Here are some of the reasons STRs need meaningful regulation:
STRs hurt housing for locals.
- Hood River seems to be quickly changing from a vibrant rural county to an exclusive resort community. Tourist use of homes as STRs or second-homes is growing exponentially.
- According to 2011-16 American Community Survey data about 8% of homes in in Hood River County are not used for full-time residents but are for “seasonal, recreational or occasional use.” This is double the percentage from 2007-11 when just 4.4% were for seasonal use. A national travel site recently ranked Hood River as the number one place in the US to invest in a winter vacation home.
- Hood River is one of the least affordable rural communities in the nation. We are literally in the 99th percentile according to the Oregon Office for Economic Analysis. Today’s median listed home price in Hood River is $533,000, a price which only the top 10% of Hood River residents can afford and about $100,000 more than Portland or Bend.
- Hood River is the least affordable county in Oregon for long term renters. Some of that rise is caused by homes being taken off the long term rental market and turned into lucrative Short Term Rentals (aka “STRs” or vacation rentals) instead. Hood River’s rental vacancy rate is just 1%. We’ve heard some pretty sad stories of people losing their home when their landlord converts it into an STR and how hard it is to find a new rental
- Short Term Rentals make a bad situation worse. The growth of STRs and increased housing costs are closely linked, according to multiple recent studies in communities across the country. STRs remove houses from use by full-time residents, reducing supply when the housing need is growing.
- STRs hurt neighborhoods. Dark houses during the week with raucous weekend bashes — that’s too familiar for more and more neighbors who complain about losing their sense of community.
- STRs have become one of the most powerful tax loopholes for real estate investors. Vacation homes can become 1031 tax-deferred exchanges – a strategy that allows wealthy speculators to dodge all federal income tax by acquiring second, or more, homes with proceeds from in-kind properties elsewhere. Investors restart depreciation on the new homes in Hood River as depreciation on properties elsewhere expire. Rewards are highest when owners spend no more than 15 -30 days per year living in the second home.
- In a rising market like Hood River, short-term rentals fuel speculation by allowing investors to use the high rental rates to cover the carrying costs of a house for a period of time while the property appreciates in value.
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STRs hurt not just families looking for housing in Hood River, they hurt local businesses too. Businesses have trouble hiring workers when they can’t find housing. Ironically, STRs hurt tourist communities in particular when workers in low-paying service and tourism-related jobs can no longer afford to live in the community they work or within a reasonable commuting distance.
STRs hurt Hood River agriculture.
- STRs in EFU zones hurt beginning farmers. Beginning farmers regularly say that land cost and availability is their most significant barrier — particularly where recreational and other uses compete for the same small parcels.
- STRs in EFU zones hurt established farmers. Increased traffic on farm roads, late-night revelry that startles livestock and recurrent trespassers with all kinds of ‘reasons,’ are just a few perennial headaches made worse with encroaching non-farmers.
Public policy makes a difference.
- Right now, our policy incentives are all on the side of encouraging out-of-town investors to buy Hood River homes. Many STRS in Hood River County are second homes (or third or fourth) and aren’t occupied by the owners except for a few weeks. STR rates – $150 to $700 a night – pay the mortgage and taxes. And our state and federal tax codes subsidize second-home ownership with appealing tax breaks — made more lucrative by federal tax-code restructuring that favors so-called ‘pass-through’ investment partnerships.
- Second-home owners often claim they can’t afford their second home without sweet STR income. We agree. Lucrative STR income gives a source of real estate funding to out-of-area investors who couldn’t afford to buy here otherwise.
- Online STR platforms like AirBnB have been a game changer and local governments have struggled to keep up. Hood River needs to get a handle on STRs before its too late.
What about the cap?
- Hood River County’s total zoning cap of 100 STRs (25 of which can be on farmland) is a nothing-burger if not enforced. Using STR application fees and fines to fund enforcement work well when there’s a strong policy to do so. Our research shows that there are already about 140 STRs in the county and only 30 have applied for an STR permit from the County. What good is a cap if most STR operators don’t apply for a permit or pay transient room tax?
- Conversion of permanent housing to STRs will accelerate even with a cap, allowing non-residents to divert housing to investments. Caps are often adopted as a compromise measure and subject to frequent change with political winds. STR supporters like to point out that conversion to STRs needn’t be permanent, but government removal of someone’s income isn’t real-world.
First Homes First – Help with Local Affordability
- With Hood River’s housing crisis, its far more important to help local folks get into their first home than it is to help outside investors make money in Hood River’s real estate market.
- Hood River should stick with its current requirement that an STR operator must be a permanent resident of the home. This is similar to the common sense rules that Hood River, Portland, Ashland and many, many other communities use.
- With this requirement, a fulltime resident can rent out a bedroom on AirBnB or even their whole house for a couple of weeks a year, but the main use of the house is as their own primary home. This eliminates STRs for out-of-town investors while allowing real residents to earn a little extra income. Some communities put a limit on the number of days that even these resident-operated STRs can rent out.
Urban Growth Area
In the Urban Growth Area around the City of Hood River, there are no rules on STRs at all. Since all of the land inside the Urban Growth Area is expected to eventually be part of the City, the County said it would adopt the City’s rules on STRs there. That was over a year ago and the County hasn’t adopted anything yet, nor is anything lined up as part of the code changes the County is working on now. Meanwhile, the UGA is the wild west for STRs, anyone can operate one, no permit, no rules.
Resources on STRs:
HRVRC testimony to Board of Commissioners June 18, 2018
HRVRC Testimony to Board of Commissioners April 16, 2018
Economic Analysis of Impact of STRrs in Hood River