What happens when a city’s economic growth and its affordability to residents are in competition? Last month, Asheville’s City Council voted to enact rules to slow the development of vacation rentals in its downtown area. The new rules come in the wake of the rapid conversion of housing into short-term rentals, which local leaders believe has complicated an increasingly expensive housing market. The development highlights a challenge that many cities face when attempting to grow and sustain a tourist economy while also encouraging a healthy and affordable housing market.
Housing mismatch has been a concern in Asheville for some time. Mike Cronin from the Asheville Citizen-Times examined U.S. Bureau of Labor Statistics data in 2016 indicating that wage increases were not keeping pace with housing price increases.1 Additionally, Cronin notes Nationwide Insurance’s 2016 Health of Housing Markets Report, which identifies Asheville’s housing market decline as the eighth worst in the country during 2015. Other cities that ranked slightly worse, including Austin, Santa Fe, and Boulder, all have experienced sharp declines in affordability. The real estate listing website Zillow currently places median list price for Asheville at $375,000, with a 6.5% increase in home values over the past year.
At the same time, short term rentals have generated significant economic benefit for rental property owners and the tourism industry. In 2017, Asheville’s Airbnb rentals generated nearly $20 million, more than any other city in the state.2 Flexible listing options like Airbnb and Vacation Rental By Owner are attractive to both tourists and property owners. However, the rapid growth in short term rentals of entire homes or condo units in recent years was enough to garner a 6-1 vote from the Council in favor of the new rules requiring any new short-term rental units to obtain conditional zoning for operation. The rules do not place the same restrictions on accessory dwelling units, which are typically adjacent to an owner-occupied home.
Asheville is not the first city to restrict short term rentals of residential properties. In 2016, New York City enacted restrictions on short term rentals, making it illegal throughout most of the city to rent for less than thirty days unless there are only one to two guests, and the owner is also present. San Francisco has enacted similar rules, along with many cities across Europe.3
Some local leaders see an opportunity for compromise and policy innovation. Laura Hudson, Chair of the Planning and Zoning Commission that recommended the new regulations to the City Council on a 4-1 vote, indicated that there are options to work with developers to increase affordable housing. In exchange for conditional zoning to develop short term rental units, developers could be required to also include long-term rental units at below-market rates.4
As long as workers in tourist-oriented cities struggle to find affordable housing near their places of employment, local governments and planning departments will need to continue examining the impact of the short term rental market upon the housing sector. In easing the rapid turnover of current housing stock to rentals and considering opportunities to develop an inclusionary zoning policy, Asheville is taking a first step at doing just that.
1. Mike Cronin, “National study finds Asheville housing market unsustainable,” Citizen-Times (Asheville, NC), May 9, 2016. http://www.citizen-times.com/story/news/2016/05/09/national-report-asheville-housing-market-unhealthy-unsustainable-affordable-housing-real-estate-housing-sector-asheville-buncombe-county/84115312/
2. Dillon Davis, “Amid new city restrictions, Airbnb brings a state-best $20M to Asheville hosts in 2017,” Citizen-Times (Asheville, NC), Jan. 23, 2018. http://www.citizen-times.com/story/news/local/2018/01/23/amid-new-city-restrictions-airbnb-brings-state-best-20-m-asheville-hosts-2017/1057075001/
3. Feargus O’Sullivan, “Europe’s Crackdown on Airbnb,” CityLab, Jun. 20, 2016. https://www.citylab.com/equity/2016/06/european-cities-crackdown-airbnb/487169/
4. Joel Burgess, ” Update: Asheville’s downtown vacation rental ban passed quickly,” Citizen-Times, (Asheville, NC), Jan. 9, 2018. http://www.citizen-times.com/story/news/local/2018/01/09/asheville-downtown-vacation-rentals-airbnbs-banned-6-1-city-council-vote/1019195001/
About the Author: Catherine Peele is a second year Master’s of City and Regional Planning candidate from Albemarle, North Carolina. Her planning interests include transportation project prioritization methods and freight mobility.