In the past few years, we have heard a lot of buzz about short term rental investing. AirBNB’s are the new investment craze. And all kinds of “investors” are seeking to capitalize on the craze. Is this craze coming to ruin your community? Your neighborhood?
How would you feel if the house or condo next door is full of tourists who like most people on vacation want to unwind, often until the wee hours of the night? Do you think your neighborhood is going to continue as a safe space for your children with a bunch of transient vacationers in and out of your community? Do you think that these people have any regard for the residents and the rules of your neighborhood common areas? Not a chance!
A short term rental is classified as:
“Any unit or group of units that is rented to transient occupants more than three (3) times in a calendar year for periods of less than thirty (30) days or one (1) calendar month” (1)
As of 2021, there are over 345,000 AirBNB listings, just in Florida! (2) I experienced firsthand what just one short-term rental investor can do to a wonderful neighborhood.
My home is in a nice area of suburban Orlando, close to the theme parks, and other attractions. Good schools, a neighborhood park, and close to grocery stores and restaurants. A quiet neighborhood where most of the residents are owner occupants, meaning they own their home and live here full time. We do have a few “snowbirds”, but these folks don’t rent their house out at all when they are away.
Beginning in mid-2018, my neighbors and I began to see a shift. A house went up for sale, the first in almost 2 years. Since our neighborhood is a well-established community, close to many restaurants, grocery stores, as well as the attractions, it would naturally attract many buyers who want to be part of a great community. Of course, these factors will also attract real estate investors.
The house I mentioned sold in 1 day with multiple offers for over the asking price. To anyone wanting to sell a house, this sounds fantastic, right? This house had only 1 offer from buyers who wanted to live here. These buyers were squeezed out by multiple cash offers from out-of-town investors. In many instances, these investors have no regard for the community or the people who call it home. They are only out to turn a quick buck, however they can. This includes the short-term rental approach.
Our neighborhood HOA expressly forbids short term rentals of any kind. This is made clear by the homeowners’ association by-laws and deed covenants that govern the homeowners. (Our association does allow for lease terms of 1 year or more). However, do you think some absentee investor cares about this? The investor who purchased this property had it on every short-term rental web site out there within a week of closing the sale. When we discovered this, we sent a letter through the association attorney to cease and desist the short-term rental activity. There was no response from the investor. A second and third request were made. Again, crickets! Meanwhile, this absentee investor continued to violate the HOA and rent short term.
We spoke the attorney for our association as well as our county commissioner regarding what could be done. In each case the response was, “this is a civil matter” and “no laws are being broken.”
To protect our community and our property values, we must expend precious dollars to seek remedy in civil court against the property owner. Legal fees, filing fees, time, and effort. Then comes the pandemic and all the courts and government offices are closed. Meanwhile, the property continued to be rented short term.
During a professional golf tour event in 2019, at a country club very near to our neighborhood, this house was rented to a group of vacationers. The party never stopped! All hours of the night, the party continued at this house. Speeding on the residential streets, noise, trash, and beer cans in residents’ yards. No regard for the people and families who call our neighborhood home. This is just one example of the damage short term rentals can do to a community. Just one of several examples I can site.
Unfortunately for many like me and my neighbors, this is becoming a serious threat to a way of life many people have worked very hard to achieve. A safe neighborhood and thriving community.
Yes, I live in Orlando, tourist mecca of the world. There are many hotels, neighborhoods and developments in Central Florida specially designed to cater to the short-term rental investor and vacationer. I have done a “Staycation” in a few of these developments myself. But in residential areas, one short term rental begets another and can create a serious domino effect of problems for your community.
Given the current shortage of affordable housing stock in Central Florida and many other parts of the country, we must ask ourselves, is this how we see the future of housing in our communities? Or should we take a stand and be vigilant to protect our family neighborhoods from turning into something undesirable. What is this the future we want? “The younger generations with no opportunity to purchase a home? Enjoy the sense of community? Build equity in a property that will not be ruined by an invasion of investors with a big bank behind them? I think not!
A recent study shows short term rentals can negatively affect neighborhood property values. This is called the “Externality effect”. Short-term rentals may create negative nuisance externalities, lowering nearby property values. If neighbors fear turnover or unfamiliar people in their neighborhood, this may reduce demand for housing. (3) If there is high percentage of rental properties in a neighborhood, property values can stagnate and even decrease. All while costs for common area maintenance, insurance, and financing increase. Look at all the investors who hit the exits at the same time during the 2008-2009 Financial Crisis. It can happen again, only this time for different reasons.
Many lenders won’t even issue a mortgage to a buyer to purchase a home in a neighborhood with a high concentration of investors. Also, since many short-term rentals are under the radar so to speak, they don’t pay the bed tax like a hotel, so local communities miss out on tax revenue that they would have received if those guests had stayed at hotels instead.
All this leads us to this one question…What can I do to protect my biggest investment? My home!
First, get involved in your community. Talk to your neighbors. Talk with your local elected representatives to understand the current regulations already in place. Have a plan of action with your neighbors and\or your HOA to identify potential issues and develop a strategy to quickly combat the short-term rental investor invasion from coming to your neighborhood.
Call on your elected officials to stop catering to the whims of these investor only developers and shift our focus back to building affordable, family-oriented neighborhoods and communities for people to live. Insist they work to protect our vibrant communities of all socio-economic levels.
Protect and encourage homeownership. For families. For your community. Peace.
(1) Source: City of Ft. Lauderdale zoning and land use
(2) Source: www.airdna.co 11-14-2022
(3) Source: Journal of Urban Economics Volume 124, July 2021,