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Bloomington Airbnbs and Vrbos are stifling local housing options, experts warn

The number of short-term rental properties such as Airbnbs and Vrbos in Bloomington has nearly doubled since 2021. A trend that local housing experts warn could drive up the cost of living and hamper options for homeowners and long-term renters during a national housing shortage.

Bloomington has about 542 active short-term rental listings on Airbnb and HomeAway, up from 210 listings in 2021, according to a new report from an Indiana University geography class that collected data from rental analytics company AirDNA.

Most of these units are listed as entire homes, rather than private rooms or floors. Annie Shattuck, an assistant professor of geography at IU who helped with the capstone, said this likely means no one lives in these homes if they are not rented.

“So we can probably say that two-thirds of this has no one living in it,” Shattuck said. “That means all these houses are in neighborhoods and they are empty most of the time.”

Short-term rentals are saturating the market across the city

College towns across the country have seen rapid growth in the number of short-term rentals such as Airbnbs in recent years, with many taking advantage of the football and basketball markets that bring hundreds of fans to town several weekends a year.

Nate Ferreira, real estate director for Bloomington Housing Authority, said short-term rentals such as Airbnbs and Vrbos have shifted to an “investor model” in recent years.

“It seems like at that time there was starting to be a shift from this ‘sharing economy,’ which was the original promise of Airbnbs and Ubers, to a more market-driven, investor thing,” Ferreira said. “And we already have such a severe shortage in the number of units available for the people who live here, so anything that takes entire homes off the market is concerning.”

Shattuck notes that in Bloomington, the increase in short-term rentals extends beyond the Elm Heights and High Point neighborhoods that surround the campus and Assembly Hall. High concentrations of short-term rentals can also be found in the College Mall, Broadview and the east side.

Shattuck said these rents drive up the cost of living and take housing that was historically developed for lower- to middle-income working families out of the market.

“I live near Mills Pool, and there are five Airbnbs within three blocks of my house, which is wild,” Shattuck said. “These are typically smaller two- to three-bedroom homes, the types of homes the real estate industry calls ‘starter homes’, which were previously available to a first-time homebuyer or rented to a small family. . And they disappear.”

State laws and the influx of students complicate the issue

Several cities have passed laws regulating short-term rentals, often imposing registration fees and requiring units to be owner-occupied, meaning the owner lives in them for at least nine months of the year.

In 2017, the Indiana Legislature passed a bill that severely limited the restrictions local communities could impose to regulate short-term rentals, after Carmel began cracking down on homeowners who converted rooms and houses into Airbnbs. The bill effectively ensured that the only restrictions local governments could impose on Airbnbs were those related to safety and public health, such as fire and building safety, sanitation, and traffic control.

Shattuck said these restrictions limit what the city of Bloomington and other local governments can do, even as the city works on community land trusts like Summit Hill and other affordable housing initiatives.

“The city can’t build affordable housing as quickly as it can take it away,” Shattuck said. “There are more Airbnbs in the city than there are workforce housing.”

The spike in short-term rentals also comes at a time when IU is rapidly increasing enrollment, exacerbating the housing shortage. Since 2020, IU’s annual headcount has increased by more than 3,000 students, a drastic jump from the near-stagnant enrollment of 2014 to 2020. At the same time, IU only has about 12,000 beds, meaning demand for homes to rent and own is likely to is. will increase in the coming years.

Even if they sit vacant for weeks or months out of the year, short-term rentals remain a promising economic proposition. Geographic Keystone research found that short-term rentals generate between $30,000 and $37,000 per year. In contrast, the average annual rent in Bloomington is less than $15,000.

“I certainly see the temptation for landlords or investors to buy up cheap starter homes and convert them into short-term rentals,” Ferreira said. “What I’m particularly concerned about is how so many of these homes, which we used to call ‘starter homes’ or ‘missing middle’ homes, are being removed from the market to essentially be a tool for investors.”

Ferreira said housing solutions are complex and vary by community, but noted that local governments across the country have experimented with setting caps and requiring commercial taxes on short-term rentals to try to regulate short-term housing markets in their cities.

“I don’t know what exactly is right for Bloomington,” Ferreira said. “I think there are steps that cities and local municipalities can take, and I think more research is probably warranted.”

Reach Brian Rosenzweig at [email protected]. Follow him on Twitter/X on @brianwritesnews.

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