Tourism has long been an important part of Galveston’s economy. Each year, millions of people from all over Texas and the nation flock to Galveston to enjoy our beaches and historical charm, especially during the summer months. Although traffic along Broadway and crowds along the Seawall are perennial complaints among residents of the island, tourists and their arrival are generally seen as a net positive for our community.
In recent years, however, short-term rentals in Galveston have complicated that picture. Not only has the number of short-term rentals increased dramatically, but they are now popping up in neighborhoods that have traditionally been home to long-term residents. The increase in short-term rentals has led to an uptick in complaints among residents. In response, Galveston City Council recently considered a proposal from the City Marshal’s office to add 18 new deputies to enforce short-term rental regulations at a startup cost of $2.3 million.
The rise of short-term rentals in Galveston is also occurring at a time when housing and rental prices are increasing rapidly on the island. And there’s reason to think the two trends might be connected, based on research of other cities.
As these discussions about short-term rentals in the community continue, we wanted to provide hard numbers to the conversation for better context. In this post, we look at the growth of short-term rentals in Galveston and explore where that growth has been concentrated. We also look at the impact on the housing market and outline potential policies that might help mitigate the harmful impacts associated with unfettered growth of short-term rentals on the island.
Growth of short-term rentals
Five years ago, there were around 2,300 short-term rental units in Galveston. While the number of short-term rentals fluctuated up and down in the following years, it held steady at around 2,000-2,700 housing units. (These data come from point-in-time observations of all online short-term rental listings by Granicus.)
Things began to change, however, between April 2019 and February 2020. During this period, the number of short-term rentals nearly doubled from 2,200 units to 4,000 units.
But it didn’t stop there. Over the Spring and Summer of last year, the number of short-term rental units on the island continued to increase to over 5,200 units. As of August 2021, that number held steady.
So if it suddenly feels like short-term rentals are everywhere, it’s because they are. In a little over a year, the number of short-term rentals increased by 125%.
Geography of short-term rentals
The chart below shows where these short-term rentals are concentrated based on city council district. Unsurprisingly, District 6, which comprises the western half of the island and has traditionally been filled with beachside vacation properties, has the largest number of short-term rental units listed (~2,400 in 2021). That’s roughly a quarter of all housing units.
More surprising is that STRs have also taken off in District 5 and District 2. In District 5, there are over 1,100 short-term rental units, or 18% of housing units. In District 2, there are over 800 but they make up a similar share of housing units (18%).
What do short-term rentals look like and who owns them?
The typical image we have of an Airbnb owner is someone who is renting out a garage apartment or a room in their house to make money on the side. That’s not what short-term rentals look like in Galveston. According to the data from Granicus, 98% of short-term rental listings on the island are of the entire home. The majority, 61%, are single-family homes.
What’s more, many short-term rentals are run by people who do not live on the property or even in Galveston. Data on property ownership is harder to come by for short-term rentals. For this part of the analysis, we used data from the Park Board on registered short-term rentals (as of 7/31/2021) and cross-referenced it with data on land parcel ownership from the Galveston County Appraisal District (GCAD).
According to these data, only 7% of registered short-rentals are owner-occupied, i.e. the homeowner lives on the property. This reflects the share of short-term rentals on parcels where the owner claimed a residence homestead exemption in 2021 on their property taxes.
The data also show that only 30% of registered short-term rentals are owned by residents or businesses located in Galveston. While the majority of non-Galveston short-term rental property owners are in and around the Houston area, around 5% are from outside of Texas.
In addition, many short-term rentals are owned by businesses, not residents looking to make extra cash. More than 1-in-5 of registered STR owners (22%) are businesses (LLCs, etc.).
These data, moreover, only give us a partial picture of short-term rentals and their owners. The data from Granicus, which is compiled from listings on websites like Airbnb and VRBO, include more than 1,000 additional properties than are currently registered with the city.
Impact on housing market
The influx of short-term rentals is occurring at a time of rising housing prices in Galveston. In a previous blog post we found that housing prices have increased by over 80% in the past decade, far outpacing growth in nearby cities and, most importantly, wage increases among residents.
There’s emerging research on the impact of short-term rentals on the housing market from across the country. In places where short-term rentals increase, housing available for long-term residents tends to shrink and housing and rental prices increase.
As sites like Airbnb and VRBO continue to lower the barriers to entry, short-term renting has become a more lucrative enterprise for homeowners, especially in markets like Galveston that see a lot of demand from tourists. As a result, single-family and multi-family homes that used to house long-term residents – both homeowners and renters – are being bought up and transformed into short-term rental units.
But the increase in prices also reflects a shift in the short-term rental market towards bigger investment firms. Residents who are interested in buying a home in Galveston aren’t just competing with other residents, now they’re competing with big investment firms that have large amounts of capital.
We can see the impact of short-term rentals on housing prices in Galveston. The chart below shows the results from an analysis of changes in appraised home values (Galveston County Appraisal District, 2015-2021) and reported monthly rents (American Community Survey, 2010-2015 & 2015-2019) at the census tract/neighborhood level based on the concentration of short-term rentals.
What we find is that in the top 25% of neighborhoods with the most short-term rentals saw the largest percent increases in home values and rents. In the neighborhoods with the most short-term rentals, appraised home values have increased by 250% since 2015. By contrast, home values in neighborhoods with the fewest number of short-term rentals increased by just 150%. Rents increased by a lesser amount but the same pattern holds.
What can be done?
As the recent calls for increased funding for short-term rental regulation enforcement indicate, there’s more to concerns about short-term rentals than just housing prices.
We’ve spoken with many long-term residents who have seen the character of their neighborhoods transform overnight. Streets that used to be home to long-term homeowners and renters are now filled more and more with short-term rentals and scores of tourists coming in and out each week. And with that influx has come complaints about trash, parking, and noise.
What can we do about the rise of short-term rentals in Galveston?
As a community, Vision Galveston wants to see all the stakeholders come together to figure out solutions. We need short-term rental owners, HOAs, community members, vacation rental owners, and city government to work together to come up with a set of workable regulations that ensure our island remains a home where families live and not just a place that tourists visit.
For instance, one of the findings from this analysis is that there are at least 1,000 short-term rentals on the island that are not registered with the city. If the public is going to be on the hook for funding enforcement of short-term regulations and addressing STR-related complaints, owners of short-term rentals should be required to register with the city and pay their fair share.
Neighborhoods also have tools to push back against short-term rentals taking over their blocks and keep the character of their community intact. Ten neighborhoods in Galveston, including Cedar Lawn, Adler Circle, and Lafitte’s Cove (full list and map here) are now short-term rental restricted subdivisions (R0 status).
We can all reach out to our city council members to let them know how important this issue is to us. You can find contact information for your city council member here.
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