The Airbnb Effect: Vacation Rentals and Housing Stock

It’s a common refrain: If rich people weren’t scooping up every available affordable home and converting it to an Airbnb to make even more money, affordable housing in Door County wouldn’t be an issue. But the boom in tourism that has closely followed the growth of vacation-rental platforms has funneled millions into the region.

The tension between the tourism economy and the sustainable growth of the community has no greater stage than vacation rentals. The benefits of additional rental options for visitors are clear, but the costs are elusive. They show up in displacement of local residents paying perpetual rent, businesses that can’t afford to buy a motel downtown to house their employees and, some argue, the gentle tearing of our community fabric.

The growth in the number of property owners who rent out their space is profound. Since the Door County Tourism Zone Commission (DCTZC) began tracking data on room tax, it has issued 397 additional permits for the property type called Cottage/Cabin/Home: an 86 percent increase. Meanwhile, hotel, resort, inn and B&B permits have remained relatively flat throughout the decade.

But Kim Roberts, DCTZC administrator, cautions that it’s hard to make any inferences from the data. Year-round residents who rent their home out for a single weekend while they are away add to that permit count, so many of those permits do not represent a loss in available housing stock.

“Do I hear a lot of people purchasing homes just for rentals? Not really,” Roberts said, adding that rentals are often a way to keep family properties in the family. “This is such a complicated issue because there are so many factors that go into it.”

Matt Horton has bought and maintained a handful of homes around Baileys Harbor as Airbnb properties.

“I would love to rent to long-term people up here, but there is no possible way that I could do that,” Horton said, explaining that the carrying costs of the house would force the monthly rent out of range for the local workforce.

Bailey Koepsel is all too familiar with rental costs and Door County real estate prices. She has been looking for a home to purchase since last year.

“I think our biggest problem has probably been how hot the market is versus how many homes – or lack of homes – come up in our price range,” Koepsel said. “Ideally we would love to live in Northern Door, but real estate prices north of Sturgeon Bay are just obscene.”

Koepsel mentioned a home that went on the market in Sister Bay for $250,000, and the listing advertised it as a good candidate for a vacation rental. She put in another offer on a home in Sturgeon Bay, but the seller took an offer with no contingencies.

“No survey, no home inspection,” Koepsel said. “We would guess that was snatched up by someone who is going to use it as an Airbnb because if you’re going to be living there, you would want a home inspection.”

Horton said many of the homes he converts are tear-downs that have been sitting on the market for months with little interest. Meanwhile, he employs local residents at a living wage to clean and maintain the properties, pumping money back into the local economy.

Koepsel is skeptical of the economic cycle of vacation-homes revenue.

“The money the owners get from that [rental] probably does not come back to us into our economy because the owners are most likely not living up here,” Koepsel said.

Sturgeon Bay is trying to balance the positive and negative effects on the economy with the need for housing.

“We used to require a 30-day minimum rental period, which more or less killed any vacation rentals,” said Marty Olejniczak, community development director for the City of Sturgeon Bay. “There’s some talk of going back to minimum rental periods.”

A provision in the 2017 state budget changed the way in which municipalities can restrict vacation rentals. Now a municipality can require minimum rentals of seven days but no more, which is believed to be a win for the short-term-rental industry. Although Sturgeon Bay cannot go back to the 30-day rental requirement, the city is exploring restrictions that would slow the growth of vacation-home rentals.

“Are the tourist rooming houses taking away what could have been a nice, affordable unit? The jury is out on that,” Olejniczak said.

Horton is critical of the proposals in Sturgeon Bay.

“If the problem is long-term housing, let’s not create another problem,” Horton said. “Travel trends have changed.”

Rob Esposito is developing a vacation-rental property in downtown Egg Harbor. Although he understands there could be problems for the housing stock with converting traditional homes into vacation rentals, he believes the conversation about housing in Door County has never been more prescient.

“It’s not going to solve itself overnight,” Esposito said, adding that the impact of vacation rentals on the housing stock that was explored in the recent housing study was inconclusive. “Let’s identify the problems and find the right people to solve those problems.”

It is unclear what long-term effect the restrictions in Sturgeon Bay would have if implemented, but they would surely reduce the number of rentals in the city, which is already showing sluggish room-tax growth compared to most of the other Door County municipalities.

The specific effect is hard to define, but the economics would say the income potential of vacation-rental properties in Door County has driven up home prices. Continuing this trend may further price out the local workforce, which has a median income 9 percent lower than the state, in a market with median home values 4 percent higher than the rest of the state.

“I think what has been kind of aggravating for us is, we’ve all heard the discussion of, ‘How do we get young professionals to stay in Door County?’” Koepsel said. “You’re not going to get them to stay in Door County if they can’t buy a house in Door County.”

“There seems to be more of an emphasis than ever before,” Esposito said. “I think that’s the real solution. I think the important thing is we keep talking about affordable housing.”