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    Study: Overnight rental developments ‘directly’ limited housing opportunity

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    Carter Pape
    Carter Papehttp://moabtimes.awebstudio.com/author/carter-pape/
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    Various economic dynamics feed Moab’s housing problem, and tourism is among them. In particular, hotels have created demand for workforce housing, which is limited locally and not as lucrative as some commercial developments. Photo by Carter Pape

    An economic study published in March 2018 showed that hotel developers were directly limiting affordable housing developments in Moab. Since then, overnight rentals have been the primary subject of Moab’s struggle to control the effects of tourism on locals.

    “Hotel projects are directly affecting the ability of local workforce housing developers to undertake projects, due to competition for a limited pool of local construction labor,” reads the study, conducted by national consulting firm BAE Urban Economics on behalf of Grand County and the City of Moab.

    Following the release of a second study that was commissioned that year, Grand County and the City of Moab passed inclusive housing ordinances that levy development fees on new hotels to offset the cost of building workforce housing.

    This means that, for every new hotel development that is or has been started since late 2018, the developer either builds housing for their hotel’s employees or pays into a public housing fund that goes toward building affordable housing.

    The City of Moab and Grand County have both also passed ordinances to allow for high-density housing under certain conditions, giving developers a better chance at profitability when building workforce and low-income housing.

    Despite these new rules and regulations, the underlying dynamic remains: vacation rentals are highly profitable in Moab, and affordable housing development can’t hold a flame to them.

    How overnight rentals affect housing

    The March 2018 study outlined the mechanisms by which overnight rental developments negatively impact the availability of affordable housing.

    At a basic level, overnight rental developers can outcompete long-term housing developers in land acquisitions and, as previously mentioned, construction labor. This, in turn, drives up development costs, pricing retail, office space and residential developers out of contention.

    “The economics of visitor accommodations allow them to pay more for land, making it difficult to build housing affordable to the workforce,” the report reads.

    Building a new hotel also creates demand for employees, some of whom end up needing affordable housing. Given Moab’s severely limited housing stock, this increasing demand acts to drive up housing and rent prices.

    Many hotel employees are moderate to low earners

    The BAE study showed that, on average, roughly half of the jobs created by a new hotel development in or around Grand county provided “above moderate” pay, defined as being 120% or more of Grand County’s median income. The other half of the jobs, on average, provided pay that was below that threshold.

    For these households earning less than 120% of the area median income, affording rent or affording a house was no trivial task. In light of this, the report presented a bleak outlook for the feasibility of workforce housing developments should Moab’s tourism economy continue to grow under-regulated.

    “As Moab’s tourism economy grows, the addition of new workers required … places further pressure on an already tight housing market, with the injection of buyers from wealthier urban centers driving home prices beyond the reach of Moab’s workforce,” the March 2018 report reads.

    ‘Outside money’ drives Moab housing prices

    Buyers from wealthier, urbanized parts of the region, according to the report, were the primary population of people driving the prices of long-term housing in Moab

    One result of this is that housing prices increased from 30% to 42% between 2014 and 2017, leaving even median-level income earners unable to afford housing. Indeed, by 2018, building a house was financially feasible only for people with sources of revenue external to Moab.

    “In summary, real estate products that were feasible under baseline conditions and can support paying fees were those reliant on ‘outside’ money,” the report reads.

    One primary source of “outside” money was from “retirees and second-homeowners from urban parts of Utah or nearby states who can afford to pay more for housing,” for example, newly built single-family homes. The report mentions that the fastest growing demographic in Moab is the population over the age of 65.

    The other primary source of “outside” money supporting real estate development? Tourism. It primarily fed development of hotels and overnight rental townhomes and condominiums, according to the report.

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