The City of Myrtle Beach, South Carolina earlier this week gave its initial approval to a multi-family housing development plan. The proposal entails the annexation and rezoning of approximately 18 acres of land.
The City of Myrtle Beach, South Carolina earlier this week gave its initial approval to a multi-family housing development plan. The proposal entails the annexation and rezoning of approximately 18 acres of land. Presently, the site is designated for commercial projects, but the proposed zoning change would permit a mix of commercial and residential development — this would include construction of more than 380 housing units, with a portion of them anticipated to be utilized for short-term rentals.
Remember back in April when we wrote about how the short-term rental industry has an ally in built-for-rent projects? Sources I interviewed for the story said there was increased interest among real estate investors in purpose-built, multi-family projects like the one in Myrtle Beach. There are cases where communities in South Florida and La Quinta, California have been re-zoned to include short-term rentals.
Let’s look at South Florida.
The South Florida Business Journal reported in March that condo development in Miami can be broadly categorized into two segments: short-term rentals, typically priced below $1 million, and luxury condos priced at $1 million and above, which exclusively permit long-term rentals. The middle ground is relatively limited, and developers assert that the increasing demand from buyers will inevitably lead to the expansion of short-term rental condos to other cities in South Florida.
The report also said that the development pipeline includes a 13 short-term rental condominiums – 12 in Miami and one in North Miami – accounting for more than 4,900 units. In contrast, the development pipeline for traditional condo units in the Miami and Fort Lauderdale regions consists of approximately 6,600 units.
I spoke to Edgardo Defortuna, CEO of Fortune International Group, which is currently developing two STR projects in Miami that would deliver 794 units with prices starting at $400,000 and $859,000. These are fully furnished units that would be sold to individual homeowners who have the option to rent them out, and should they choose to do so, there is already a property management company that will handle the rest.
Defortuna added that short-term rentals have generated more construction activity in South Florida because they are attractive as an investment, and because the units are delivered completely furnished, the buyer can list the unit as soon as it’s complete. And because it’s already zoned and armed with permits, the price is higher.
In the 10 years ending in 2018, the construction of new homes in the U.S. was at its lowest level since the 1960s. According to a study conducted by Fannie Mae in 2019, there was an estimated shortage of 3.8 million housing units available for sale or rent in the United States. The pandemic exacerbated the situation, leading to increased construction and labor costs, as well as higher interest rates and mortgage rates. To address this shortfall, the report said, developers will need to build approximately 2.5 million homes each year over the next decade.
It shouldn’t come as a surprise that new builds are developed with investors in mind rather than homeowners — given that the average 30-year fixed mortgage rates increased overall in July, reaching 6.63%, according to Zillow — 15 basis points higher than rates were in the prior month.
“The prices are typically 15-20% higher if it’s allowed to be short-term rental,” Defortuna said. “People are willing to pay more, even though a typical short-term rental unit is smaller in square footage despite having the same number of bedrooms. For these types of units, we compress everything and in per square foot terms, but since they’re move-in ready, these short-term rental units are selling higher than the regular product.”
Court Shoots Down Austin’s Short-Term Rental Ordinance
A federal judge ruled against a provision in Austin, Texas’s short-term rental law that barred such rentals by non-residents, KXAN reported.
“The City is disappointed with the ruling but hopes that the owners and guests of short-term rental properties will be respectful and considerate of the neighborhoods in which they are located. The City is committed to enforcing its nuisance regulations to short-term rental properties as needed,” a City of Austin spokesperson said, according to the report.
In a complaint brought by a Houston couple seeking a summary judgment, the judge ruled in their favor of their arguments that Austin’s short-term rental ordinance discriminates against both out-of-state residents, and those Texas residents who live outside of Austin.
Santa Barbara Begins STR Enforcement Program
The City of Santa Barbara began its short-term rental enforcement pilot program on Tuesday. The 12-month project, which received funding through a city council agreement in April, will enhance the enforcement measures against unlawful short-term rentals and also collect data on the quantity and whereabouts of such rentals within the city. Oversight of the program will be provided by the city attorney’s office. The program has a budget of $1.175 million, and while it won’t change current laws, it gives city staff more resources to enforce the already existing rules.
Long-Term Rentals Project Kicks Off in Nantucket
Political action group ACK•Now has launched “Lease to Locals” campaign aimed at addressing Nantucket’s affordable housing crisis. Nantucket, Massachusetts is a popular vacation rental market. The program is designed to incentivize property owners to convert housing units into year-round rentals for local residents. Notably, this program is distinct as it is privately funded, without relying on taxpayer support. The organization has earmarked $300,000 for this purpose, with the primary funding coming from the McCausland Foundation, headed by billionaire Peter McCausland, a founding member of ACK•Now.
It’s supported and developed by Placemate, an online platform focused on solving the housing crisis in vacation towns. Lease to Locals programs have already been implemented in half a dozen towns across the U.S.
Elsewhere on Skift
One would think that purchasing a share in a company should be rewarded with the stock price increasing over time, and investors receiving dividends, if the company provides them. However, the hospitality brand Selina announced on Wednesday that it has introduced an incentive for people to buy its stock. In addition to potential financial gains, shareholders will also receive special benefits such as discounts and complimentary offerings at Selina’s properties.
Other travel companies do this too: Carnival Cruise Line, Norwegian Cruise Line, and Royal Caribbean have been providing onboard credits for staterooms on specific sailings for confirmed shareholders. Similarly, Intercontinental Hotels Group (IHG) has been offering discounts to shareholders who book their hotels through a private website, accessible by emailing the company’s registrar and providing evidence of holding certified shares.
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