Regulatory Crackdown Drives Shift to Midterm Rentals – But Don’t Expect the Same Payoff

The market for midterm rentals is growing, and while it’s a good alternative for those forced out of short-term rentals because of regulations, it’s not quite as lucrative an investment. 

Often defined as a furnished stay of one to 12 months, midterm rentals serve a different market compared to short-term rentals – think people moving for new or medium-term jobs. Midterm renters are usually not looking for leisure destinations and tend to be more urban-bound.

“There's regulatory pressure from short-term and then on the long-term side, there's not a very liquid sales market,” Jeff Hurst, president and CEO of Furnished Finder, said at Skift’s Short-Term Rental Summit in New York Wednesday. “There's 44 million rental homes in the U.S. There's seven million short-term rentals. My guess is there's almost 2 million-ish earnest midterm rentals in the U.S. We have about 300,000 on our platform, and it's growing really fast on both sides of the marketplace.”

What's Driving Growth

The regulatory crackdown on short-term rentals in markets like New York coupled with a shortage of long-term housing that’s only getting more expensive, is creating space for midterm housing to thrive. In most markets, such homes are classified as residential real estate and don’t face as many hurdles, according to Bluegound CEO and co-founder Alex Chatzieleftheriou.

“I see a lot of new buildings coming in, which have 50% furnished, 30% furnished, so that's going to be a growing market,” Chatzieleftheriou said. “On the demand side, I don't see any reason for that to go down.”  

That said, for certain properties, the shift to midterm means less money. “For investors, I think it's really attractive. For people who are often regulated out of short-term, it's a strategy, maybe you're only one, but it does not replace what you lost in regulation,” Hurst said.

Chatzieleftheriou argued that it depends on the location and type of asset, and that money can be saved by limiting occupancy gaps, not having to constantly hire a cleaning service and not dealing with check ins and outs. 

“There are areas where you can make more money, even with midterm, but in general, the short term could be more lucrative,” Chatzieleftheriou said.

“It's going to grow multiples faster than short-term or long-term over the next five to 10 years. There's just too many reasons, on both sides, that capital and tenants are going to want to meet in the middle, because there's more money to be made,” Hurst said.