Shedding some light on the heat of short-term rentals

This is part 2 of an ongoing series on the subject of short-term rentals. Part 1 ran in the January 17 edition of The Nugget. Click here to see Part 1.

Last time we learned what a Short-Term Rental (STR) is and the local rules surrounding them. Now we’ll take a closer look at some of the concerns surrounding STRs and how they are or are not being addressed.

Nationally, most controversy centers around how STRs do or don’t affect housing affordability or property values. The thought being that STRs reduce supply for residents, making housing and rent more expensive. Supply and Demand: It’s more than just a good idea, it’s the law.

Increased property values are generally a good thing for existing homeowners. For buyers or renters… not so much. So again, different Sisters residents may feel differently about the same situation.

Less opinion, more data. Turns out the big brain people at businesses like Zillow and AirDNA, as well as institutions, like UCLA and USC, were kind enough to provide that. All credible studies agree that STRs can affect housing prices. But even among experts, there is little agreement on how much. Every study is full of caveats, assumptions and unknowns. Economics is, after all, an inexact science.

The most quoted study is from 2017 (a lifetime ago in economic terms) and showed a .18 percent increase in rents and a .26 percent increase in housing prices for every 10 percent increase in STR listings. More recent research shows that STRs account for 1 to 4 percent of total housing price increases in the past several years. So, if Sisters allowed 10 percent more STRs (11 units), the average housing price would increase about $2,000. Or, of the $350,000 run-up in average price in Sisters since 2020, less than $10,000 could be attributed to STRs.

But hold on, it’s not even close to that easy. National statistics rarely translate into local markets, especially small markets like Sisters. This is also a time to note the high percentage of non-owner-occupied houses in Sisters. Non-owner-occupied can mean a rental. Or can also mean a vacation home or second home. Common in all tourists town, these can definitely affect housing prices as outside money scoops up desirable houses, which sit empty most of the year.

One area of agreement among researchers was that owner-occupied STRs had a negligible effect on rents or housing prices. What is an owner-occupied STR? This is when the owner’s primary residence is used as an STR on a part-time basis when the owner is away. And this is what is generally happening in Sisters. This looks like a local family escaping the drama of Quilt Show, Rodeo Week or other event, and putting a few bucks into their own vacation fund.

I spoke with Joe Morgan, Owner of Streamline Vacation Rentals. Joe is a Sisters local, realtor, and expert on the STR market.

“The majority of Sisters STRs are owned by locals who rent their homes for occasional events and some summer weekends,” he said. “Current prices, interest rates, and rental rates make it harder than ever to operate a profitable full-time STR. Doable, but much more difficult than 2-3 years ago.”

Airbnbust? After a massive COVID-fueled run-up, STR investors are facing a reckoning as both occupancies and rates are down nationwide. Many investors who purchased STRs in the past couple years are not meeting profitability goals, and are turning them into long-term rentals or selling them outright. This despite continued growth in national STR inventory.

Conclusions? It seems both the quantity and the nature of STRs in Sisters are not materially affecting property values or affordability. In a purely economic sense, the tourists (and the money that they bring) likely affect our town more than the STRs themselves.

Next time, we’ll take a look at some other externalities of STRs, focusing on neighborhood livability. Stay tuned.

Mike Zoormajian is principal at WetDog Properties in Sisters. Providing local real estate, property management and investor services. Questions and comments to: letters@wetdogpnw.com.