BY JOHN FARQUHAR AND JACKSON TIERNEY
In recent years, demand for rental housing in Asheville has outstripped supply, and it seems pretty likely that waves of renters will continue to arrive, most of them hoping to live within the city limits. After several years of severe shortages, however, the latest data suggest that our rental market is reverting to a healthy norm, with a 4 percent to 6 percent vacancy rate.
Asheville should seize this period of calm as an opportunity to try out a regulatory environment designed to promote long-term housing solutions.
The experience of Portland, Ore., offers real promise for Asheville.
Like Asheville and other cities that have been “rediscovered” by millennials and baby boomers, Portland is experiencing skyrocketing housing demand, especially in areas near the city’s core. In 2014, despite a ban on short-term, whole-house rentals, Airbnb listed thousands of them in Portland. The city decided to manage this reality by legalizing short-term rentals of up to two bedrooms in a private home, provided that the owner is also living there. Renting more than two bedrooms would require a conditional use permit. Short-term rentals of multifamily apartment and condo buildings remained illegal, as did rentals of entire homes which the owner doesn’t occupy at least nine months of the year.
You might have expected Portland to also clamp down on rentals of accessory dwelling units (attached or detached granny flats, garage apartments or backyard tiny houses on owner-occupied property). Instead, the City Council voted to eliminate the limits on short-term ADU rentals, treating them as homestays — and even added financial sweeteners to encourage people to build more of them. ADU construction boomed, with nearly 700 units added in just two years. As Kurt Creager, Portland’s housing director, now proudly reports, that works out to almost “an ADU built every day.” According to consultant Martin John Brown, who’s now a researcher for Oregon’s Department of Environmental Quality, more homeowners will build ADUs if they have the option of renting them short term.
But then a curious thing happened: Within one year of licensing, nearly half of Portland’s ADUs stopped being short-term rentals, reported Brown.
This might seem counterintuitive, but on reflection, it’s less surprising: Operating short-term rentals can be time-consuming, disruptive and require menial labor, and the revenues may not be much more than you’d get from a less labor-intensive long-term rental. Values change; life situations change. For many reasons, substantial numbers of ADUs will return to the long-term rental pool every year. This reversion, it turns out, is a global phenomenon found in cities worldwide.
Applying the Portland model to Asheville
Portland’s experience belies the NIMBY-driven scare stories and fear of change that have clouded the short-term-rental conversation here. Despite differences in population and economic base, Asheville and Portland are quite similar in terms of culture, attractiveness and values. Portland’s experience suggests that allowing short-term rentals to encourage ADU construction will boost Asheville’s housing supply — which is exactly what our City Council hoped for when it loosened zoning restrictions on ADUs in 2015.
To test the Portland solution’s viability for Asheville, we propose a pilot program, as follows:
- Continue and aggressively enforce the strict ban on whole-home, short-term rentals.
- Allow up to 150 ADUs as short-term homestays, issuing permits that must be renewed annually on a first-come, first-served basis.
- Within the 150-unit limit, permit new ADUs on the same basis.
- Require all units to:
- Maintain liability insurance.
- Collect occupancy taxes.
- Comply with all applicable building codes.
- Revoke permits after three verified violations.
- Require ADU homestay operators to live on the property full time and be in residence during the entire term of the homestay.
- Collect detailed information about host and guest behavior and neighborhood impacts.
- Establish clear milestones for regulatory review and revision.
- Require Airbnb to display the city’s permit on rental listings and report the addresses of those who fail to provide a permit.
Both New Orleans and Santa Fe, N.M., have recently negotiated the latter requirement, and other providers such as VRBO will surely follow: Airbnb is the industry’s 800-pound gorilla.
Don’t let short-term issues cloud strategic goals
The extra cash an ADU can provide can help people stay in their homes despite retirement, rising taxes and other expenses. Still, experience shows that ADU owners place considerable value on flexibility, and as they age, they may opt for the more relaxed lifestyle that long-term rentals allow. But ADUs can also support multigenerational housing options, and elderly owners may move into the ADU and rent the primary dwelling long term.
The benefits of increasing the city’s ADU stock will span generations. Some argue that banning short-term rentals of ADUs would immediately increase the supply of long-term rentals. This is questionable, however: ADU owners concerned about flexibility might simply choose not to rent them at all. And as Creager, Portland’s housing director, concluded, “ADUs add to the housing stock, and they will be around for 75-80 years, so a sometimes-use as homestay is inconsequential in the long term.”
It may be tempting to add a tweak here or there, such as limiting the physical distance between ADUs or the number of days per year they can be rented. But care should be taken, as every restriction affects the owner’s cost/benefit/risk equation. Both Portland’s experience and research in other communities suggest that maximizing flexibility is the key to encouraging ADU construction.
The real winner: our unique community
Building ADUs to rent to tourists will ultimately increase the city’s long-term housing stock at no cost to taxpayers. Hospitality profits will be recycled directly into the local economy, rather than being remanded to hotel coffers and big investors. Some data suggest that homestay growth will direct more tourist spending to neighborhood merchants and eateries. Like homestays, short-term ADU rentals pose no problems with noise, appearance or parking. Far from “hollowing out” our precious neighborhoods, helping current residents keep their homes as they age will bolster neighborhood resilience.
John Farquhar is a retired management consultant and ADU owner living in Norwood Park. Jackson Tierney is an environmental consultant and ADU owner in Montford.