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Vacation Rentals Not All Bad for Local Communities

There are some communities in the U.S. that have a glut of vacation rentals. These are single-family homes that are only rented to tourists on a short-term basis. Vacation rentals can be found in cities like Orlando, FL, Park City, UT and Nags Head, NC. Yet despite their seemingly negative reputations, vacation rentals are not all bad for local communities. A recently released study proves as much.

The study in question looked at nearly 3 million residential building permit applications, 4 million residential sales transactions, and 750,000 air B&B listings in 15 major metropolitan regions. Researchers compared the data to determine what impact vacation rentals have on permanent housing. The results are surprising to anyone who is convinced that vacation rentals only ruin the towns in which they are located.

Encouraging New Construction

One of the most surprising results of the study was its revelation that rental housing tends to have a positive impact on new construction of long-term residential properties. Despite vacation rental neighborhoods temporarily restricting housing supply and sending both rental and purchase prices higher, new construction eventually catches up.

Moreover, the new construction tends to be for houses that are purchased as long-term primary residences. The new houses are not being built to further enhance the vacation rental market. As to why that is, the researchers do not give a whole lot of detail. They just present the numbers and let us decide the whys and hows.

One possible explanation is that vacation rentals spur local economies. Tourists need places to eat. They need activities to keep them busy. Likewise, the houses themselves require maintenance and repair. All of this adds up to jobs. Where there are jobs, there tend to be opportunities to move. People will go where the jobs are, and builders will build where people want to move.

Restrictions Play a Role

The other surprising thing revealed by the study is that local restrictions on vacation rentals influence new construction. Local areas with very few restrictions see, on average, 9% more building permit activity than similar communities with heavy restrictions. Again, the researchers do not offer an explanation.

It could be that cities with onerous rental restrictions also place unattractive restrictions on new construction. After all, restrictions tend to breed more restrictions if communities don’t make a concerted effort to avoid them.

Building Your Own Vacation Rental

All of this begs the question of whether people looking for vacation homes should buy them or build them. Sparano + Mooney is a Salt Lake City architecture firm that specializes in new home construction throughout Utah, Idaho, and a few other states. A lot of their activity centers around vacation homes in the Park City, UT area, where skiing is king.

They say there are definite advantages to building your own vacation rental. First and foremost, you can get exactly what you want within your allotted budget. Second, a modern home is likely to be more sustainable and efficient than a home that has been on the ground for 50 or 60 years. Third, building from the ground up gives you more say in terms of location.

One way or the other, vacation rentals are not all bad. Data shows that they can be good for local municipalities by encouraging new home construction. They seem to do the best in locales with limited restrictions on vacation rentals.

If all of this sounds foreign to you, you’re not alone. The data contradicts everything we believe about vacation rentals. But the numbers don’t lie. Perhaps it’s time to rethink our collective vacation rental attitudes.

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