City Council to consider cap on short-term rentals

Albuquerque is joining cities around the country that are eyeing a cap on short-term rentals like Airbnb and VRBO in an attempt to stop housing units from hemorrhaging out of the market.

A proposed cap on the number of short-term rentals is expected to come before City Council on Aug. 21. The legislation would build on the 2020 short-term rental ordinance, which required short-term rental owners to obtain a permit and set certain occupancy limits.

The permit cap would be set at 1,800. The cap was raised from 1,200 in the original legislation to accommodate all current rentals in the city.

Besides establishing cap, the legislation would:

• Limit the number of permits per owner to three
• Require a manager (either the owner or another party) to live or be based within 20 miles of the city limits, and be available 24/7 to respond to maintenance issues, security concerns, and complaints
• Require the manager’s contact information be included on the permit application
• Limit permits to natural persons, as opposed to corporations or other business entities

How many are there?

Data sources are conflicting about the number of short-term rentals currently in operation in the city. According to AirDNA, there are currently 1,954 active rentals in Albuquerque. Of those, 241 are single room or shared room rentals, which would not be included in the cap — leaving 1,713 rentals, which already comes close to the 1,800 cap.

But city data, collected through a third-party, puts the number much lower. As of May 1, city data showed 1,325 short-term rentals in the city. Diane Dolan, City of Albuquerque government affairs manager, said the AirDNA data is overstated, as it includes some areas outside of the city, including Los Ranchos, and could potentially lump in medium-term rentals, geared at traveling nurses and other nomadic tenants. Only rentals under 30 days would be considered short-term rentals under the regulation.

For several years, the number of short term rentals has hovered around 1,200 in the city, Dolan said. But between September 2022 and February 2023, she continued, the city has seen an unusual spike of about 400 rental units.

“It’s like having the drain open, with the water on full blast,” said Dolan. “We’re trying to pass down some housing, and meanwhile, some of it’s just trickling out the bottom.”

The nitty gritty

There are a few additional quid pro quos in the legislation. All existing rental properties would be grandfathered into the 1,800 cap.

People who currently own more than three rental properties would be able to keep all of their properties, and renew those permits in perpetuity — they would just be prohibited from adding properties.

Corporations would still be able to own short-term rentals, but they would need to find a local manager to list their contact information and be available to guests. Dolan said currently, it doesn’t appear like there’s widespread corporate ownership of short-term rentals in Albuquerque.

“We want to do something that’s reasonable and that doesn’t penalize anyone who is trying in good faith to have this service, to be an owner,” said Eric Griego, associate chief of staff for policy at the city.

Despite meeting with both national Airbnb representatives and local owners, however, parts of the legislation have remained contentious with some short-term rental operators in Albuquerque.

Carl Vidal, who owns three short-term rentals and runs a property management company for other owners called a cap “inherently unfair,” and questioned who would decide who receives permits if the 1,800 cap is reached.

“If the city is capping it and saying, ‘Okay, we’ve hit our 1,800 cap … they’re basically telling all future generations of New Mexicans, ‘I’m sorry, you’re not allowed to use your real estate to produce extra streams of income,’” Vidal said.

Vidal participated in discussions about the 2020 ordinance as well. He didn’t agree with all of the regulations, he said, but supported others like occupancy limits.

Stacey Seidel, a contractor and fellow short-term rental owner, said he understands adding a cap on the number of permits and acknowledges that some housing is lost to the short-term market.

But he doesn’t support the limit on three rental properties per person. Having additional properties allowed him to scale his business and hire several full-time employees, Seidel said.

“Here’s what happens: now I can’t have full time employees,” Seidel said. “So we’ve lost jobs out of our community … it really restricts our ability to give a good, quality service and high paying jobs.”

Seidel said he would rather see a tax increase on short-term rentals – including his own – that goes towards multifamily construction or other housing programs than a limit on the number of rentals per person.

The legislation can still be tweaked ahead of the August City Council meeting.

Replacing housing

Dolan said that the city faces a high cost to replace lost housing. Although the number of housing used by short-term rentals is a small proportion — Dolan said about 1% or lower — replacing even a few hundred units can be costly.

Converting old motels and hotels is one of the cheapest ways to build new units, but replacing the 400 units lost between September and February could still cost at least $40 million, Dolan said. For different types of housing, that number could double, she continued.

But industry members contend that not all properties are suitable for long-term rentals — and vice versa. Vidal owns both short- and long-term rentals, and said that certain properties are more appropriate for one use.

“I wouldn’t be able to cover my mortgages with (the short-term rental properties) as long term rentals,” Vidal said. “I do have two additional long-term rentals … and those two houses don’t make short term rentals.”

Seidel said that the area that units are in can affect their success as one type of rental. A lot of people, Seidel said, might not want to live in Downtown Albuquerque. But tourists love to stay in the area. Similarly, tourists are less interested in visiting the North Valley.

Seidel, who also rents to four long-term tenants, said short-term rentals may eventually convert into long-term housing as the market oversaturates, and it becomes harder to justify cleaning and management costs as nightly rates fall.

He spent $250,000 renovating a historic boarding house in Huning Highland, which he currently uses as a multi-unit vacation rental. The goal, Seidel said, has always to convert some of those units into regular apartments – fulfilling the “historic precedent” of the building as housing.

But, Seidel said he wouldn’t have been able to afford the renovation without the increased immediate revenue from Airbnb, and the property may never have been restored.

“If it were going to be long-term rental, the cost of the restoration would have prohibited me to restore that building,” Seidel said. “...While we are losing some things to the STR market, we are also gaining things.”

Regulations statewide

Other cities and counties around the state have implemented or are considering short-term rental caps.

Santa Fe capped the number of permits at 1,000, and the Town of Taos capped theirs at 120. While both locations have reputations as tourist towns, they also both have much smaller populations than Albuquerque.

In Albuquerque, before 2020, city officials said, short-term rentals were “completely unregulated.” And, until a recent effort to increase compliance, the city struggled to enforce certain aspects of the current regulations.

Right now, 59% of Albuquerque short-term rentals are permitted — a provision of the 2020 ordinance. In September last year, just 39% of rentals were permitted. The number increased after an enforcement push on the city side, although as of June 2023, no fines had been issued.

There are a few select industries that have permit caps. One is liquor licenses, which are capped at the state level. In June, some members of the cannabis industry called on the governor to limit permits in the state.

Griego said the legislation isn’t intended to penalize short-term rental owners, and fits into the larger zoning changes passed in June and other Housing Forward initiatives, including allowing casitas in more residential areas in the city. Griego said the legislation can help ensure that when new casitas are built, they’re primarily used for housing rather than short-term rentals.

“This is about making sure that we can maximize the number of units that we can put into the housing stock,” Griego said. “It’s looking forward as we bring more accessory dwelling units online … to the extent that we can, protect as many of those for affordable housing in particular.”