Short Term Rentals — Long Term Impact

by Jon Balilies 

The City of Richmond has been discussing altering and revising regulations about short-term rentals (STR’s) and the next action will take place at the Planning Commission meeting on Tuesday afternoon (September 5th). It is an important decision because it is entirely possible the decision by the Commission and ultimately City Council could have a tremendous impact on housing availability, high sale prices, and neighborhood character.

For the last few years, the city has done a good job of holding public meetings and soliciting feedback through various methods and gathering information about short-term rental properties (like AirBnB and VRBO, etc.). Until 2020, they were technically illegal and unregulated but they did exist (they rose to a more visible status when the UCI 2015 Bike Championships came to town).

In gathering information and developing the first ordinance, the city said it wanted to find the right balance to allow property owners to take part, but also make sure it was done right to protect neighborhoods. Some other cities dove in head-first with few, if any, regulations, which led to adverse, if somewhat predictable, effects. Richmond smartly agreed to revisit the ordinance after having some time to evaluate the initial regulations. Currently, in residentially zoned areas, the city requires that owners must claim primary residence at least 185 days (just over half the year) to rent out as a STR. If the property owner has a converted garage, etc., then they may rent that out all year. In commercially- zoned areas, there is no residency requirement being proposed in the new legislation.

Which brings us to the multi-step approach to STR’s. The first was an ordinance  approved in May to ensure all STR’s pay the same lodging tax incurred by hotels so all lodging establishments are on an even playing field and no one has an unfair advantage.

The second aspect of the city’s approach concerned revising the STR regulations and allowing Accessory Dwelling Units (ADU’s) by right on properties (such as a garage or “granny flat”) in a back or side yard in a residential zone in the city that allows single-family housing (with size limits, etc.). These can help some homeowners to age in place or provide affordable options for those who don’t need a lot of space or want to earn some extra income.

Earlier this summer, the Mayor and administration recommended that the city pass the new ADU ordinance first and then they would work to “loosen” or change the STR residency requirement. Thankfully, many people and some on Council saw right through that bait-and-switch and said the two should move forward together, which was accomplished thanks to Councilwoman Jordan:

“Residents overwhelmingly support ADUs, but not if it results in a proliferation of short-term rentals,” Jordan said. “This is a proposal that has broad support, furthers our housing goals, and incorporates community feedback. That said, I would like to see the short-term rental vote happen first to ensure we’re adding long term housing opportunities, not just opening the door for even more short-term rentals.”

So here we are in September and the question is what will the new STR requirements look like? Since the discussion began a few years ago, people have been concerned that removing or loosening that requirement would allow people (or companies) to buy up multiple properties and rent them out. With the new ADU ordinance, they could also build another separate unit either to rent to a tenant or use as a STR 365 days a year if they so chose.

They weren’t the only ones concerned about this happening. Richmond Bizsense reported in late July that a Planning Department memo that accompanied the potential rule changes acknowledged these very concerns:

In addition, short-term rentals can increase the housing shortage and housing prices in the city, the memo states.… The continuation of the primary residency requirement in all residential zoning districts will help preserve existing dwelling units in the city. The proposed STR regulations will enhance tourism and provide income opportunities while protecting the character of residential neighborhoods.

At the August 21 meeting, the City Zoning Administrator had recommended leaving the residence requirement in place for properties in residentially zoned districts. But the Planning Commission asked for other options as well.

Now, we have heard ad infinitum from the Mayor and City Council and non-profits and others that we have a housing crisis. Everyone seems to agree and/or acknowledge we need more units and affordable options; rents are rising; housing evictions are still a problem; investors are grabbing more homes every month at higher prices and preventing locals from buying; on and on and on.

Relaxing the regulations to minimize or eliminate the residency requirement could open the door to what has occurred in other cities: investors buy properties and then use them as rentals which constricts the housing market even further; housing prices are driven up because the investors pay premium prices to acquire; and it saps the vibrancy from neighborhoods because units that once were always occupied with longer-term tenants may only be occupied a few nights a month.

So, a boiled-down example could look like this: If John Smith owns a house and buys ten more properties in residentially zoned districts across the city, he can currently rent only his main residence on a STR platform. He could let the other ten units sit vacant or rent them out to people who live there and go to work, and walk their dogs, and talk to and look out for neighbors.

If the residency requirement for STR’s was removed, John Smith could rent out all ten properties (plus his own house) as STR’s anytime he wanted, year-round. And the soon-to-be-approved ADU allowance will allow Smith to build eleven ADU’s on those properties and he then could rent out all eleven main properties PLUS rent the eleven ADU’s to folks from Boston, St. Louis, Seattle, London or Tokyo who want to visit Richmond for a few days and check out our vibe.

But Smith won’t be the only one buying up properties; there will be a tsunami of buyers — real estate speculators, private equity groups, and firms like Blackrock that are already buying houses all over the country to rent (usually at a much higher monthly rent) or use as STR’s. It has happened in Austin, Texas, New York, Lisbon, Barcelona, and numerous other cities that have weak (if any) requirements for STR’s. The character of neighborhoods and cities can change because of it.


So, the debate next week and afterwards at City Council will be interesting to follow. The Mayor was surrounded by most of City Council earlier this year when he declared a housing emergency. Homes for sale all over our region are already subject to astronomically high bids on properties that otherwise might be bought by a local looking for their first house or someone moving here looking to become part of the fabric of Richmond. The real estate market is flat-out nuts not only with high interest rates but many all-cash sales, and people are now turning to their investment accounts to get loans to purchase a house.

We will soon see if all of the statements and proclamations about our housing crisis, evictions, unaffordable housing, gentrification, and all the rest are really going to influence policy or serve as nothing but political slogans.

The stakes are pretty high at Tuesday’s meeting. If you can’t attend the meeting, you can still participate. Send comments by email prior to the meeting or attend via phone or their online video platform (e-mailed comments have to be sent by 10:00 AM on Tuesday morning to be included in the meeting packet).

Jon Baliles is a former Richmond city councilman. This column is republished with permission from RVA 5×5, a reader-supported blog that focuses on central Virginia.