This is part two of my three-part series on common misperceptions about the vacation rental industry in Oregon. Last week, I explained why vacation rentals are important drivers of local economies. This week, I take on the common misperception that vacation rentals negatively impact the availability of permanent housing, and particularly affordable housing, in Oregon.

The dream of many Oregon families has long been to save up for that family beach house to enjoy with friends and relatives. Consequently, seasonal and second homes have historically been a large portion of home ownership on the coast. See this 2021 data from a January 2024 Oregon Coast Visitors Association study:

For a historical perspective, see this analysis which found that eleven years ago, second home ownership on the north Oregon coast was more than twice any other region in Oregon.

Prior to the rise of vacation rentals, who used these second homes? They were not rented to long-term residents or low income community members. Rather, they sat vacant except when in use by the owners and their family and friends. Thus, vacation rentals do not shift occupancy from local residents to out-of-towners. Instead, they change occupancy from one type of out-of-towner to another. Previously, it was only family members and friends of those who could afford to own a beach home. Now, beach vacations are available to a much broader slice of the community. You no longer need to be able to afford your own beach home (or know somebody who can) – you just need to afford a few days’ rent.

Why, then, is it hard for locals to find affordable housing in coastal communities? For starters, like many tourist towns, coastal communities have never been that affordable to locals. Perhaps more importantly, affordable housing scarcity has been a consequence of longstanding public policy to favor construction of single family homes over other, more affordable housing types. Even in environmentally-conscious, land use planning-friendly Oregon, the supply of low-cost rental units decreased statewide by 44% from 1990 to 2017, and as of 2020, 63% of all Oregon housing was detached single-family dwellings.

This seems to show that local officials know who butters the bread – if demand is and historically has been higher for vacation and second homes, then that is what they approved, perhaps recognizing that higher-value properties will generate more tax revenue. Like many other communities across the nation, the needs of lower income residents with less of a voice have been disregarded in favor of the wants of those with money and influence.

This is not to say that all markets are the same. Different market dynamics can lead to different results when evaluating the impact of vacation rentals on housing stock. For example, multi-family housing is more prevalent in Hawaii, and on O’ahu the conversion of those units to vacation rentals has had a significant impact on rents and housing costs.

But it is worth noting that fears about the impact of vacation rentals on housing, even in the world’s most popular tourist meccas, can also be overblown. A February 2024 Harvard Business Review study found that short-term rentals have caused full-time rents in New York City to increase by about $125 per year, or about 1% of aggregate rent growth, over a 10-year period in which rents overall increased by 32%. In other words, short-term rentals accounted for 1/32nd (about 3.1%) of rent growth and other factors accounted for the rest. Furthermore, rent pressures in NYC from vacation rentals disproportionally affect higher-income residents, which makes sense since vacation rentals are concentrated in touristy areas that generally house more affluent tenants. Lower-income neighborhoods and more affordable housing options are less affected.

In my upcoming, final post, I will explore the primary, largely unspoken reason driving opposition to vacation rentals in Oregon: good old-fashioned NIMBYism.