Short-Term Rentals Are Exacerbating Homelessness

By David Malcolm / Voice of San Diego / November 20, 2024

Short-term (vacation) rentals (STRs) are an innovation. Since VRBO and Airbnb came on the scene, this is a new sub-sector of the lodging industry, just as Uber and Lyft were a new sub-sector for the transportation industry.

But, at least for STRs, there is a downside.

Unintended consequences often accompany innovation, mostly during early adoption. STRs rely on existing homes and apartments. The more there are, the less housing there is for residential. As a result, rental prices can soar, sometimes pushing residents out of an area.

My concern, because homelessness is one of our greatest crises and something I have been personally involved in addressing for decades, is that exacerbates the problem. Less stock and higher prices and/or rents are only going to cause more people to become homeless, especially if they have an unexpected financial setback and are already living on the edge.

Let’s look at how this is turning thing upside down, and what might be done about it.

Knee-Jerk Reactions Causing Chaos

With STRs, governments have allowed market forces to reduce inventory for housing, but that came at a price. As more homes were offered up as STRs, they impacted neighborhoods, sometimes becoming party centers. Visitors don’t always act like they live there with consideration for neighbors and neighborhoods. But STRs make a lot of money for a lot of people.

Among the knee-jerk reactions when things started getting a little out of hand were regulatory “experiments,” which are still ongoing. Some regulations cap the number of STRs allowed in a city. Others set conditions about length of rentals, restrictions on loud parties and other obnoxious behaviors, and even looking at visitor taxes similar to what hotels charge.

The city of Del Mar, CA capped STRs in the City at a total of 129. And on Nov. 5, Del Mar voters overwhelmingly approved a 13.5 percent transient occupancy tax (what hotels pay) on STRs, expected to bring the City $775,000 annually.

Barcelona, Spain went even further by planning to ban all STRs for tourists because of out-of-control increases in rental rates for residents.

Online maps of STRs in San Diego have stirred arguments linking the proliferation of STRs to the housing crisis.

Is there any basis for that? Well, some local tenants have claimed they were evicted so their apartments could be converted to STRs.

Another side of unintended consequences is playing out in Hawai’i. The island of Maui is considering phasing out 7,000 STRs which would lose the county “up to $91.8 million in annual tax revenue and up to $280.9 million in total tax losses.”

Not Going Away Any Time Soon

When the National Association of REALTORS (along with numerous other entities) issue guides about buying a property specifically to become a STR, you know that this issue is not going to fade away quietly.

And when an entire California coastal town sees itself at risk of its resident population being displaced by vacation renters, causing a post-tourist-season “ghost town”, we have to take this seriously and realize something is out of control.

To the extent that this is going to increase homelessness because of the increasing lack of housing stock, I am worried. As long as homelessness is a such a pressing social and societal ill, the debate how STRs impact availability of housing must continue.

Eventually, I believe, we will settle on some sort of balance between STRs and resident housing. In nature, this is called homeostasis, defined as, “a relatively stable equilibrium.” We are not there yet.

David Malcolm is a real estate professional and a philanthropist. He is on the San Diego Rescue Mission’s Board of Trustees and previously served on the board of St. Vincent de Paul for 34 years.