Across the United States, local and state governments are exploring ways to micromanage the short term rental (STR) industry. The controls they seek come in the form of additional fees and taxes for STR properties, limiting the number of STRs in a given area or banning STRs altogether. Home Owner Associations (HOA) are also expressing their opinion of STRs by including covenants that prohibit STRs and harassing guests who stay at permitted STR properties.
Why? Media publications occasionally try to stir up trouble by incorrectly printing that STRs negatively affect housing availability and costs. But largely the opposition are a few people who are annoyed (justifiably or not) with STR guests in their neighborhood. These grumblers join HOA boards or get elected as local commissioners to oppose STRs and go so far as to embroil others to revise the STR statutes in their community. Some are unconscionable and reward homeowners for reporting or even fabricating problems with STR guests in an effort to promote their anti STR agenda. The NIMBY (not in my backyard) phenomenon comes to mind because most of the STR opposition admit to using STRs when they travel.
I’m here to say, watch what you wish for! I live in an east coast city that was once home to a lucrative film industry. In the last 40 or so years, more than 400 movies and several TV series, as well as individual episodes, were produced here. Less than a decade ago, sketchy local and state politics that included initiatives to shrink film industry incentives and ban short term rentals (preferred housing of actors and crews during filming) sent full time agents and producers in search of more user friendly settings. Quickly and quietly the agencies and their crews vanished to other states taking with them scores of people who made their living providing services they needed: hair styling, make-up, costume design, set design and special effects to name a few.
No big deal you might think but keep reading! The people who left had contributed both directly and indirectly to our local economy. They bought coffee at Starbucks, dined in our restaurants, shopped at our stores, rented or bought properties and participated in local events. In other words, they spent their time and money here. The celebrities and shows made us famous which attracted tourists from all over the world who came and spent their time and money here. We were the winners: we saw increased tax revenue and job growth, especially in tourist and service factions. Unfortunately and not surprising, when the major and minor players in the film industry relocated to greener pastures, their spending power and influences moved with them.
How you wonder are filming and STR companies like Arizona Vacation Home Rentals similar? For starters, they are both environmentally clean industries as opposed to corporations that pollute water, soil and air and spend our tax dollars to clean up their mess. If you aren’t a tree hugger and this doesn’t matter to you, perhaps I can hook you by explaining how the STR industry, similar to the film industry, positively impacts the local economies in Arizona.
Rounds Consulting Group (RCG) conducted an economic impact analysis and published the results in The Economic Impact of Short-Term Rentals in Arizona, February 2022. The results are impressive! Guests who stayed at STR properties generated $538.4 million dollars in Arizona county and city tax revenues in 2021. These included taxes levied on rental fees, sales taxes from guests’ spending and tax revenues from the 75,500 jobs created by the short term rental industry.
RCG used a common economist model that measures the effects of activities related to the industry and converts the activities into estimated tax revenues. They included direct effects such as taxes generated by guests as they spend money in the locale where they are staying e.g., dining at restaurants, playing golf, buying food and visiting attractions. They also counted what they labeled as secondary impacts that result from increased demands on companies that supply goods and services to the STR industry. Examples of this include the tax increase in revenue and jobs or payroll hours affiliated with the suppliers of goods and services to STR companies e.g., housekeeping and maintenance crews, cleaning supplies and fuel. And as RCG points out, the rippling effect continues as employees of the suppliers spend their earnings on goods and services and so on and so forth.
Before you support or vote in favor of limiting or banning STRs think long and hard about $538.4 million dollars in tax revenues and 75,500 new jobs. Those are BIG numbers! Everyone benefits, everyone is a winner because more people are working and tax revenues pay for schools, roads, first responder salaries and equipment, and so much more, without raising everyone’s taxes.
You should also contemplate this: long term renters have a greater negative impact on communities and house prices than STR guests and homes. If you doubt me, talk to a landlord. Their top 3 challenges include evicting tenants who stop paying rent (good luck with this!), periods of vacancy between tenants and property damage. Next, talk to a realtor who will confirm that these behaviors directly contribute to the decline of neighborhoods and falling home prices. STRs are not problem free but evictions, property damage and in most cases, vacancy, are rarely the challenges. The very nature of STR income motivates homeowners to keep their properties occupied and in excellent condition, stay on top of problem guests and resolve damages quickly in preparation for incoming guests. These desirable behaviors contribute to maintaining everyone’s property and community values and promoting neighborhood civility.
Hands down, the benefits of STRs far exceed the few nuisances, but that’s another blog (to be written soon). For now, don’t make the mistake my urban area did and allow an environmentally friendly and lucrative industry to decline or disappear. My home city is currently scrambling to right their mistakes and encourage the return of full time filming productions. Be smarter! At the very least, elect representatives and vote in favor of ordinances that support STRs in your community. If possible, get involved to help ensure STR regulations make good neighborly sense without limiting their ability to contribute generously to Arizona’s economy and job market.
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