The darker side of home vacation rentals and property prices

 

Charles Hugh Smith brings us a report from one of his correspondents about the impact of short-term vacation rentals on the housing market in resort towns in Colorado.

Over the past few years virtually all of the 'locals' housing in Vail, the duplexes in nearby Eagle Vail, the houses in Edwards - everything in the upper Eagle River Valley where locals lived - has been purchased - often sight unseen - by hedge funds, private capital and wealthy full and part time homeowners. It has all immediately been turned into short term rental properties (STVRs) - Airbnb, VRBO, etc.

Why rent a two bedroom apartment to a teacher for $1,500 a month when you can Airbnb the same 40 year old unit for $2,500 a week?

Except now, there are literally no housing units available.

Ok, a few pop up now and then but for $3,750 to $4,000 a month, since the work at home class has bid up the price of everything in resort towns with fast internet, and all of them have it. Even if they don't, Starlink is $120 a month for 50-200 MBPS connectivity. (I have it, it's flawless.)

Local teachers with masters degrees start at $45,000 a year, fresh out of school.

A $3,750 per month rental requires about $11,000 to move in, first and last plus the security deposit. The annual rent comes to $45,000. Thats the gross pay for new hires, which we need annually as our experienced educators retire, or sell their homes they bought a few years ago for huge gains and move elsewhere.

We can't hire teachers.

We can't hire snow plow operators, who are sort of essential in the high country.

Can't hire substitute teachers at $100 a day.

Can't hire bus drivers.

Nobody making under $250,000 can buy a house and live here anymore. Wendy's pays $19 an hour to start - but you can't work there unless you live with your folks or 4 roommates (maybe).

It's so bad in Eagle County that the school district is bringing new teachers, fresh graduates from the Philippines. The district is building 37 apartments for them to live in, dorm style. Teaching has become a job only workers imported from other countries can afford to do here, like picking vegetables.

There's more at the link.  Go read the whole thing.

Mr. Smith's correspondent talks only about the situation in Colorado, but I'm sure it's manifesting itself (sorry - personfesting itself - must be politically correct, you know!) in other states as well.  Coastal resorts, inland holiday destinations such as southern Missouri and the Ozarks, the hill country of Texas . . . I'm sure they're experiencing something similar, but I have no evidence to prove that.  Can readers help?  Do you know of similar developments in tourist/holiday destinations near you?  If so, please tell us about them in Comments, with whatever details you can provide.

This is where the capitalist system stores up trouble for itself.  By allowing those with capital to shut others out of the market, it condemns those without capital to miss out on those opportunities.  (Mr. Smith wrote about that a week ago in his article "The Problem Isn't a Housing Shortage, It's the Concentration of Ownership by the Wealthy".  Recommended reading.)  I'm no socialist, and I can't support the Marxist idea of "from each according to his ability, to each according to his needs" - that's been revealed over time to be a massively destructive philosophy that ruins entire economies, let alone housing markets.  Nevertheless, I know a number of younger people today, particularly younger couples, who despair of ever being able to own property in or near the areas where they work.  The so-called "American dream" of owning their own home seems closed to them.  That's not all STVR's, of course - the warped housing market at the moment makes it worse all round - but to them, the future looks bleak.  It's little wonder that a number of younger people tend to be socialist in their outlook, because they see capitalism as "unfair" by comparison.  That's not true, of course - all economic systems have their drawbacks and failings - but one can understand how they come to feel that way.  The appalling education indoctrination they're receiving at our schools and universities doesn't help, of course.

Then, of course, there are the builders.  They build houses that will give them the greatest return on investment;  in other words, upmarket dwellings with all the trimmings.  There are few, if any, lower-priced homes being built in major housing markets right now, and those that are tend to be "lower-priced" only in terms of the currently greatly inflated house prices prevailing there.

Eight years ago, my wife and I (who are not wealthy by any stretch of the imagination) moved to our present home in a small Texas town.  We did so for a number of reasons, one of which was the affordability of housing.  For less than half the price we'd have had to pay in the city where we previously lived, we were able to buy a three-bedroomed, ±1,300-square-foot house for an entry-level six-figure price - affordable for an older couple with limited income.  Even so, today, houses on our street, all of which are very similar to ours in size and construction (brick, modern, with nice interior fixtures and fittings) are selling for well over double that - a ridiculous jump in price over so short a period, but for the fact that the housing market has become so distorted by the influx of capital from investors that it's pushed all prices out of whack.

A local developer is building new homes very similar to ours less than a mile away, a few at a time.  He reported that he'd been approached by a major corporate investor, offering him a huge premium if he'd sell them the entire sub-division and build all the houses at once, so they could turn them into rental properties.  He's an older man who's made his pile, and doesn't want to work that hard or under those pressures, so he declined the offer;  but it's telling that a small Texas town can attract that level of interest.  (Yes, we're a dormitory town for a larger city not far away, which buoys up our housing market;  but even so, we were surprised to hear about the scale of that offer.)

On the other hand, there are encouraging examples of people with their heads screwed on right, who are determined to work hard and make a go of it despite such obstacles.  There's a young couple a few miles away who got married soon after we arrived here.  They decided they were not going to chase the big money in the big city, but live in a less urban environment where they could build a future together more affordably.  They bought an acre or so of lower-cost land a few miles outside town, and set up house together in a small 20-foot travel trailer.  That's all they had.  Within two years, they'd bought the materials and done the work themselves to erect a 30-foot-long shed structure, which they insulated and made habitable.  That became their "house", with their bedroom still in the travel trailer.  Over the next couple of years they built a carport on one end, then expanded the building until they could move into it altogether.  The travel trailer is now parked out back, along with a second shed that's a workroom and storage area, and the main building has been expanded into a small home for the family.  They're taking it one step at a time, doing the work themselves, and saving money so they can pay cash for most of what they need.  Good for them!  I wish more young couples showed the same common sense they're exhibiting.  It's heartening and encouraging to see them set down their roots and grow together.

All the same, that approach isn't practicable for those living in or near big cities.  Prices have already overtaken such opportunities.

Let us know what you've seen in your local real estate market over the past few years.  How does it square with what we've discussed above?

Peter