Affordable housing: City encourages vacation rental owners to instead lease to local residents

When Zach Weldon and Jessica Kinney started renting a three-bedroom house on North Avenue, they were unsure they’d be able to afford it. Renting out the third bedroom was the answer.

Posting the room at a rate of $35 per night online with Airbnb provided the couple with about $500 to $800 per month, depending on the time of year. The extra income pays for more than 50 percent of their rent.

“It was only the two of us, and we didn’t have any reason to move into a three-bedroom until we decided to just do it and see what we could do with Airbnb,” Weldon said. “It was strictly just to supplement income.”

Marco and Christine Littig own two housing units near downtown, and rent them out on Airbnb as well. They’ve met the mayor of Gallup, New Mexico, the publisher of the Washington Post and guest artists who showcase their work at the Missoula Art Museum.

Vacation rentals like Airbnb and VRBO are beneficial to both homeowners and visitors, but now the city of Missoula is encouraging owners of vacation rentals and accessory dwelling units to keep long-term renters in mind as an alternative means of earning extra cash.

Erin Pehan, director of housing and community development for the city, wants to incentivize the construction of accessory dwelling units, or ADUs, through Missoula's recently released housing policy. And rather than encourage more short-term vacation rentals, she hopes ADU owners will instead rent the small houses to local residents in need of an affordable place to live.

According to the housing policy, the city would encourage ADUs by subsidizing certain construction fees. Since 2013, only 13 ADUs have been built in Missoula.

“In exchange for that, the ADU owner would agree to rent that ADU out as permanent housing to someone engaged in a lease as opposed to a short-term rental,” Pehan said. “So we’re looking at ways to incentivize that and encourage people, if you’re going to be building an ADU, or you’re going to be building some other structure or renting out of your home, are there ways to incentivize you to do that on a permanent basis?”

Accessory dwelling units, or ADUs, can be used for vacation rentals and are units located within the same lot as the owner's home, whether that be a separate building or within the same house. They’re usually smaller in size and benefit the city’s Focus Inward growth policy.

Short-term rentals, or vacation rentals, are the rental of a home or room in a home for less than 30 days, often through an online booking company like Airbnb or VRBO.

Finding housing is an issue for many in Missoula.

“ADUs are a great tool to assist with affordable housing,” Pehan said. “I think they’re one tool out of many, so they’re not a silver bullet, but based on their small footprint and based on the lack of infrastructure that you have to build to construct an ADU, they tend to be relatively affordable as rentals, so it’s sort of a market-based approach to provide affordable housing.”

Missoula is also looking to other university towns on how they encourage ADU owners or vacation rental hosts to rent short-term during the summer months and rent to students, for example, during the school year through a lease.

According to Laura Spanjian, Airbnb public policy director for Montana, surges in Airbnb host income during certain university events benefits communities.

During this year’s commencement weekend at the University of Montana, Airbnb hosts earned $82,600 and welcomed nearly 900 guests in their homes.

In 2018, there were about 236,000 Airbnb guest arrivals, with about 35,000 of those being in Missoula County.

“Cities like Missoula that are home to universities typically see big increases in guest arrivals and host income during big events related to campus activities,” Spanjian said in an email. “Big events like these are a great economic opportunity for hosts to earn extra, meaningful income by sharing their extra space.”

Short-term rentals are a growing trend nationwide, with larger cities seeing tourist homes displacing long-term housing.

“Vacation rentals have proven to be problematic in many communities like Missoula, and it’s something that we’re watching closely,” Pehan said.

A study by Norma Nickerson and Rhonda Fitzgerald of the Institute for Tourism and Recreation Research at the University of Montana found that short-term rentals can cause problems for communities, and that they're “flooding” places like Whitefish, Bozeman, West Yellowstone, Kalispell and Missoula.

“But a growing trend has emerged with commercial operators running hoteling schemes, which tend to fracture communities, raise safety concerns and increase the price of rent for residents while depleting affordable housing options,” they wrote.

Christine and Marco Littig, who rent out short-term housing downtown, said that on their street, two other real estate owners want to convert their buildings into vacation rentals.

Pehan said that in Missoula, vacation rentals haven’t become an issue. An ordinance that the city adopted in 2016 that requires whole-dwelling-unit tourist homes to register with the city, and state also protects against that very issue.

“We have a policy lever, meaning through the registration fee, by which we can either incentivize or disincentivize short-term rentals in some fashion,” Missoula City Councilman Bryan von Lossberg said.

The ordinance requires residents who rent out a private home or condominium that is not occupied by the owner or manager on a daily or weekly basis to register with Development Services annually. Neighbors within 150 feet are to be notified about the vacation rental.

It does not apply to bedroom rentals within a home.

About 80 tourist homes are registered with the city of Missoula, and the ordinance provides a way for residents to file complaints and be aware of all operations within their neighborhood.

Over 300 Missoula Airbnbs are posted on the company's website, however most are either located out of the city limits or are rooms within a home, which are not regulated, Pehan said.

“The main reason for registration was to gather data and to ensure safety,” Missoula City Councilman John DiBari said.

Vacation rentals can provide convenient ways for visitors to travel affordably, and can also provide opportunities for longer-term housing within Missoula.

“The ordinance that we have in place today provides us the ability to track and monitor the issue and to adapt and evolve that ordinance if we see the displacement of our rental population start to occur or if we see vacation rentals becoming too numerous, too quickly in our community,” Pehan said.

Contact reporter Mari Hall via email at mari.hall@missoulacurrent.com.