it harder for long term locals to afford to stay in the area as long term rental units are being converted to STRs.  The whole Airbnb investor community is (unintentionally) kicking out locals to make money.  

[Bruce Woodruff]

Quote from @Bonnie Low:

No doubt housing is scarce is many areas. Nationwide, the actual amount of housing units needed is said to be so large it will take years for builders to catch up with new home builds. 

Please list your sources for this. According to very recent data, there are 15 million vacant housing units in the US. Of course not all of these can quickly converted to house people affected by this 'housing crisis', but there are a lot of units sitting out there. https://fred.stlouisfed.org/se...

Other studies show over 10% of housing units are vacant. https://ipropertymanagement.co...

Not saying that every city in this country has as many units available as there are people that want them, but that's hardly the point.

[Bruce Woodruff]

Quote from @Stefan D.:

all the comments calling the OP a snowflake or a virtue signaler are out of line.  

No they're not. But you are certainly entitled to your opinion....

[Randy Gutierrez]

I wouldn't say it is immoral to own STR's. I think it's a case by case basis on determining if there is a net positive to having them within a community. That decision should probably be left up to the city/town. As an investor, if my intent was to buy a STR property I would also make sure that property would be viable as a LTR as well.

[Julie Falen]

Quote from @Michael Deering:

Yes.  And it is immoral to dictate how another should use their property

 Then why are there zoning laws in every city and town, and laws dictating how to treat animals and disallowing pollution and so much more?

[Julie Falen]

Quote from @Bruce Woodruff:

Quote from @Bonnie Low:

No doubt housing is scarce is many areas. Nationwide, the actual amount of housing units needed is said to be so large it will take years for builders to catch up with new home builds. 

Please list your sources for this. According to very recent data, there are 15 million vacant housing units in the US. Of course not all of these can quickly converted to house people affected by this 'housing crisis', but there are a lot of units sitting out there. https://fred.stlouisfed.org/se...

Other studies show over 10% of housing units are vacant. https://ipropertymanagement.co...

Not saying that every city in this country has as many units available as there are people that want them, but that's hardly the point.

 Your data is misleading. Total vacant in US is about 10 million. For rent, only 2.9 million.  Dig deeper ruce https://fred.stlouisfed.org/re...

[Bruce Woodruff]

Regardless, that's a lot of vacant units, right? And the 'for sales' can become 'for rents', so that's really irrelevant.

Let's focus on getting the Govt out of the way so we can build more  - if really needed - not further restricting property owners when it's not even necessary...

[James Hamling]

wow, Wow, WOW....... Has everyone lost there flipping minds????!

This is the exact kind of thing why the rest of the world looks at Americans, shakes there head with a eye-roll and chuckle saying "Americans....". 

Let's re-frame this to see if common sense can't make at least a brief appearance in this re-donkulous of queries: 

Is McDonalds moral? How many hours of the day do you suppose the team at Mickey-D's sit's around asking about the "moral imperative" of a Big Mac?    Are you aware how many car accidents there are daily? How many fatalities there is in connection to such? Does GM or Ford ask if it is moral to sell vehicles vs swapping it up to bicycles? Are cigarettes moral? Casinos? PORN? How about swilling an entire Franzia box per night, is that moral? 

In a free democratic society morality is a statement of at-the-moment beliefs held by that society, and the free-market system votes on what is and is not moral via there commerce dollars. Because morality is not an on-off button, it is one of degrees and shades, as in a FREEDOM society people have the free-choice to engage in acts that are NOT moral, like eating a tipple Whopper with bacon and cheese every day if they choose. Hell, you can eat 18lbs of bacon for breakfast if you want. Is it moral to race towards cardiac arrest? Is it a non-moral action of the restaurant for serving such? 

What's really being asked here is should peoples decisions be policed? 

If something is selected as harmful and not moral by society to a level it should not be, like say Baby Seal Slippers, society will vote with it's commerce and that item will not exist. 

A STR is a micro-hotel, is it seriously a debate if a micro-hotel is not moral? Your kidding me right, seriously.......

Is it an an addictive substance? Does it take command of ones cognitive functions of reason and decision making? So if it's not moral, why does so many persons vote for it's existence with there commerce $'s? And what does that make them, "deplorables"? Is that what's next to follow, how these "deplorables" who chose a STR vs Hilton, they "must be stopped"?

Let me draw you a picture, to highlight my reply: 

Picture a video to detail what it is to be "American", what "let freedom reign" means in action. Picture a over-weight guy, riding his chopper, no not a motorcycle a CHOPPER, with forks that are too long, handle bars that are too long, it's too loud, rough riding, will probably slip a disk eventually but damn it looks cool, and this over-weight guy get's to do that, WITHOUT a helmet, no safety anything, as he's burning up a "cowboy killer" which yeah, he knows it will give him cancer but the liter of whisky a day dosn't help either, nor the 3 bacon and mayo sandwhiches for lunch either. This is freedom, the right and ability to make informed choices of self-harm, because you feel like it.

You know what they never talk about in history, way back when in Boston as the people threw the crates of tea over the rail of the ship, that little twerpy f*^k who was running around saying "no, hey guys, no, come on, it's not right, your gonna make Kin..." and they threw him over the rails too.     That's all this whole thread reminds me of, that guy..... And I stand by the American decision, over the rails with ya! 

[James Hamling]

Quote from @Bruce Woodruff:

Regardless, that's a lot of vacant units, right? And the 'for sales' can become 'for rents', so that's really irrelevant.

Let's focus on getting the Govt out of the way so we can build more  - if really needed - not further restricting property owners when it's not even necessary...

 Oh come on Bruce, havn't you heard; there from the Government, and there here to help you....... (oh SOooo much sarcasm)

[Bruce Woodruff]

@James Hamling Nice response as usual.....! Made me laugh...

[Aaron Gordy]

Immanuel Kant has very little to do with Adam Smith. Money will flow to the sector that will have the highest return for risk tolerance. Once the risk becomes too high then it will flow to other spots. Right now, str is very good but that will change as the returns become less over time. The hospitality industry is very susceptible to the economic winds such as the high price of gas discouraging traveling. Does it keep me up at night? No because once it stops making money in that niche then I will be forced to switch it up to ltr. Its just Economics. 

[Joe Villeneuve]

Quote from @James Hamling:

wow, Wow, WOW....... Has everyone lost there flipping minds????!

This is the exact kind of thing why the rest of the world looks at Americans, shakes there head with a eye-roll and chuckle saying "Americans....". 

Let's re-frame this to see if common sense can't make at least a brief appearance in this re-donkulous of queries: 

Is McDonalds moral? How many hours of the day do you suppose the team at Mickey-D's sit's around asking about the "moral imperative" of a Big Mac?    Are you aware how many car accidents there are daily? How many fatalities there is in connection to such? Does GM or Ford ask if it is moral to sell vehicles vs swapping it up to bicycles? Are cigarettes moral? Casinos? PORN? How about swilling an entire Franzia box per night, is that moral? 

In a free democratic society morality is a statement of at-the-moment beliefs held by that society, and the free-market system votes on what is and is not moral via there commerce dollars. Because morality is not an on-off button, it is one of degrees and shades, as in a FREEDOM society people have the free-choice to engage in acts that are NOT moral, like eating a tipple Whopper with bacon and cheese every day if they choose. Hell, you can eat 18lbs of bacon for breakfast if you want. Is it moral to race towards cardiac arrest? Is it a non-moral action of the restaurant for serving such? 

What's really being asked here is should peoples decisions be policed? 

If something is selected as harmful and not moral by society to a level it should not be, like say Baby Seal Slippers, society will vote with it's commerce and that item will not exist. 

A STR is a micro-hotel, is it seriously a debate if a micro-hotel is not moral? Your kidding me right, seriously.......

Is it an an addictive substance? Does it take command of ones cognitive functions of reason and decision making? So if it's not moral, why does so many persons vote for it's existence with there commerce $'s? And what does that make them, "deplorables"? Is that what's next to follow, how these "deplorables" who chose a STR vs Hilton, they "must be stopped"?

Let me draw you a picture, to highlight my reply: 

Picture a video to detail what it is to be "American", what "let freedom reign" means in action. Picture a over-weight guy, riding his chopper, no not a motorcycle a CHOPPER, with forks that are too long, handle bars that are too long, it's too loud, rough riding, will probably slip a disk eventually but damn it looks cool, and this over-weight guy get's to do that, WITHOUT a helmet, no safety anything, as he's burning up a "cowboy killer" which yeah, he knows it will give him cancer but the liter of whisky a day dosn't help either, nor the 3 bacon and mayo sandwhiches for lunch either. This is freedom, the right and ability to make informed choices of self-harm, because you feel like it.

You know what they never talk about in history, way back when in Boston as the people threw the crates of tea over the rail of the ship, that little twerpy f*^k who was running around saying "no, hey guys, no, come on, it's not right, your gonna make Kin..." and they threw him over the rails too.     That's all this whole thread reminds me of, that guy..... And I stand by the American decision, over the rails with ya! 

...and, as an extension of all those "freedom of choices", must come the responsibility to do what is necessary to achieve those choices, and to live with the results of those choices.  It's NOT the responsibility of society in general to compensate for any of those choices.  Basic economics takes care of stupid decisions (from almost any arena), if the government, and society in general get out of the way, and stop politicizing every decision others make because they feel those decisions are wrong, and label them as being, oh let me think, "immoral?".

[Shane Blackshear]

I've had this same thought. As a result I won't do a STR in a densely populated area where prices are sky high. There are rural areas where the market isn't the same and STR do just fine.

[Jarrod Kohl]

Quote from @Bruce Woodruff:

Regardless, that's a lot of vacant units, right? And the 'for sales' can become 'for rents', so that's really irrelevant.

Let's focus on getting the Govt out of the way so we can build more  - if really needed - not further restricting property owners when it's not even necessary...

I think this is the point that gets missed ALOT. People love to make landlords and/or STR operators the "bad guy" and ban the short term rentals (see Boston, Cambridge, Somerville) but when they make AirBNB the bad guy, they (gen pop and politicians) dont address the real problem which is no new construction and major limitations in zoning or redevelopment.

There is a way to have both STRs and a healthy housing market, but the problem is everytime someone tries to modify a dwelling or build a development all the NIMBYs pop up and kill it and then complain that rents and prices are going up.

[Bruce Woodruff]

Quote from @Shane Blackshear:

I've had this same thought. As a result I won't do a STR in a densely populated area where prices are sky high. There are rural areas where the market isn't the same and STR do just fine.

STRs do just fine (maybe even better) in dense markets where prices are high too. It's all just a numbers game. 

Now if it bothers your sensibilities to buy a house for business purposes in a densely populated area, then don't do it, more for rest of us.....