The practice of renting properties out on a short-term basis has been on the rise for several years. This fast and often cheaper alternative to hotels has been changing the traditional way that individuals live and vacation. But it’s also changing the real estate industry.

Agents and Airbnb

Real estate professionals around the country have found adding short-term rentals to their business profiles to be a good business move. “It’s nice. It’s fun,” said Naomi Preston, a broker-owner with The Keyes Company in Miami Beach. “It’s fairly lucrative. It’s good for the property owners if they live out of state and they want to generate a higher income than an annual tenant.”

She’s also been able to help clients maximize their investments through short-term rentals. “When you do the numbers… [it] comes out much more favorable for the property owner to do the short-term rentals,” Preston said.

That holds especially true in major markets, such as Miami, Los Angeles, New York and Chicago. “If you do the average rent on an annual lease, average comes to [approximately] $40 a night,” she said. “With the short-term rentals…that can basically go from, say, $85 a night up to a few hundred dollars a night.” Property managers can also charge for extra guests as well as cleaning fees, something that is not possible for a standard yearly lease. That said, property owners need to factor in utility costs that tenants would normally pay as well as the cost of furnishing the rentals and regularly stocking them with amenities and essentials that a hotel would normally provide.

Preston often checks the Greater Miami Chamber of Commerce to see what events are going on to help inform her rates. She also advises that professionals check their local ordinances about short-term rental properties and be upfront with potential renters about amenities and house rules upfront.

Miami’s regulations on short-term rentals vary depending on the location of the property. “The Miami area has a varied regulatory landscape given the over 30 individual municipalities that make up the area,” Samuel Randall, Airbnb’s senior communications manager for the eastern U.S. told Miami Agent magazine. According to Airbnb’s site, the Miami-Dade County Code of Ordinances requires any person wishing to rent out a property for short-term use to register the property with Florida Department of Revenue, obtain a certificate of use, and comply with the maximum number of occupants per unit (two per bedroom, plus two additional per property).

Preston said the most important thing in establishing a great rapport on short-term rental sites delivering an impeccable property to the client. “We might have ace properties down here in South Beach, because of art deco here and things like that, but the cleanliness and…the amenities, they’re going to be there and they’re going to be to par.”

Preston pointed out that marketing is fairly easy because much of it is managed by the various short-term rental sites such as Airbnb and VRBO. But agents do still need to be diligent in screening their potential renters. “A lot of times price points will handle screening for you,” she said. “When someone sends me a message or an email inquiring about a property, I pay attention to how they write. Grammar is important; communication is important. If they’re problematic and demanding in the beginning, they’re going to be like that through the rental, and I’m not going to deal with that.”

The affordability question

Online hospitality marketplaces like Homeplace, VRBO, and—most popular—Airbnb, have changed the hospitality market, but housing affordability advocates and economists alike have also argued the ethics of the booming business practice.

Short-term rentals mean that fewer homes are available for rent and cause pressure on the housing market. The low-inventory market drives up costs, which can cause tenants to be displaced. Just like Miami, several cities — including San Francisco, Washington, D.C., and New York City — have introduced legislation to address this concern.

The city of Seattle has put legislation in place to regulate short-term rental properties. It was at the forefront of creating stricter boundaries for marketplaces like Airbnb. The city’s ordinance, passed in 2017, caps the number of short-term rental units for a property at two. “One can be a primary residence, plus one more,” said former mayor and city council member Tim Burgess during a media call for the National League of Cities Summit in San Antonio. “If you live outside the city, as an outside investor, you would only be able to have one.” According to Burgess, short-term rentals have a space in the hospitality market, but a lawmaker’s job is to make sure its balanced and fairly regulated. Miami enacted their new regulations last year.

Due to these perceptions, the industry is fighting back with data. “Vacation rentals are a really important part of the accommodations mix. They’re not going away, and yes, they create challenges for local communities, and so we’re really here to say we hear your concerns and we want to help solve them with real, effective regulatory solutions,” said Expedia VP of Government and Corporate Affairs Amanada Pedigo during the media call. Expedia is the owner of short-term rental site VRBO.

Expedia recently partnered with Oxford Economics to examine what role short-term rentals play in housing affordability. Their study found that vacation and short-term rentals are not the key contributors to affordable housing challenges that the United States is facing. “We find that the major drivers of the rental side and homeowner side is really just economic growth,” Alice Gambarin, researcher at Oxford Economics, told Miami Agent magazine. According to Gambarin, the growing economy contributes to home and rental prices rising. She also referenced labor market conditions that have been improving. “Unemployment has dropped dramatically recently, so that has had a major impact on home prices and rent as well.”

Pedigo emphasized the idea that Expedia is working to address the concerns of the public, even if their data showed their industry isn’t necessarily responsible for the affordability crisis. “Despite the findings,” she said, “Expedia wants to work collaboratively with local communities to find fair and effective regulation of the short-term rental market.”

Airbnb also said they are in support of common-sense home-sharing regulations. They claim to have built more than 500 regulatory relationships with jurisdictions throughout the world. “Through this partnership, we have found paths forward for short-term rentals,” Airbnb’s Randall said, “addressing local concerns while protecting residents who rely on home sharing for extra income, as well as small businesses that benefit from visitors.”