Short-Term Rentals: Milk the Cows, Not the Squirrels

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Barrera House by Candid Rogers Architect, LLC. Photo courtesy of AIA-SA.

Courtesy / AIA San Antonio

Barrera House by Candid Rogers Architect, LLC.

I was raised in San Antonio, but we never went downtown, because it was too expensive and it was “for the tourists.” As most locals live in neighborhoods a long way from the River Walk and don’t frequently venture into downtown, perhaps visitors would appreciate that same authentic experience of our city.

Short-term rentals are more than a hotel alternative – they distribute tourism dollars more evenly across San Antonio. Companies such as Airbnb allow guests to enjoy locally enriched hospitality that cannot be matched by large chain hotels. This “home vacation business” is changing the way visitors experience cities, and competing for tourism dollars requires San Antonio to invest in a vibrant short-term rental stock.

Upsides for the City

Moving tourism dollars out of downtown has a lot of benefits:

  • Better distribution of touristic traffic
  • More spending at diverse local restaurants
  • More necessity shopping at neighborhood commercial stores
  • Decreased vacancy rates in a city with chronic oversupply of developed buildings (within Loop 410, San Antonio is approximately 25% vacant)

This adds resiliency to our base industry (tourism), which provides housing flexibility for both the medical and defense industries (our other biggest base industries). When including medical tourism, specialists on work assignments, and temporary duty postings, our three base industries have substantial appetites for temporary housing.

Correspondingly, the distributed nature of short-term rentals reduces the visitor impact that downtown is not always prepared to absorb. Cooling off the thirst for hotel rooms downtown will also adjust the property demand model, making residential housing more affordable downtown.

Downtown residential housing makes downtown more resilient to fluctuations in tourism seasons, as empty hotels mean empty touristic restaurants and empty streets. Unbooked AirBnB rooms can be temporarily repurposed on the fly in dozens of ways, while an empty hotel room is wasted city space.

On a regional level, should the Gulf experience another event like Hurricane Katrina or Ike, San Antonio not only has dozens of hotels to provide emergency shelter, but also several hundred homestay rooms distributed throughout the community ready to accommodate people in need while providing organized hospitality.

Redefining “Hospitality” is a Struggle

Most short-term rental operators have an extra room or a second house. They meet their guests and acquaint them with the amenities in their neighborhood, thereby realigning visitors’ experiences from “tourist” to “house guest.” Through immersion, guests are able to create special memories of San Antonio and its people rather than being penned up with other strangers in a high-priced “tourista villa” downtown. There are two other obvious outcomes:

  • Guests will likely use the homestay option for future travel.
  • They will remember San Antonio fondly, suggest it to friends and corporate planners, and keep it on their short-list for future travel.

The meager profit margins are a constant struggle for homestay operators. Given the burgeoning market there are no economies of scale of which to take advantage. Both hotels and short-term rental models require groundskeeping, housekeeping, guest services, and maintenance. Comparing a Holiday Inn to a short-term rental is like likening COSTCO to a mom-and-pop hardware store – There is a 10-to-1 efficiency advantage in favor of large hotels. The short-term rental model’s labor inefficiency, therefore, creates more jobs for San Antonio.

Given the low density of the city, public transit isn’t an efficient way to move from one side of Bexar County to another. The transportation drag effect, therefore, limits the short-term rental market throughout most of San Antonio. Where a place like Austin has 6,000 AirBnB options, San Antonio has only approximately 900 as of this writing.

Like it did for the music industry, the internet is giving us the chance to connect more intimately with our hosts. Where mega hotels impose a burden on the commons of the city (and should be taxed for the benefit they extract), the short-term rental industry is distributed throughout the city and more readily allows the community to realize income from our heritage. Hotels are net extractors from our local economy whereas short-term rentals are net contributors:

  • They are locally owned
  • They consistently employ locals rather than import management
  • They direct more visitor dollars into other locally owned businesses

Regulation? Maybe. Tax? Not so much.

Are there any drawbacks to short-term rentals? There are some concerns about the impact on neighborhoods and increased traffic and rabble-rousing. The “not in my back yard” knee jerk response is largely fueled by the “stranger danger”mindset. If those same properties were left vacant they would suffer from neglect and vandalism which have documented negative impacts on community quality of life and property values.

The average two-person Texas household owns three cars. Given that short-term rentals cannot add more bedrooms than the house was designed for, the traffic influx is actually zero-sum.

If a company or developer started utilizing a distributed model to run a short-term rental operation from multiple residential lots, or worse, started amassing a neighborhood full of rentals, this would be a problem as there would be no improved guest experience. The distribution of guests into the neighborhoods would still be a benefit, but guests would not have the local connection to take advantage of local amenities – That is a hotel model in the suburban context.

Public safety factors are an interesting issue. Typically we rely on the government to ensure that we are reasonably safe outside our homes. This stems from a need to create accountability, so the government steps in to hold groups accountable. The American Medical Association is not a government organization, and yet we trust it to hold doctors accountable.

What makes a short-term rental successful is its accountability on the renting platform websites. While not a panacea for public safety, this system does create a strong disincentive to cut corners on quality and safety. Any major guest safety violation will likely get the property delisted and the host banned. As an architect and planner, I support safety standards, but I can’t deny that the sharing economy self-prunes the bad hosts and annoying guests.

A short-term rental operation is a locally owned small business – it deserves to be watered, not taxed. It isn’t efficient to tax individual rooms in a hotel. Rather, hotels pay a lump sum on tens of thousands of profit dollars. An individual short-term rental will be paying the equivalent of a tenth of a percentage point. The loss to the taxed value due to administrative inefficiency is absurd, the income potential a pittance, with little to show but a loss to the guest. Only hotels benefit if short-term rentals are taxed and regulated.

If the point of the hotel tax is to extract more value from visitors because they spend much of their money on big chains, then how great of a deal are short-term rental guests? Their money is already better directed toward the local economy.

If large chains are cows eating all the grass (net extractors), short-term rentals are squirrels planting a forest (net contributors). Putting squirrels in cages and trying to milk them defeats the point of having squirrels.

On a personal note, I have enjoyed meeting my guests. One in two wind up talking to me for several hours into the night. I’ve hosted a paramedic on oil exploration vessels and a doctoral candidate studying an extinct form of Taoism.

Amazing people come to San Antonio, let’s invite them to see the real SA.

15 thoughts on “Short-Term Rentals: Milk the Cows, Not the Squirrels

  1. I’ve been on all three sides. Landlord, neighbor of rental, airbnb visitor. It can be a wonderful experience, making new friends, welcoming people to our city with an open heart; but it can also be a nightmare. Loud parties; parking problems; my personal favorite– replacing flooring and carpet due to sewer lines backed up by people flushing things they shouldn’t; stolen property…It’s interesting that we come down on one homeowner for working out of their home and yet allow others to basically create a business in a residential neighborhood that allow public interaction, parking and a higher level of density simply for profit. Regulation, yes, please. Tax? Hopefully not. But if we want a quality of life as our city continues to change we need to slow down, listen to each other and think long-term.

  2. The author seems to be unaware that there is already a requirement for short-term room rentals of less than 30 days to pay the hotel occupancy tax. We have had an Airbnb room that we rent for a couple of years now and a house that we rented as a vacation rental before that. We have always paid the hotel tax. And the rate is not one tenth of a percent as the author states in this article–it is a whopping 16.5% when you add the city and state portions of the tax together. Anyone who is renting out a vacation rental and not collecting and paying this tax is at risk of getting hit with a huge tax bill in the future if the city decides to start enforcing this requirement.

        • I can understand how that could be interpreted that way. As is typical there is conflicting data within the code itself and the city webpages. Any person who wanted to make counter to such a claim would have standing based on two items. Firstly that the tax has a specific authorization under 31-68(a) that names “hotel” and second that IV.15-18 has a more limited definition of “hotel”.

          Sec. 31-68. – Tax authorized; tax rate; exceptions to tax.

          (a) Authorization. There is hereby levied a tax upon the cost of or consideration paid for a sleeping room or sleeping facility furnished by any hotel.

          ARTICLE IV. – HOTELS[2]

          Sec. 15-81. – Definitions.

          The term hotel, within the meaning of this article, is any hotel, lodging house or inn in the city having three (3) or more rooms where transient guests are fed or lodged for pay.

          (Code 1950, § 29-1; Code 1959, § 18-59)

        • Don’t take my word for it. Call the revenue office and ask for yourself. You can choose to interpret however you want, but you are taking a risk of getting hit with a huge tax bill if the city decides to retroactively enforce the requirement.

  3. I haven’t yet done airbnb in San Antonio but I’ve done it other places I’ve lived. We did short term rentals in an additional room we had in our house. In the two years I did airbnb I never had loud and obnoxious guests, I never had guests that had more than one vehicle (often times they had no vehicle), and I never had an issue with our neighbors ‘fearing’ our guests. There needs to be little to no regulation for airbnb hosts that are hosting guests in an extra room or mother-in-law, as the hosts are usually present and can solve issues as they arise. For short term rentals of a whole home/apartment without the host present, well that is a different situation and maybe requires some rules. I hope the city plans to regulate whole home short term rentals vs host sharing their space rentals quite differently.

  4. This reads like a paid promotion for AirBnB.
    Have you been to New Orleans, where neighborhoods have been not just taken over, but destroyed by owners shifting from either living in or renting to AirBnB. At a critical mass, the rowdy tourists destroy neighborhood peace. Renters who have lived in their homes for decades are being forced out by the removal of housing from the rental market in favor of short-term tourist rental.
    AirBnB is an idea that works well on a small scale, but rapidly becomes destructive to cities and ordinary people.
    Regulation is absolutely necessary along with strict enforcement if it this is not to destroy our city, too.

    • You have to admit that New Orleans attracts a different market than San Antonio. It focuses on the Bourbon Street experience. As to the threat to our neighborhood quality, that fight was fought with the Bed and Breakfast community (particularly King William) and won handily by requiring a 300 foot separation between BnBs. The issue there was the concentrated car traffic from a multi-guest facility. It may come to that with Short-term Rentals. There is already codes on the books that define a 6 room faculty as a BnB and then must follow those rules. With the large volume of empty buildings inside loop 410 (current estimates put it at 25%) San Antonio has a housing surplus that needs something to put those buildings in play. Will a distributed tourism model help? Potentially, yes. Will doing nothing help? Nope.

      • The problem is that the current proposed ordinance for short-term rentals completely guts the terms of the hard-won B&B ordinance.

  5. While the “sharing” economy sounds good and may have many benefits, it no doubt would rather self-regulate than have to deal with city, state, and federal laws. Who will ensure compliance with safety regulations and civil rights regulations, for example?

    Where are the safety requirements for sprinklers, fire extinguishers, emergency lighting, etc? If you are hosting a person or a group and something should go wrong, you can bet that a lawsuit will be quickly filed.

    Where are the protections that race, gender, or even disability will not be a factor when you host someone. The answer is that the mechanism provided by the technology platform has struggled in this respect.

    I am sure there are many hotels that would like nothing more than be exempt from the types of regulations that provide for both safety and insure a protection of civil rights.

    Maybe there are some exemptions (e.g. ADA) for individual properties, so long a a subset of locations on a platform do meet the requirements. As for the occupancy tax, since the majority of folks who stay are still visitors, the stay should be taxed, since it is supposed to be levied and paid by the guest, but collected by the place of business.

    If we are unwilling to exempt hotels from these rules, for good reason, than we do need to both regulate and tax any personal property that is used as an alternative to staying at a hotel. You give a free stay to a friend; that is fine. You make money off a stay, you collect a tax and pay, and you have basic safeguards to protect those same guests, and your neighbors who I doubt share in your proceeds.

  6. Weighing in as someone who has stayed in other cities as an Airbnb guest but also paying attention to San Antonio patterns, I’m going to say that it is too soon for stricter regulation of Airbnb but likely time for the City to plan how to support Airbnb not only as tourism but a ‘start up’ form of housing – attractive to people relocating to San Antonio and trying out different patterns of living before making (or being in a position to make) bigger commitments.

    Airbnb and similar platforms designed to pull more or different utility out of owned spaces (local Spacecadet etc) could also likely help to address one of our biggest quality of life concerns locally, as Jason raises – vacant structures and/or owned properties that are not inhabited or occupied many months of the year (if ever) and that can fuel public safety and amenity as well as housing affordability concerns.

    In other RR comments, I’ve raised the need for San Antonio to engage in creating pedestrian strategies for key areas including neighborhood commercial districts (as other cities have done). Related, the City needs to develop an overall car-free visitation strategy, as this is clearly a leading trend not only in tourism but in business and worker relocation and retention patterns. In a recent op-ed, Bob Rivard asks why Alamo Plaza planning can’t be more like successful urban European or Mexican (or for that matter South American, Australian, African, or other North American etc) tourism site efforts. The lack of City planning for visitation not involving privately owned or rented cars contributes to this, and it seems to be a visitation pattern where Airbnb as a company and individual operators are leading the industry and San Antonio.

    It’s interesting to me that regulation of Airbnb is being framed as a ‘traffic’ or ‘parking’ issue in San Antonio as the City does not seem to have done much research on existing Airbnb clusters across San Antonio (more than anecdotal complaints) or how these properties are advertising.

    At least, I’m noting Airbnb clusters across San Antonio emerging along major VIA lines (the airport 5 / 30 etc) and promoting bus as well as creek path and B-Cycle and walking access as part of their listings.

    If the concern with Airbnb is ‘parking’ or ‘traffic,’ where is the City effort to improve other options in these emerging or long established neighborhood visitation centers ? I’m thinking particularly of the St Mary’s Strip and bar zone that still lacks B-Cycle stations or better sidewalks despite being en route to downtown and Brackenridge Park, but also Rigsby & Hackberry (another Airbnb cluster) that could also be connected with the B-Cycle network for locals and visitors but the City hasn’t made even these nominal investments. In fact, I don’t believe any City sponsored B-Cycle stations (roughly $70k each) have been added in recent years despite major spending on urban planning and interventions in B-Cycle management – resulting in no stations to date on Apache Creek or lower San Pedro Creek trails or even near the City’s Cafe College downtown and downtown UTSA.

    I respect concerns about Airbnb and housing affordability, and it is part of why I support approaches like Airbnb in residential areas that can increase density as well as support homeowners while offering travelers or newcomers additional options.

    San Antonio is a city with a reported 114,000 university students and 26m visitors annually. Although we are a ‘start up’ city like (or arguably more so than) Austin, I’m noting how various ‘start up’ housing opportunities beyond Airbnb are disappearing locally, including for young people but also retirees.

    San Antonio has lost a number of affordable weekly or monthly hotels or ‘single room occupancy’ (SRO) apartments downtown and on major bus lines in recent months, but the City does not seem to be paying attention to this trend. I am very familiar with people using such hotels but also neighborhood Airbnb not only to find their footing in a new city, but to use such temporary (weeks to months to part-year) accommodation to stage moves or transitions in life, such as tackling the repair of deeply battered or neglected and long vacant residential and commercial properties – what parts of San Antonio seems to have in spades.

    Nobody wants to live next to a party house or apartment (all the time), but the City needs to frame Airbnb as part of bigger conversations about:

    – problems with VIA and B-Cycle (including the lack of planning for commercial development / retail / advertising revenue; Airbnb could at least be considered a potential sponsoring advertiser of VIA and B-Cycle as they seem to already connect with these practices. Likewise, the local hotel industry should be engaged in supporting VIA and car-free visitation);

    – limited planning for or attention to start up housing and our snowbird tourism industry (including the closure of many weekly and monthly hotels or places of seasonal accommodation like trailer parks. Noting, too, how some snowbird approaches predating Airbnb plague our neighborhoods with properties that are vacant, unkempt and dark most if not many months of the year – a more troubling issue than use complaints related to noise and parking);

    – lack of pedestrian planning including planning for car-free visitation focused to universities/training centers, the airport, existing regional bus and rail options, and key downtown as well as neighborhood tourism sites or districts (including as signaled with Airbnb listings); and

    – lack of planning for a safe and healthy night time economy, including better transit options near licensed establishments that are frequently in neighborhood (and neighborhood tourism or commercial) zones, fueling a dangerous DWI culture.

    Our Airbnb situation – just like our housing situation – is not comparable with New Orleans, New York or LA or even Austin currently or maybe ever. We have our own challenges to contend with that Airbnb could likely play a key role in helping to address – including the overstock of hotel rooms citywide and a hotel industry largely not interested in supporting San Antonio car-free visitation or patterns of living but dependent on major public urban development investments (including sometimes HUD funding).

    When is the last time you saw Hyatt or Drury or other hotel advertising on a VIA bus or stop (VIA has generated less than $2m annually in commercial revenue in recent years) or a B-Cycle? Airbnb has paid for similar advertising in other cities but does not seem to have been approached as a potential local advertising sponsor. Both Hyatt and Drury (as two examples) have received public funds or support locally in the tens of millions in the last decade while Airbnb has not yet been engaged with so positively. As Jason suggests, let’s look at what Airbnb can do for San Antonio as part of our tourism and start up and community development ecosystem – as vital as bikeshare and ride hailing and public transit as (generously publicly subsidized) hotel jobs and stays

    https://portal.hud.gov/hudportal/HUD?src=/program_offices/comm_planning/economicdevelopment/programs/rc/tour/tx/sanantonioEZ/gs3

  7. City Code § 35-3311, regarding bed and breakfasts, already regulates short term rentals (STRs). Under this ordinance, a B&B is broadly defined as any “establishment which supplies temporary accommodations to overnight guests for a fee.” This ordinance was negotiated after many years of public input regarding the same issues raised here. There is no reason to abandon the critical components of that negotiation: the owner-occupier requirement and density limitations – both designed to protect neighborhoods.

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