San Bernardino County Summary of Short-term Rental Outreach and Study Findings
Read the memo from November 2023
The County could not find clear and empirical data that indicates that short-term rentals (STRs) have a substantial impact on the availability of long-term, rental housing options in the unincorporated Mountain and East Desert communities.
Despite an exhaustive review of data sources, including direct communication with property managers, schools, and service providers, the study could not clearly identify data or trends that pointed to STRs displacing long-term renters or serving as a primary cause of an increase in monthly rents. While some residents cited incidences of displacement, the County could not confirm any substantial or widespread pattern of such activity throughout the unincorporated Mountain and East Desert communities. Some data indicates that the STR model may offer greater financial return (compared to long-term rentals) and studies conducted elsewhere (though often in highly urban areas) conclude that STRs may increase rents by up to 3%. However, other data indicates that the local STR market is rapidly cooling and that nearly two-thirds(65%) of STR property owners book fewer than 60 nights per year, with just under half (44%) of STR property owners earning less than $5,000 per year.
Finally, US Census data show that, in the unincorporated communities that contain the vast majority of STRs, the rates of rental occupied households are roughly the same or higher in 2021 compared to 2010 and the rates of vacation/2nd homes (aka seasonal homes) are actually lower compared to levels reported in 2010. Larger events and economic trends play the largest role in the ongoing increase in housing costs, with the COVID Pandemic exacerbating a pre-existing shortage of housing construction. The Pandemic also increased opportunities for remote work and expanded the housing market for working (non-retiree) households into the unincorporated Mountain and East Desert communities, creating a surge of housing demand into areas with little ability to quickly build new housing.
• The COVID Pandemic changed the housing landscape, expanding the conventional housing market into rural areas. The primary driver of rising housing costs in the unincorporated Mountain and East Desert communities was the COVID Pandemic. Areas that were once viewed as too far from major employment centers became part of the conventional housing market for many households.
• Retirees & remote workers competed in a housing market where the rate of new construction was at its lowest in nearly 20 years. Retirees and white-collar workers along the coast and other affluent areas, flush with cash from home equity and/or high salary jobs, viewed the unincorporated Mountain and (especially) East Desert communities as desirable and relative bargains, and were willing and able to pay much higher rents and pay much higher sales prices. Additionally, the historic lack of housing production across the state meant that these households were competing for a relatively small supply (that largely consisted of existing housing stock).
• The number of STRs grew in response to the Pandemic and the STR market is now showing a downward trend. The unincorporated Mountain communities have a long history and high rate of second home ownership. Homes in the East Desert communities are primarily occupied year-round. Joshua Tree was the primary community that saw a dramatic change, going from 5% second homes in 2010 to 21% second homes in 2021. Property owners leveraged the market demand created by the Pandemic to use existing or build new second homes as STRs. STR activity surged after the easing of travel restrictions in 2021 and peaked in late 2022. The latest 2023 figures for STR activity appear to indicate a downward trend and possible market correction.
• STR activity makes sense functionally and financially for second homes compared to long-term rentals. Property owners leveraged the market demand created by the Pandemic to use existing or build new second homes as STRs. Many cited the increased home insurance rates as a reason they opted and needed to continue to use their property for STR in order to afford their existing primary residence. They also cited increased restrictions on evicting tenants who did not pay and/or did property damage as a reason they avoided long-term rentals. Most second homes generate little to no income and are rented fewer than 60 nights per year. However, STR activity enables property owners to generate some income while retaining the ability to use their vacation home whenever they like.
• Existing residents are likely not being replaced by STR activity, but by buyers and tenants willing to pay higher sales prices and rents. If STR activity were displacing a substantial number of renters, there would be a corresponding change in the rates of vacant homes and rental occupancy. However, US Census data indicates relatively little change from comparing conditions in 2021 and 2010, with most communities adding year-round residents. In Joshua Tree, where rate of vacant homes rose by 16% during that time period, the rate of rental occupancy increased by 3% and the rate of owner-occupancy dropped by 18%. Existing homeowners likely sold (at high Pandemic level prices) to buyers looking to own a vacation property that could also be used as a STR. At the same time, the community added more year-round renter households.
