May 15, 2024 - News

How vacation rentals impact Arizona's housing shortage

Illustration of a small house with different large hands all reaching out to grab it.

Illustration: Aïda Amer/Axios

Arizona's lax short-term rental regulations have made it one of the most successful growth markets for companies like Airbnb and Vrbo, but some advocates say it comes at the cost of housing affordability.

Why it matters: Using residential homes as vacation properties exacerbates the state's already severe housing shortage, Urban Institute researcher Jorge González-Hermoso told Axios Phoenix.

Driving the news: Two bills meant to address the housing shortage — one that would permit backyard casitas and another to allow duplexes, triplexes and townhomes on lots zoned for single-family residences — could lead to more short-term rentals, cities and neighborhood groups say.

  • Critics have asked lawmakers to add a short-term rental ban to the bills to ensure that new housing stock is reserved for local residents, but supporters argue homeowners should be able to rent new units to generate an income source if they want to.

The big picture: There are about 50,000 active Airbnb and Vrbo listings in Arizona, likely accounting for about 90%-95% of the short-term rentals in the state, according to data analytics company AirDNA.

  • That's up from about 30,000 listings in 2019. Short-term rental demand surged following the pandemic and thousands of new properties came online to meet the demand, AirDNA economist Bram Gallagher told Axios Phoenix.

Between the lines: The increased short-term rental interest correlated with a spike in people moving here. The demand has driven up prices for everyone, especially in popular tourist destinations like Scottsdale, Sedona and central Phoenix.

The intrigue: Arizona Neighborhood Alliance president Susan Edwards told us it's frustrating to hear the Legislature talk about the need for more housing but ignore the role short-term rentals play in the shortage.

  • She said she's particularly bothered to see her neighbors disappear and their homes converted into quasi-hotels.
  • "There are bachelorette parties where people used to live," Edwards said.

The other side: Short-term rentals serve as a lucrative income stream for many local property owners, and bring tourists to the state.

What they're saying: Arizonans for Responsible Tourism board president Jonathan Wicks told us he believes banning short-term rentals would not have a major impact on local housing costs (he pointed to New York City's effective ban on vacation rentals, which has yet to produce desired results), but would devastate a tourism industry that employs thousands of locals.

  • "For Arizona to sit out or remove themselves from that major economic driver would be absolutely catastrophic to our local economy," Wicks said.

What's next: The House is expected to vote on both housing bills Wednesday.

  • Cities believe the casita bill will override ordinances like those in Phoenix and Chandler, which already allow casitas but with the caveat that they not be used for short-term rentals.
  • Tempe Mayor Corey Woods told Axios Phoenix the Legislature doesn't need to outright ban short-term rentals in casitas but should give each individual city power to decide if they want to outlaw them.
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