Short-term rentals are reshaping real estate market in some cities
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In a few ways, the McMillin Court in Nashville, Tenn. looks like a vintage motel. It is yellow-and-gray, two stories tall, and in the shape of a horseshoe. All 16 units have their own doors to the outside.
The kicker is the neon sign in blue and yellow. It even touts “no vacancy,” although that’s kind of a joke. Since these are former apartments, there’s no front desk to inquire about a room. Guests like Luke Graham, of London, England, book online.
“It ticked all the boxes really,” said Graham, 33. “A good rate. It’s easy to book … For me, it’s like, as long as you can get in and secure, that’s all you need.”
Instead of check-in, Graham was emailed the keypad codes for the front gate and for his room. “But, main thing: budget,” he said. “It was dramatically cheaper than anywhere else.”
At least in downtown Nashville, Airbnbs and VRBOs tend to run cheaper than hotels, especially in a city that saw the nation’s fastest growth in room prices last year.
In a matter of a couple years, the popularity of Airbnbs and other short-term rentals has changed the way people invest in property. And the trend has kicked up some controversy as it shifts from the sharing of an occasional spare room to a serious moneymaking venture.
McMillin Court is that it’s one of maybe two buildings in town that has flipped into short-term rentals since Nashville created a permitting system and regulations in summer 2015.
In a past life, this building was the “Phoenix Apartments” — surrounded by razor wire. It burned once, and was condemned for a while, before bouncing back.
The building’s recent conversion to a hub of short-term rentals is an outcome that local housing advocates feared.
“When you take more than 3,000 units out of the residential rental and sales market in 18 months by allowing outside investors to run short-term rental businesses in neighborhoods, it shouldn’t come as a big surprise to any of you that affordable housing becomes a much bigger problem,” Grace Renshaw, a local writer and activist, told the Metro Council at a recent public hearing.
Her sentiment echoes nationwide.
Tom Slee, a tech writer in Ontario, has analyzed Airbnb data for dozens of cities. “The whole building that you’re talking about, it is at the extreme, obviously, but certainly not heard of,” Slee said. “That changes the character of the neighborhood and it certainly raises prices for people who are trying to get by and live there.”
Slee finds that in many places, nearly half the short-term rentals are run by operators who have multiple listings. And they’re concentrated in desirable neighborhoods — like in pockets of San Francisco, where 20 to 30 percent of rentals are short-term.
This has officials from the West Coast to New York City considering new limits. Nashville’s council has six proposals in the works, including one to further restrict short-term rentals on properties where the owner isn’t present.
Yet it’s easy to see why landlords might be interested. One unit at McMillin Court in Nashville can bring in $4,000 in a month, instead of, say, $1,200 in rent, said property manager Clay Louallen.
Clay Louallen, property manager at McMillin Court, shows one of the first renovated units.
The developers did have to invest in the apartments, replacing the roof, flooring, cabinets, toilets and all of the bathtubs. But he said that has been worth it in a part of Nashville that needs rooms that feel like a temporary home.
He said the rooms appeal to tourists and business travelers and especially to families who have loved ones being cared for in several nearby hospitals.
“These are all book dates,” he said while showing his bookings calendar. Most dates are marked, including some rooms through January.
He said that’s proof of the demand for short-term rentals by travelers — and of the business potential.
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