Will Vacation Rentals cease to exist!?

Question

Vacation rentals in the Palm Springs area have become a hot button topic over the past several years as it has been in many other communities. Palm Springs and it's neighboring towns are hot areas for vacationers. Despite being a  tourist destination, Cathedral City, which is the next town over from Palm Springs, has decided to cut vacation rentals out of the picture altogether!

According to the Desert Sun, after a five hour long city council meeting, the final decision was made to phase out vacation rentals over a two year period. The council is also considering some new rules it may implement over the next two years which include:

• -Increasing the fines for advertising or renting a short-term rental without a city permit to $5,000 for the first violation, $10,000 for a second violation, and up.
• -Closing outdoor amenities such as pools and spas between 10 p.m. and 8 a.m.
• -Capping the number of guests to two per bedroom with a maximum of 10.
• -Guest check-ins must be done in person or via video technology.

The council decided to move forward with the phase-out and the other ordinance changes after reviewing a lengthy report from the task force that had about 90 recommendations.

So what does this mean for short term rentals in the long run? Is this decision going to set a precedent that may sway the decision of other cities as well? The bottom line from this is that doing your research is extremely important when looking to invest in vacation rentals. There are many towns in this country that are very short term friendly and can turn a healthy profit.

How would you feel if your city shut out short term rentals?

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https://www.desertsun.com/story/news/2020/07/29/vacation-rentals-cathedral-city-council-moves-phase-them-out/5538948002/?for-guid=95de4889-fae5-4b7d-8eff-3db91fb69c2f&utm_source=desertsun-Daily%20Briefing&utm_medium=email&utm_campaign=daily_briefing&utm_term=hero

Julian Sage · Answer

I think some regulation is better than none. It's going to be up to the municipality but STR's are here to stay, it's just counties are just trying to figure out what to do with the new urban STRs that haven't been addressed. Vacation rentals have been around for centuries but the urban short term rental is pretty new concept. In Boise Idaho around 4 years ago there were just a handful of STRs, 4 years later there around around 1000. Now the city needs to come up with rules and taxes because that's money they're losing out on!

Alice Horn · Answer

Agree this depends highly on the municipality. Our market (Osceola and Polk Counties near Disney) has nearly 65,000 legal vacation rentals which are a crucial part of the local economy and tax base. They are not gong anywhere. On the other hand, I am very familiar with Miami Beach which has experienced the highest fines in the nation - which have been just recently (hopefully) overturned.  What's most important is that the demand from travelers for STRs during the pandemic is through the roof.  Check it out below. With vacation rentals outpacing hotels, it's highly unlikely they will go away and the industry will likely grow and mature further as a result.

Jeffery Wilen · Answer

I agree with most of the sentiments posted about STRs. They definitely will not be going away. What happens will be localized, take a look at how active a local tourism promoting group is in the community. If they have an agenda that promotes tourism, it will include allowing STR. There’s likely going to be more regulation of it, but not elimination. For a tourism focused group, STRs make money for the community. Guests spend more than residents on restaurants, shops, activities and attractions.

I’d be careful about investing in a location that doesn’t actively promote their town/area to tourism. They may not have restrictions on STRs now, but the voices against them will be louder than those for them.

Stephen Kehoe · Answer

If my city banned them I would be outraged. However I don't think Palm Springs will be the one to set the trend since banning STR's has been in vogue for a while. I don't think some areas will ever ban STR's. A lot of areas like the jersey shore are built around the summer season when everyone shows up.

Account Closed · Answer

I believe that in the post COVID world, STRs will skyrocket! I feel a lot more comfortable staying at a residence than staying in a hotel with hundreds of other people sharing the same AC and vent systems.

John D. · Answer

Cathedral City was atrocious at enforcing their existing ordinance, it seems a very common theme that when an area with lots of pool homes on smaller lots does a very poor job of enforcing their ordinance, there is sufficient backlash that a ban or near-ban may happen>

Neighboring La Quinta has recently changed their rules to make fines steeper, no longer allow any amplified music/sound outside, and yank peoples licenses quicker for non-compliant homes.  My hope is these types of rules along with the enforcement of remove the bad actors, and enables the practice as a whole to continue.

Jeff Piscioniere · Answer

This will be a local issue and a local issue only throughout the country because there are definitely parts of America where the economy is almost completely fueled by tourism dollars and they’d be shooting themselves in the foot to ever regulate it. There are always going to be the tax and spend municipalities that salivate at the sight of something they can tax arguing it off as some act of leveling the playing field. It all boils down to making an informed decision as to where to invest in STR rather than the knee jerk reaction of chasing shiny objects.

I own in East TN specifically the Smokies. Economy almost completely tourism based and for virtually 12 months of the year and the local governments know this. They’d be committing suicide to ever regulate. Let me throw in an increasing factor of excellent locales.....future growth. What are the trends in population movement now and as might be expected in the future. A state like TN is growing because people are migrating from high tax states, such as my state of CT who’s economy is on life support mostly due to those same tax and spend policies and politicians I mentioned above.  These growing states will have even more people looking for places to relax and play.  And this migration of populations was underway well in advance of Covid, but now may have gotten a small permanent boost from many second guessing living in large congested and expensive areas.

Doug Pintarch · Answer

I think that's extremely localized and dependent on the town council.  The little satellite towns and neighborhoods to major vacation spots get so much more traffic in-season they sometimes get members elected and they get their panties all in a bunch and say "We're done!"  The longer the area has been a hot spot I think the adjoining communities like the additional revenue and will be okay with STR's.

At least I hope so..   ;)

John Underwood · Answer

Short Answer: Absolutely not.

STR's are on the rise in most locations.

Yes there are challenges and risks in certain locations so we as investors need to analyze the risk before deciding on new locations.

Luke Carl · Answer

@Phillip Vaughan. City is the issue. There’s a big difference between hotel alternative and vacation rental.

Will Vacation Rentals cease to exist!?

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