Over the past few years, my colleagues and I have been waging numerous battles on behalf of the vacation rental industry around Oregon. We have achieved some successes, like in Clatsop County and the City of Manzanita, and have yet to overcome challenges elsewhere, including Tillamook County, the City of Hood River, and the City of Portland. We have found that opposition to vacation rentals has been driven by three primary factors: (1) a false perception that the economic benefits of vacation rentals flow mainly to large national companies; (2) another false perception that vacation rentals are bad for neighborhoods and exacerbate the housing shortage; and (3) good old-fashioned NIMBY politics.
In a series of three blog posts, I will address each of these challenges in turn. Today’s post focuses on who truly makes money from vacation rentals. In Oregon at least, the vast majority of vacation rentals are owned by families and Oregon-based small businesses. Tourism-dependent Tillamook County is typical — 93% of vacation rental permit holders in the County have only one permit. Some properties are second homes rented out when the owners are not using them; others are owned strictly as investments and run as small businesses. Others are future retirement homes used to generate income until it is time to retire. Very few properties are actually owned by out-of-state companies.
It is true that large companies well known in the vacation rental field, like Airbnb and VRBO, earn income from Oregon vacation rentals. But these companies are largely advertising platforms and booking agents; for the most part they do not own or manage properties. Also, for them the market in out-of-the-way Oregon is dwarfed by much more lucrative world-wide tourist destinations like New York, Paris, and Tokyo. Revenue from Oregon vacation rental bookings is a very small drop in their revenue buckets.
In truth, vacation rentals contribute far more to local pocketbooks than they do the bottom line of Fortune 500 companies. In most jurisdictions, in addition to paying property taxes, vacation rental owners also pay transient lodging taxes to local governments. These funds are reinvested in the community; for example, in Tillamook County. transient lodging tax has funded things like tsunami safety improvements, fairground upgrades, parking, trash management, and beach restrooms. Owners spend money with local businesses to outfit, maintain, and manage their properties, and vacationers of course patronize local businesses, each creating jobs and injecting capital into the local economy. In places other than Oregon that have sales tax, this creates even more tax revenue for local needs.
For tourism-dependent communities, this economic lifeline is crucial. A 2022 study by Travel Oregon showed that when travel dropped off sharply in 2020 and 2021 due to the COVID-19 pandemic and then surged back in 2022, that increased travel generated $821 million new dollars spent in the Oregon economy, 16,450 new jobs and a 21.2% increase in state and local tax revenue. These economic benefits would not be replaced if vacation rentals went away. In many smaller communities like the Oregon coast where large hotels are not prevalent, vacation rentals can provide 70% or more of the available tourist lodging in the community. Without vacation rentals, nobody could come and stay, and these tourism-dependent economies would seriously lack for jobs, tax revenue, and economic activity, with nothing to replace them.
Vacation rentals provide an important and often irreplaceable contribution to local economies. Particularly in smaller jurisdictions like Oregon, they are important moneymakers for local families, businesses, and communities, not national corporations. In my next post, I will explore why vacation rentals also have little impact on the permanent housing market.
