Home Commentary Montpelier Housing Committee Seeks to Restrict Short Term Rentals

Montpelier Housing Committee Seeks to Restrict Short Term Rentals

Last week the Montpelier Housing Committee recommended that the City Council restrict short-term rentals in the capital city. The proposal has two parts. The first is to limit short-term rentals to properties declared as an owner’s homestead in an attempt to curb investors from diverting long-term housing to vacation or investment properties. The second is to ask city voters in March whether to increase the tax on the remaining short-term rentals, the proceeds of which would benefit Montpelier’s Housing Trust Fund. 

The housing committee was created in 2022 to find solutions to the housing crisis in Montpelier. The scarcity of long-term housing in the city puts pressure on families with children in local schools and on businesses, which find it increasingly difficult to recruit and retain employees. Scarcity also contributes to the increasing cost of rent and nudges individuals and families closer to becoming unhoused.

According to the 2010 U.S. Census, the vacancy rate in Washington County was 7.3%. By 2021, the rental vacancy rate in the county had constricted to 1.5%; the same year, Montpelier had a 0.0% rental vacancy rate. Housing scarcity is one of the key drivers of increasing purchase prices and monthly rents nationally. The Fannie Mae report, “The U.S. Housing Shortage from a Local Perspective,” notes that, “The supply/demand imbalance has been growing steadily over the past decade. This imbalance intensified since 2020, exacerbating the financial burdens experienced by many households due to the rising cost of renting or owning a home.” Increasing the number of dwelling units will have a positive correlation to price. A 20-year analysis, “Exploring the Impact of Supply-Demand Factors on US Home Prices” by data scientist Utkarsh Singh, agrees: “Property values may be under pressure to decline if there is an increase in the number of vacant housing units.”

As municipalities across the United States place restrictions on short-term rentals, the cities and towns left to market rule are more likely to attract investors who buy up homes with the intent of turning them into short-term rentals. A 2022 Business Insider article went viral after peeling back the story of a millennial couple who purchased a Vermont home to rent on Airbnb. After the success of their first investment, they then bought 14 more homes, which provided them with monthly earnings that topped a staggering $100,000. This story set the investment market for short-term rentals in Vermont ablaze. However, Burlington was quickly removed from Business Insider’s “Best Places to Invest in Short Term Rentals” list after the City passed a short-term rental ordinance in 2022. 

The Montpelier Housing Committee outlined the intent of their recommendation to the City Council, noting the proposal does not “seek to eliminate short-term rentals altogether. The committee recognizes that many residents’ ability to stay in their home is dependent on the income from renting out a room, half of their duplex, an accessory dwelling unit, or their entire home from time to time. The intent is to restrict housing being diverted into short-term rentals for investment income. Restricting short-term rentals prioritizes primary residences over the luxury of second homes and investment income.” 

Data pinpointing the number of short-term rentals fluctuates depending on the source; however, an Aug. 28 story in Seven Days points to a 13% increase of short-term rentals in Vermont in the past year alone. Reporter Anne Wallace Allen noted, “the number of entire homes — including about 100 tiny houses — that were listed on sites such as Airbnb and VRBO hit 10,982 in June 2023 in Vermont.” 

The Housing Committee recommendations to the Montpelier City Council pursue two separate paths:

1. Through city ordinance, restrict short-term rentals only to properties declared an owner’s homestead, and incorporate registration, data collection, adherence to safety codes, and enforcement requirements.

2.  Ask Montpelier voters, by measure on the 2024 Town Meeting Day ballot, whether the City should request that the Vermont legislature change the Montpelier charter to allow an additional 8% local option tax on the gross receipts of all short-term rental income.

The pandemic prompted people to leave cities in droves. Climate refugees fleeing fires, tornados, earthquakes, and rising waters have come to Vermont looking for a more stable landscape. Then, the July floods put further pressure on housing in central Vermont, displacing many. 

“At a time when neighbors and friends are forced to leave town because they have been uprooted and can’t find a home they can afford, and when much needed employees can’t take jobs because they have nowhere to live, we are asking the City Council to prioritize citizens who live, work, volunteer, and attend schools in the community over the investors who are putting undue pressure on the City’s scarce resources,” said Housing Committee member Jessica Oparowski. 

Rebecca Copans is a member of the Montpelier Housing Committee. 

The material presented here represents the opinion of the author and does not reflect the opinions of The Bridge. Commentaries may be submitted to editor@montpelierbridge.com. Preference is given to submissions by those who live in central Vermont. Submissions are encouraged to be 500 to 750 words in length.