Short-Term Rentals Boomed – That’s Good and Bad
People who could work from anywhere often opted for Fla., and real estate investors found short-term-rental profits soared – but it added to buyers’ frustrations.
FORT LAUDERDALE, Fla. – Needing places to either work from temporarily or vacation as they escaped pandemic restrictions, COVID fleers made South Florida one of their top destinations.
And with them came an increased need for short-term housing, or vacation rentals.
“It appears mostly in the Sunbelt states, particularly in Florida, in South Carolina, where we have beachfronts and parts of Texas,” says Ken H. Johnson, real estate economist at Florida Atlantic University. “If you were going to work from home and you were in the north or in the Midwest, and you wanted to get away from home or even work for a short while, you could do it from West Palm Beach or Miami.”
At the same time, investments in short-term rentals in South Florida took off as investors sought to cash in on the soaring real estate market, according to real estate agents in South Florida.
It’s a nice way for homeowners to earn some extra cash, but how does the proliferation of short-term rentals affect a community?
The business end
Agents witnessed the trend first-hand, and reported an uptick in people looking to buy these investment properties.
“A lot of people came to the Airbnb market,” said Benjamin Gene, president of Keyes Property Management in Pompano Beach. “They saw the market and they saw that they could make almost three times the income in a vacation rental. They also saw the demand as compared to a hotel because people were scared [of public spaces.]”
According to Gene, they saw an approximate 200% increase in their portfolio of vacation rentals over the course of the pandemic.
Shannon Nowden, with the Nowden Group in Fort Lauderdale, has seen a similar trend over the past three years, as interest in acquiring such properties has only risen. In 2019, he said, about 10% of his clients were interested in buying a short-term rental property, while in 2020, the number jumped to 25%. By 2021, 60% of his clients were looking to get into the market.
Investors in these properties are a mixed group: some are international buyers, some are people who were typically in the single-family rental market and were trying to break into the vacation rental space after seeing how profitable it was, and some are families that own a second home and want it to make money when they are not using it, agents said.
“Most of these buyers that we’re seeing are coming from out of state. They are typically savvy investors who have experience in other investments like cryptocurrency and want to get in on the real estate market as well,” said Brian Peal with the Pearl Antonacci Group in Boca Raton.
Recently, the market has begun to change as interest rates and home prices have both risen.
“We’re still adding new investors every month. It is the slow season but we are seeing people hesitating a little bit more because the profitability is not where it was a year ago or two years ago,” Gene said, adding that while the market might be in a small flux, it will not take away from its longevity.
Some cities are more conducive to short-term vacation rentals than others, with Fort Lauderdale being a big draw due to its vibrant downtown and beach access. Delray Beach is similar, with its proximity to the beach.
Properties range from condos to single-family homes outside of the city to large waterfront mansions.
Some real estate agents have even made short-term rental homes a specialty. The Nowden Group teaches short-term rental owners the ins and out of the business, how to upkeep their property and also serves as a property management company for these units.
One of Nowden’s pitches to potential buyers is that there’s a steady flow of customers – South Florida is a vacation wonderland, and a short-term rental offers a good option for families that want to travel and not have to rent multiple hotel rooms to accommodate them, which brings shopping and spending to the local economy.
The effects of the rental boom on neighborhoods, housing
Though the trend may be a boon to some, various neighborhood associations in Broward aren’t happy with the uptick of short-term vacation rentals in their communities, as they say the influx of these properties bring with them a host of problems.
Ric Buchanan, president of the Coral Ridge Isles Civic Association says that in the past six months in one of the quadrants of the Coral Ridge Isles neighborhood, three properties listed on Airbnb have popped up, and with it has come a host of trouble: large parties that violate the noise ordinance and improper parking on the side of the streets.
“I’m concerned that it’s going to make it difficult for the average homeowner to buy something,” said Buchanan. “It’s going to make it hard for long-term residents to want to stay because their community is being eroded.”
Hollywood Lakes Civic Association president Terry Cantrell said that 30% of the homes in their neighborhood are owned by an LLC, an issue that has been only growing over the years.
“It’s a total disruption to a quiet neighborhood,” said Cantrell. “Nobody wants to live next door to a commercial operation. When we bought our homes here in Hollywood Lakes, we were buying in a purely residential neighborhood.”
Airbnb, for its part, says on its website that guests who are reported for “throwing a disruptive party or violating our rules on gatherings of more than 16 people are subject to suspension or removal from Airbnb’s platform.”
Another concern is that while South Florida suffers from a lack of housing, these properties – potential places for people to live full-time – are now essentially part of the hospitality industry. That might bring fresh customers to local shops and restaurants, but it could be exacerbating the housing shortage.
“There is nobody living there year-round, so that unit is effectively off the market when we need them,” Johnson said.
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