Amid Housing Crises Vacation Towns Limit Short-Term Rentals

STEAMBOAT SPRINGS, Colo. (AP) — In the Colorado ski town of Steamboat Springs, motels line the freeway, once filled with tourists eager to pitch down the slopes or bathe in the local hot springs.

Now residents like Marc McDonald, who keep the town humming by working service-level jobs, live in the converted motels. They cram into rooms, some with small refrigerators and 6-foot-wide kitchens, or even just microwave kitchenettes. Others live in mobile homes.

Steamboat Springs is part of a wave of vacation towns across the country facing a housing crisis and grappling with how to regulate the industry they point to as a culprit: Short-term rentals such as those booked through Airbnb and Vrbo that have squeezed small towns’ limited housing supply and sent rents skyrocketing for full-time residents.

Difficulty staying afloat

“It’s basically like living in a stationary RV,” said the 42-year-old McDonald, who lives with his wife in a just over 500-square-foot converted motel room for $2,100-a-month, the cheapest place they could find.

McDonald, who works maintenance at a local golf course and bartends at night, and his wife, who is in treatment for thyroid cancer and hepatitis E, said they will be priced out when rent and utilities jump to about $2,800 in November.

“My fear is losing everything,” he said, “My wife being sick, she can’t do that, she can’t live in a tent right now.”

Short-term rentals have become increasingly popular for second homeowners eager to offset the cost of their vacation homes and turn a profit while away. Even property investment companies have sunk hundreds of millions of dollars into the industry, hoping to pull a larger yield from tourists seeking their own kitchen, some privacy and a break from cookie-cutter hotel rooms.

In turn, local governments — from Lincoln County on Oregon’s coast to Ketchum in Idaho’s Smoky Mountains — are grappling with how to regulate the $74 billion industry they say fuels their economies while exacerbating their housing crises.

Rental tax

In June, the Steamboat Springs City Council passed a ban on new short-term rentals in most of town and a ballot measure to tax the industry at 9% to fund affordable housing.

“There is not a day goes by that I don’t hear from someone ... that they have to move” because they can’t afford rent, said Heather Sloop, a council member who voted for the ordinance. “It’s crushing our community.”

The proposed tax is strongly opposed by a coalition that includes businesses and property owners, the Steamboat Springs Community Preservation Alliance. Robin Craigen, coalition vice president and co-founder of a property management company, worries the tax will blunt any competitive edge Steamboat might have over other Rockies resorts.

“The short-term rental industry brings people to town, funds the city, and you want to tax it out of existence?”

Craigen said. “It doesn’t make sense.”

Small town tourism

While larger cities, including Denver and Boston, have stricter short-term rental regulations, smaller tourist destinations must strike a delicate balance. They want to support the lodging industry that sustains their economies while limiting it enough to retain the workers that keep it running.

“No one has found the perfect solution yet,” said Margaret Bowes, executive director of the Colorado Association of Ski Towns, which tracks efforts to control short-term rental markets.

“The trajectory of the number of properties becoming (short-term rentals) is not sustainable,” she said.

While the industry’s major companies, including Airbnb and Vrbo, do not release comprehensive data publicly, figures from analytics firm AirDNA and the U.S. Census Bureau show nearly 30% of homes in Steamboat Springs are vacation rentals.

That’s some 3,000 units taken out of the Steamboat Springs’ housing supply as the town’s median home prices jumped 68% to $1.6 million since early 2020, according to data from Zillow.

Houses dot a hillside in Steamboat Springs, Colo., Wednesday, Aug. 3, 2022, in Steamboat Springs. The city council passed a rule in June that could prove to be a model for other vacation towns: A ban on new short-term rentals in most of the city and a ballot measure to tax bookings at 9% to fund affordable housing. (AP Photo/Thomas Peipert)

Rental zones

A study commissioned by Airbnb found that short-term rentals support 13,300 jobs in popular Rocky Mountain counties and, it argued, have little impact on housing prices. The real problem, it said, is that housing construction hasn’t kept up with job growth.

“This report underscores the integral role of short-term rentals in the Colorado tourism economy,” Airbnb spokesperson Mattie Zazueta wrote in an email.

“Vacation rentals … help some vacation homeowners and residents afford their homes, and are a key revenue generator in local economies,” Vrbo parent company Expedia Group said in a statement.

The new Steamboat Springs ordinance divides the township into three zones. The red zone, where new short-term rentals are prohibited, covers most of the city but those who have rented in the past 12 months can continue to operate. The yellow zone caps the number of new vacation rentals, while the green zone, set largely beneath the ski mountain, has no cap.

For Sean Bailey, 44, the new laws could not have come sooner. Bailey, who moved to Steamboat in 2019 and works at the outdoors store Big Agnes, squeezes into a bedroom in a mobile home that he rents for $650 a month, while he waits on an affordable housing waitlist.

But now, even “low-income housing is being priced out of the water for a lot of us who are just trying to get by,” Bailey said.