With the world at a virtual standstill, now is not the best time to own a vacation rental. Short-term rental hosts are reeling from massive cancellations as travel grinds mostly to a halt.
“If you can imagine the story, we’ve probably heard it,” says Louis Koorndyk of the Greater Las Vegas Short-Term Rental Association (GLVSTRA). “Some are hurting worse than others. There are fully licensed operators who are circling the wagons and trying to support their families. Do we hang on? Do we sell the property? Do we rent long term?”
Amid the uncertainty, Airbnb, the king of disruption, appears to have no intention of succumbing to the coronavirus.
The vacation rental platform provided $250 million in assistance to hosts to offset the cost of cancellation fees refunded to customers, and it’s switching its focus to the long-term rental market as the human race adjusts to staying put.
Airbnb did not respond to inquiries about whether it is applying for federal aid.
“Stay for months on Airbnb,” the website says. “Find a fully furnished home for your longer stay, complete with WiFi and everything you need to live.”
The promise of “the perfect home for your longer stay, without committing to a long-term lease,” comes with a cost.
A modest three-bedroom, two-bath home in Henderson on Airbnb is listed at about $4,500 a month, without the cleaning fees and taxes.
Why would anyone shell out money to a middleman for a long-term rental?
“If a normal home rents for $1,200 a month, a fully furnished home should be $2,000 or $2,200,” says real estate expert Paul Murad. “And there’s another premium for month-to-month rent. As you create conveniences there’s a premium.”
Murad says the inventory of pricier rentals is too low to affect rental pricing in the traditional long-term market.
Vacation rental hosts hoping to snag longer bookings are marketing to healthcare professionals and others seeking social distance during the COVID-19 outbreak.
“In the last two weeks of March, the company saw the number of guests booking longer-term stays within their same cities nearly double,” TechCrunch reported of data it received from Airbnb. “Meanwhile, 80% of Airbnb hosts now accept longer-term stays and about half of the company’s active listings now provide discounts for stays of one month or longer.”
“Most Airbnb hosts have no idea about the laws involved with long-term rental of a home,” says Julie Davies, a short-term rental educator and host, who estimates about 10,000 STRs are operating in Southern Nevada. Fewer than 1,000 are licensed, according to local governments.
A shift to the long-term market could relieve STR hosts of the regulations that limit short-term rentals in some jurisdictions and prohibit leases of less than 30 days in unincorporated Clark County.
In the meantime, the Nevada Property Rights Alliance is circulating a petition asking Gov. Steve Sisolak to take executive action to suspend regulation of short-term rentals in the time of COVID-19.
“This may mean the difference between someone being at risk of losing their home or not having the funds needed to provide for basic food and necessities for their families,” the petition for short-term rental relief says.
The NPRA’s members include Americans For Prosperity (AFP), a Republican-allied political advocacy organization funded by the Koch family, owners of Koch Industries, the second-largest company in the U.S. behind Cargill.
If successful, it wouldn’t be the first time Sisolak has embraced reforms suggested by AFP.
On March 27, AFP posted an online petition advocating that the governor take a number of measures, including relaxing licensing regulations to recruit additional medical personnel. On April 4, Sisolak announced a number of similar measures.
“We think market forces can better solve the problems than the government coming in with a one-size-fits-all glove,” says Wiz Rouzard, Nevada field director for AFP. He says the organization got involved when it “saw officials disregard the testimonies of constituents. We joined to contribute and provide tools to those property owners to let elected officials know how economic power benefits everyone as a whole.”
Rouzard says the economically disadvantaged are hurt most by regulations such as those enforced by the city of Henderson, which also requires more than $800 a year in licensing fees.
“We recognize economic opportunities are very important. When you talk about freedom and liberty, the more people can benefit themselves, the better,” he says.
Rouzard says there’s an appetite among code enforcement officials to ease regulation on short-term rentals.
“Making law-abiding citizens into criminals because you don’t approve of what they are doing is not what the government is about,” he says.
The NPRA says it intends to meet with Clark County commissioners and Las Vegas Mayor Carolyn Goodman to gain their support for suspending short-term rental regulation during the pandemic.
“People were actually fixing those properties up and having nice people living there rather than homeless setting fires,” Murad says of blighted areas in Las Vegas. “Especially where there’s redevelopment, the short-term renters are the ones that improve the neighborhood. They’re driving the value up for the homeowners.”
“I would think commissioners would be doing somersaults in excitement,” says Koorndyk of the GLVSTRA, touting the higher property values that can accompany vacation rental investment. “Even blighted areas have come up in value.”
Koorndyk says he’s heard of “some movement” on the Clark County Commission, which has banned vacation rentals. But he says an open dialogue on the topic is impossible in an environment where hosts fear being shut down.
“Just banning something, we’ve tried this for years and it’s not working,” he says.
Commissioner Michael Naft says more than 6,000 STRs are estimated to be operating illegally in the county.
“Prior to the shutdown, I did have several meetings with stakeholders,” Naft said via email. “I do not believe it is an issue that can be ignored by the County.”
“While the current priority is the health and safety of all residents and the next priority will be the economic recovery, I do believe this is an important conversation that we must have. When the time is appropriate, I will continue to work with all stakeholders including neighbors, the Nevada Resort Association, the Culinary Union, and STR operators,” Naft said.
Commission Chairwoman Marilyn Kirkpatrick said through a spokesperson that “she expects this issue will be addressed during the next Legislative session, and that at this time her focus is on addressing the impacts and expected impacts of the coronavirus here.”
Murad says if the issue goes to the Legislature, it will be up to local hosts to make their cases, because “lobbyists for Expedia and Airbnb have been ineffective.”
“Now more than ever, homeowners should be able to leverage their greatest asset, their home, to supplement their income, provide for their loved ones, and open their doors to those seeking shelter,” says Jacqueline Flores of the GLVSTRA.
“They (local governments) are spending an awful lot of taxpayer dollars trying to regulate how people rent out their homes when they could be generating revenue,” Flores says.
The City of Henderson says it’s generated $164,820 as a result of licensing 201 properties.
Davies, the vacation rental host, says now is no time to relax regulations for those she says are out to make “a quick buck without regard for the essential work required to do it in a community-friendly or code-compliant way.”
“It is even more important for there to be preventative regulations put into place, quality education about applicable laws and best practices, and strong code enforcement,” she says.
In the meantime, property owners (even investment property) with mortgages through Freddie Mac and Fannie Mae are eligible for 12 months of forbearance relief, but it must be paid back.
“Let the people rent out their homes,” says Murad. “We want to protect the economy. This is an area where no relief is necessary.”