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SF to grapple with new rules for short-term rentals

Most of Santa Fe’s short-term rental properties, such as this one above the O’Farrell Hat Company, are located downtown. (Eddie Moore/Albuquerque Journal)

Copyright © 2020 Albuquerque Journal

Short-term rentals, or STRs, have long been a controversial topic in Santa Fe and a new ordinance proposed by the Santa Fe City Council has done little to ease those tensions.

Due to companies such as Airbnb, the number of STRs in New Mexico’s capital city has proliferated in recent years. A 2019 study counted the number of such rentals in the city at 1,444 units in 2018, a three-year growth of 380%.

However, many of those units have no permit with the city to operate. While the exact number of STRs varies over time, only around 900 are currently permitted with the city, Land Use Director Eli Isaacson told the Journal.

The city has set its cap on STR permits at 1,000, but enforcing that number has proven challenging for local officials. Isaacson said that, previously, the city could enforce its ordinances only through criminal proceedings, which often complicated the process.

“It was not a good fit,” he said. “There was no real opportunity to for us to do a lot of follow-up and actually work to get folks into compliance.”

The new ordinance aims to give the city more teeth in enforcing those requirements.

That ordinance – sponsored by Mayor Alan Webber, Councilor Renee Villarreal, Councilor Carol Romero-Wirth and Councilor Signe Lindell – would once again limit the number of STR permits to 1,000, but would allow only one permit per person. The aim is hopefully to curb speculation on properties in the Santa Fe area.

In places where STRs are abundant, some purchase multiple investment properties and convert them into STR units as another source of income. Lindell said she believes speculation is occurring in Santa Fe, pointing to the fact that 40% of permits are registered outside the city.

But not everyone agrees with that perspective.

Fran Maier of the Santa Fe Short-Term Rental Alliance said that, in her experience, most property owners she knows operate only a handful of properties.

“It’s not that many people that own more than two rentals,” Maier said.

However, that same study from 2019 found that 15 hosts held nearly 60% of the STR permits at the time. Those units comprised about one-quarter of Santa Fe’s entire STR market.

The issue of speculation has driven much of the ire surrounding STRs. Their critics claim the proliferation of such units limits the supply of long-term rentals and homes for sale in a given area, invariably driving up the price.

Vacation rentals, such as this one near downtown Santa Fe that is owned and managed by Casas de Guadalupe, would be subject to new regulations now being considered by the Santa Fe City Council. (Eddie Moore/Albuquerque Journal)

Maier disagreed and said most STRs are located in and around Santa Fe’s downtown area, an area already prohibitively expensive for many.

“Many of these homes would not be considered affordable because they’re in more desirable parts of Santa Fe,” she said.

While there are STRs in all parts of Santa Fe, a map of units on AirDNA shows the vast majority are located in the downtown, South Capitol and Eastside neighborhoods, all of which are close to Santa Fe’s main tourist attractions. Isaacson said as many as 90% of STRs in the city are in this area.

Lindell, whose district covers much of the downtown area, said there is no data to suggest STRs would be unaffordable if they entered the housing market.

Santa Fe has long struggled with a shortage of rental units, especially those considered affordable – some estimates have put the gap as high as 5,000. The number of homes for sale is also quite low, with the Santa Fe Realtors’ Association recently stating there were less than 400 for sale during the past quarter.

But that saturation of STRs in one part of town plays into another key aspect of the ordinance. If passed, it would require newly permitted properties to be at least 50 feet from the nearest STR unit.

Signe Lindell

Lindell said she has received many calls from constituents who say they feel “surrounded” by STRs in their neighborhood.

“They didn’t buy that house intending to live in a commercial zone,” she said.

Isaacson said that, in some downtown areas, there is a significant saturation of STRs and that rules regarding proximity should fix the issue over time.

“Over time, what I think we’ll see is fewer and fewer people,” he said. “It will make more permits available to other areas in the city.”

To help enforce the rules, the city also has new software that can more easily identify active STRs in the city so officials can compare them to a list of permits issued.

Those owning more than one permit or who have a rental within 50 feet of another STR would be exempt from the new rules, but it would impact an ability to expand to other units.

Similar to other tourism-driven industries, the STR market has struggled during the COVID-19 pandemic. March and April, when the virus first hit New Mexico, saw a wave of cancellations that left some property owners fearing for their ability to continue operating. Many switched their units to long-term rentals as a result.

Michael Garcia

Owners such as Mariam Browne, who operates a casita unit near Canyon Road, saw a small rebound in the market during the summer. She said that,
though she mainly rents to people from New Mexico, she has found it easy to book her rental recently as more people plan a holiday visit.

 

But as irksome as STRs may be for some, their large presence in Santa Fe suggests they’re here to stay.

“This industry is not going away,” Councilor Michael Garcia said. “It absolutely is not.”


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