“What about the liability?”
“What about noise complaints from neighbors?”
“What about the extra costs involved?”
“It will totally change the character of our community, and we don’t want that!”
To anyone who’s been involved in talking about short-term rentals (STRs), the above looks very familiar, right? They’re the most common concerns about the risks (and hassles) involved with allowing residents to sublease their apartments on short-term rental platforms.
Except that’s not where I first heard these concerns. Back in the late 1990s, hardly any apartment communities allowed pets, particularly dogs and cats, in their apartments. When I asked why not, I usually heard the same four objections.
Yet a few intrepid pioneers, sensing the growing importance of pets as part of their prospective residents’ lives, took a risk and started allowing pets.
I remember visiting one of those in the early ‘00s, Archstone South Market, at the edge of the financial district in San Francisco. I was touring and noticed there seemed to be a lot of dogs. So I asked the community manager whether that was true or it was just me thinking it was.
“Oh, yes,” she said. “We have a lot of pets here. We’re the only community anywhere near the Financial District that allows pets. In fact, we get many referrals from our comps when they have a prospect with a pet since they don’t allow them.”
“Brilliant!” I thought, “What better situation than to have your competitors generating leads for you!!”
Fast forward to today. Most apartment complexes not only allow pets, but the more contemporary ones even have pet washing stations and other pet-related community amenities. We went from fearing and avoiding pets to embracing them.
So consider the following parallels:
- By allowing pets, multifamily operators opened up new demand streams for prospects who wanted to live with a pet. Similarly, STRs represent a new demand stream from residents who want to be able to subsidize their rent by renting out their home when they travel.
- Just as pets opened up a new stream of revenue (pet rent), so too can allowing STRs open up new revenue demand streams.
Allowing STRs is not without its challenges:
- Just as communities mitigated risk through things like breed restrictions, so too can they mitigate STR risk through ensuring leaseholders have the appropriate liability insurance or limit the number of nights allowed.
- Just as communities have to deal with problems like pet poop and noise complaints, so too will communities have to deal with the occasional complaint related to an STR visitor.
- Just as some communities established separate dog and non-dog buildings (or floors), so too can communities establish STR and non-STR buildings (or floors).
Lastly, when it came to pets, we saw resident expectations change. Even non-pet owners have come to expect that there will be pets at their community just a there are pets in any single-family neighborhood. Similarly, residents coming to expect that STRs are part of the apartment living experience.
In the end, the fears around allowing pets were largely overblown. Yes, there are some problems with pets, and community management takes on extra work and deals with resident complaints that would otherwise not happen, but the benefits of attracting more residents and getting additional revenue more than compensated for this. I predict the same trajectory and result for STRs!
For those attending next week’s inaugural "FLEX - Flexible Rentals Investment" conference in San Francisco, D2 will be taking part in a workshop where we will explore the nascent but hugely exciting area of STR pricing. Hopefully, we'll see you there!