The vacation rental on your block may be giving you fits but it could also be increasing the value of your home.
The short-term rental segment of the “Shared Economy” is pitting neighbor against neighbor, sparking debate over private property rights, and in a tight market, increasing home prices and long-term rent by taking much-needed housing off the market. What’s more, thousands of unlicensed operators are siphoning room tax revenue that otherwise would have landed in government coffers — about $45 million worth since 2015.
Local real estate experts say they are at a loss to calculate the saturation of short-term rentals in the Southern Nevada market.
Airbnb, founded in 2008, now has more than 2 million listings in 34,000 cities. The short-term rental (STR) booking site declined to provide information on the number of listings it has in Nevada.
The Current’s analysis of data submitted to the City of Las Vegas Planning Commission and “scraped” from Airbnb by Airdna.co, a research and data site, provides a good indication of the prevalence of STRs and reveals a striking correlation between home appreciation and Airbnb revenue.
With 6,736 active listings valley wide but just a few hundred “hosts” licensed by the City of Las Vegas, which is the only jurisdiction to permit STRs, the data also indicates bans and restrictions are doing little to thwart the practice.
Another site, Insideairbnb.com, reports slightly more listings — 6,784 as of October 26. The vast majority (4,515) are for the entire home or apartment, while 2,177 listings offer a private room for rent, and 92 listings offer a shared room. The average price for all listings is $162 a night.
“When you pull up the map, there are thousands of unlicensed homes,” says Julie Davies, a short-term rental host who literally wrote the book on the phenomenon and teaches a course at the College of Southern Nevada on best practices. “It’s more profitable to take a chance and have Code Enforcement fine you than go through the process and be the low-hanging fruit that’s attacked in this industry.”
Airbnb.com, like other home-sharing sites, allows all qualified hosts to list their properties regardless of local prohibitions — leaving regulators to battle it out with property owners.
“Internet companies such as Airbnb and VRBO pay no mind to such ordinances,” alleged RealtorMag last year. “They’ve swamped the market in California and elsewhere with thousands of STR listings, making the rules difficult or impossible to enforce. These rental sites appeal to homeowners who need additional income. Then the companies use those owners as examples to coax cities into making STRs legal.”
“We’re committed to helping our community pay its fair share of taxes, which is why have agreements to collect and remit taxes in more than 400 jurisdictions around the world. These agreements streamline the tax collection process for hosts, guests and jurisdictions, and we are willing to work with communities in Nevada to reach similar agreements,” said Laura Rillos, a spokeswoman for Airbnb.
Washoe County, Sparks and Reno allow STRs and have agreements allowing platforms to collect room tax. But in jurisdictions where STRs are prohibited, tax collection is left to the hosts, who are required to remit the 13 percent levy to the state.
A City of Las Vegas spokesman estimates each rental generates about $3000 a year in room tax — about $20 million a year based on 6,736 rentals. Since 2015, Henderson is estimated to have lost $1.6 million in uncollected room tax. In Las Vegas, which has just a few hundred licensed hosts, uncollected tax since 2014 could amount to as much as $9 million. Unlicensed hosts in Clark County deprived the state of approximately $33.5 million since 2015. North Las Vegas is estimated to have lost $658,000 for uncollected room tax between 2015 and 2017.
Clark County’s 89109 zip code, which includes the Strip from Tropicana to Sahara and mostly older apartments and homes east of the Strip, is the short-term rental epicenter of Southern Nevada, with a little more than 1,000 current residential listings. In 2017, short-term rentals in 89109 generated $25.5 million in Airbnb revenue. The platform has generated bookings worth $20.8 million through August of this year in 89109.
The 89109 zip code also enjoyed the highest real estate appreciation of any zip code in unincorporated Clark County in 2017, according to SalesTraq, at 23.5 percent.
The Henderson zip code of 89074 led that city in Airbnb revenue with $1.3 million in 2017, only to be overtaken by 89011, which has generated $1.1 million so far this year through August. The zip had a 20.5 percent home appreciation rate in 2017, the highest in Henderson.
Zip code 89117 in the city of Las Vegas generated $6.7 million in Airbnb revenue in 2017 and $5.7 million through August of this year. Homes in that zip code appreciated by 7.8 percent in 2017. The downtown Las Vegas zip code of 89101, which led Airbnb revenue in 2014, enjoyed the highest rate of appreciation within Las Vegas zip codes at 30.4 percent in 2017.
Banning vs. planning
“They are nothing more than lodging and hotel businesses in our neighborhoods that drive up home prices, cause extra noise and traffic, and compete with home-buying families in this very difficult market,” said Geoconda Arguello-Kline, the Secretary-Treasurer of Culinary Local 226, the largest labor union in the state. Its parent union, UNITE HERE, opposes short-term rentals in a variety of destinations.
The City of Las Vegas, spearheaded by residents who say their neighborhoods are being turned into tourism districts, is currently entertaining a ban on short-term rentals. Current licensees would be grandfathered in and those in the application process would have the opportunity to proceed.
“When you have eight to ten thousand unlicensed minus a few hundred licensed, a ban going forward won’t work,” says Davies. “People who play by rules will be put out of business.”
“What’s better is to use planning,” according to Davies, who says she and her husband purchased their first bed and breakfast 30 years ago. “Our newest one is in Florida. It’s near Disneyworld and has a ‘Frozen’ theme. I use it as the example for my course. Our goal is to have a short-term rental near each of our kids.”
“We’ve suggested that in their planning, the city look at areas that are blighted. Investors like me, who are wanting to do business will be willing to pay a little more,” says Davies, noting that currently, city inspectors scrutinize STR applicants while ignoring sofas and trash in neighboring yards that would render the street unappealing to vacationers.
“Officials need to say ‘Here is the demand. Here is what we need to have to keep those who do it as a hobby from jumping in on game days when there’s a special event’ And then we license based on demand. You don’t license everybody. You don’t license everywhere. You plan. But you have to approve enough that supply is sufficient to weed out bad actors. Code enforcement is essential.”
But code enforcement is costly, and despite hefty licensing fees imposed on hosts, the City of Las Vegas says it can’t keep up.
Las Vegas is not alone. San Francisco, New York and the District of Columbia have imposed restrictions or bans.
But last week, motivated by residents who oppose restrictions imposed just months ago on STRs, the San Diego city council repealed its rules.
Las Vegas officials are under pressure to do the same. Hundreds of homeowners, most dressed in t-shirts indicating their opposition to the ban, packed a recent City of Las Vegas planning commission meeting. They contend the extra income they reap by renting out a room or an entire house makes its way back into the economy. And they say Las Vegas will miss out on tax revenue. Planning commissioners voted for the ban. The City Council will have the final say.
“Home sharing is an economic lifeline for hundreds of families in southern Nevada. A ban on short-term rentals would devastate Las Vegas families who depend on home sharing to afford to stay in their homes and hurt local businesses that benefit from Airbnb guest spending,” said Rillos of Airbnb.
Raising the rent
Vacation home sales have climbed in concert with the popularity of short-term rentals. In 2017, 30 percent of all home sales were vacation homes (721,000) or investor-owned homes (1.14 million), according to the National Association of Realtors.
Las Vegas has the seventh most non-owner occupied mortgages in the nation – 12.9 percent of all loans, according to Lending Tree.
Rental prices and home values are on the rise, especially in vacation destinations.
CoreLogic reports Orlando had the highest year-over-year rent increases in August at 6.1 percent, with Las Vegas coming in at 5.8 percent. Nationally, rents rose by 3.1 percent year-to-year.
Affordable housing advocates worry that “Alternative Lodging” options are displacing long-term tenants, as landlords reap a year’s worth of rent in a fraction of the time on the short-term market — 83 days, according to one study by the Los Angeles Alliance for a New Economy. The study says the city was losing 11 rental units per day to short-term rental operations in 2015. It estimated that area rents increased by $464 million as a result of fewer units.
A review of listings on Airbnb includes about 150 apartments within Las Vegas city limits. No data is available for other municipalities.
The UNLV Lied Institute of Real Estate reports 148,004 apartments in Southern Nevada with approximately 10,700 vacant as of June 30.
An abundance of jobs in vacation destinations (4.1 percent job growth in Orlando and 3.7 percent in Las Vegas, year-to-year) is partially responsible for driving up rents and home prices, but experts say don’t discount the role of the increasingly popular vacation rental.
The Las Vegas Review-Journal reported this month that a ballot question on banning vacation rentals at South Lake Tahoe may be depressing home prices, which have increased 8 percent year-to-date over last year, compared with 12 percent in Lake Tahoe and 16 percent in Incline Village.
“There is speculation the South Lake Tahoe numbers are not trending with the rest of the lake because of the pending vacation home rental ban presently on the November ballot,” Susan Lowe, corporate vice president for Chase told the RJ. “Many potential buyers are waiting to see the outcome.”
Research published this year indicates that in the 10 cities with the largest Airbnb market share in the US, the entry of Airbnb resulted in 1.3 percent fewer hotel nights booked and a 1.5 percent loss in hotel revenue.
A 2014 study by the New York state attorney general found from 2010 to 2014, “revenue to Airbnb and its hosts from private short-term rentals in New York City is expected to exceed $282 million.”
Nevada’s resorts have sent high-rollers and entertainers who demand privacy to private homes for the last half-century. The industry has not deigned to weigh in on vacation rentals.