Real Estate

‘Zoom Towns’ Take Aim at Vacation Rentals in Western States

In Whitefish, the lack of affordable workforce housing in 2021 forced nearly all food- or beverage-related businesses to curtail hours or close at least one day a week

By Erika Bolstad, Daily Montanan
Whitefish on Sept. 24, 2021. Hunter D’Antuono | Flathead Beacon

DEPOE BAY, Oregon — Postcards with big promises began showing up in mailboxes in Oregon coastal communities in 2019: “Rent your home short term, use it when you want to, guaranteed $5,000 more monthly income than you’re earning with your current property management firm,” recalled Monica Kirk, a retiree.

Kirk’s neighborhood began to transform almost immediately.

Internet-based service firms such as Airbnb, Vacasa and VRBO had been bumping up against short-term rental caps in nearby towns. So they began aggressively soliciting property owners in quieter, unincorporated seaside neighborhoods like Kirk’s, where there were fewer restrictions on rentals. During the next year, according to a public records request Kirk filed, the number of licensed short-term rentals in unincorporated neighborhoods in Lincoln County, Oregon, grew from 385 to 601.

“During most of the year, not just the season, there were more renters than there were full-time residents,” Kirk said.

The new visitors were careless with trash, which drew pests. They drove too fast on lightly maintained roads. They crowded the rentals with more people than were intended for aging, often unpermitted septic systems. Worst of all, taking all those homes out of the potential long-term rental stock made it that much more challenging for working people to afford homes in the county, a tourist community on the central Oregon coast. The area, like all popular vacation destinations, needs affordable housing for the seasonal housekeepers, retail clerks and restaurant workers who keep it humming.

Kirk and her neighbors began gathering signatures for a ballot initiative that, over the next five years, will do away entirely with short-term rentals in unincorporated communities in the county. Its successful passage in November 2021 was one of the few bans to be approved in a wave of efforts aimed at addressing the effects of short-term rentals on affordable housing in the tourism communities of the West.

Even before the pandemic, the destination towns of the West had a shortage of affordable housing. Limited supply, the remote nature of some of the communities, zoning restrictions and even short construction seasons all contributed. But the COVID-19 pandemic accelerated everything, including the rise of so-called “Zoom towns.” Freed from physical offices, suddenly people could live, work and recreate in the vacation communities of the West, with few needs beyond a high-speed internet connection to do jobs that formerly required their presence in major cities.

It also in recent years became much easier for owners of second homes to list vacancies with internet-based property firms that promise a steady cash flow in places with seasonal, tourism-based economies. When those homes enter the short-term vacation rental pool, they’re no longer available to the local workforce.

Brian Chesky, Airbnb’s CEO, said recently that about one-fifth of the company’s business by room nights is now stays of 30 days or more. People are booking longer stays that combine work and leisure, an area the company sees as full of potential growth. Vacasa, which is based in Portland, Oregon, went public in early December on the promise of its technology to manage properties, and the understanding that vacation rentals for large groups or families are an untapped market. Jamie Cohen, Vacasa’s chief financial officer, told Oregon Public Broadcasting that at least a fifth of people staying in vacation rentals did so for the first time during the pandemic.

There are few statewide efforts to address the effects of short-term rentals; some states, such as Idaho, outright prohibit local governments from enacting bans. Individual Idaho resort communities can and do enact health and safety regulations for short-term rentals, as well as collect sales and lodging taxes. And voters in eight separate Colorado mountain towns recently passed various local option sales taxes and lodging taxes on short-term rentals, the proceeds of which are aimed at addressing housing shortages.

Voters in Vail, for example, approved a half-penny sales tax increase to help pay for housing initiatives. Several communities expanded their borrowing capacity to pay for measures that help address labor shortages, driven in part by a lack of affordable housing because so much has been converted to short-term rentals.

Colorado state Sen. Chris Hansen, a Democrat, has proposed legislation that would tax many short-term rentals at the lodging property rate, which hotels pay, for each day the property is rented more than 30 days a year.

His bill emerged in response to developers who began converting ski-town hotels into short-term condominium rentals with individual owners. That meant the new rentals qualified for lower residential property tax rates, instead of the lodging rate. In the ski town of Steamboat Springs, for example, the situation crushed the tax base by wiping $1.5 million out of the local school budget, Hansen said.

“If we don’t have a stable property tax base, we then start to create a huge, additional burden on the state budget,” Hansen said. “And we have a lot of constraints on our state budget. I think the main focus here is really making sure that we’ve got adequate revenue for schools, for fire districts, for police force, etc., public safety, that are dependent on property taxes.”

Real estate agents, property management companies and many individual property owners oppose the legislation. They would rather see other options used, including restricting short-term rentals to certain zones of communities, said Julia Koster, executive director of the Summit Alliance of Vacation Rental Managers, which represents the owners and managers of about 7,000 short-term rental units in and around ski towns including Breckenridge.

“We’re offering suggestions like putting out a sales tax or putting out a lodging tax that helps to pay for these workforce housing pieces. Whatever that looks like, those are all pieces that we need to sort through, but those are all definitely part of the conversation,” said Koster. Her own landlord told her the home she and her family live in will become a short-term rental in 2024 so he can afford college tuition for his children.

In general, the vacation rental industry also fights efforts to enact short-term moratoriums or bans. The was the case for the community-led ballot measure in coastal Oregon, said Kirk. Two separate political action committees lined up against it; they were backed mostly by real estate and property management interests that easily outspent the $35,000 locals raised to pass the measure.

Meredith Lodging, a large local vacation property management firm in Oregon, gave $200,000 to Save Lincoln County Jobs, a PAC set up explicitly to fight the measure. The VIA Oregon Coalition, a separate political action committee established to support short-term rental policies, took in $28,500 from the Oregon Realtors and one of its political action committees. Another $10,000 to fight the measure came from Vacasa.

“We are in favor of fair and equitable regulations that preserve our homeowners’ ability to operate their vacation rental and earn income they rely on, while also protecting the interests of full-time residents,” Sarah Tatone, the head of communications at Vacasa, said in an emailed statement. “It’s about finding a balance to regulate short-term rentals fairly, without limiting the potential to spur growth or support local businesses and the economy.”

Yet few popular tourist communities in the West have enough affordable options for the staff necessary to run a vacation destination in peak season. In Montana, people who can’t afford the rent in some tourist towns have been camping more regularly on public lands in the vicinity, encroaching on grizzly territory. The housing shortage has led directly to more encounters between bears and people, said Bill Avey, a National Forest supervisor in the region.

In Whitefish, a gateway to Montana’s Glacier National Park, the lack of affordable workforce housing in 2021 forced nearly all food- or beverage-related businesses to curtail hours or close at least one day a week at the height of the summer tourist season, said Lauren Oscilowski, who owns the Spotted Bear Spirits distillery. During the past year, about half the people on her 11-person team have been forced to move because their landlords decided to turn their housing into more lucrative short-term rentals.

“There’s this national thing where hospitality people aren’t returning to hospitality because the wages are too low, or they’re sick of dealing with the public or whatever it is,” Oscilowski said. “But that’s just a piece of it. The bigger piece for us is really housing. Summer servers and hospitality people are making money hand-over-fist in Whitefish. It’s a great job to have.”

Oscilowski sits on the sustainable tourism management committee of the Whitefish Convention and Visitors Bureau. Montana localities have fewer taxation tools than Colorado or Idaho, so their options are limited, Oscilowski said. She supported a moratorium on new short-term rentals, if only to slow the transition. The city defeated the measure in October after the mayor voted “no” to break a tie on the city council.

Still, she’s heartened that the city is considering some of the recommendations from the sustainable tourism committee. They include requiring all short-term rental listings to have a license number and hiring an outside consultant to help the town with enforcement.

“Anyone who’s been in our community for over 10 years has seen the change, and also feels the frustration and hardship of it,” Oscilowski said. “It’s an undeniable issue.”

This story originally appeared in the The Daily Montanan, which can be found online at dailymontanan.com.