Rapid City and the Black Hills are in the midst of a housing crisis. Double-digit percentage increases in median listing prices have been persistent throughout 2021 and 2022. In the summer of 2021, at the peak of the frenzy, houses spent an average of eight days on the market.
Housing is only considered affordable if a person or family spends approximately 30% of their income toward housing, including utilities. Approximately 30% of Rapid City residents pay greater than 30% of their monthly income for housing — most of which are cost-burdened renters.
There is no silver bullet to address the current situation and the long-term solutions are often complex. However, there are policies and initiatives leaders can implement to help improve the situation of residents currently living with burdensome housing costs or housing instability.
Short-term rentals are currently not allowed in most neighborhoods. Unfortunately, monitoring and enforcement efforts are lax and as a result, short-term rentals tend to operate under the radar. Regulating these short-term rentals, like Airbnbs, can improve housing affordability by increasing the number of long-term rental units available on the market.
According to AirDNA, a short-term rental data company, 763 homes in Rapid City were listed on Airbnb in July 2022 versus 537 whole homes listed in July 2021, or a 42% increase in the number of listings. Although July is peak season for tourism, the number of homes listed in January 2023 is over 500. The occupancy rate for these homes hovers between 60%-80%, which leaves many of them vacant, especially during off-peak times.
By putting limits on the number of nights per year a property can be rented out, or requiring the hosts to register with the city, we can reduce the number of units removed from the long-term rental market and increase the supply of much-needed housing.
Short-term rentals listed on Airbnb and VRBO sometimes meet the needs of some temporary workers such as medical travelers or construction workers, so this piece is not intended to villainize these rentals. Our city should see the operation of these rentals as a source of revenue.
Regulating short-term rentals, such as those listed on platforms like Airbnb, can improve housing affordability by increasing the number of long-term rental units available on the market. When properties are used for short-term rentals, they are not available for long-term renters to occupy, which can inflate the cost of the remaining long-term rentals.
By putting limits on the number of nights per year a property can be rented out, or requiring that hosts register with the city, local governments can reduce the number of units removed from the long-term rental market and increase the supply of housing.
Additionally, some local governments may also choose to impose user fees on short-term rentals, which can generate revenue that can be used to support much-needed affordable housing initiatives.
Housing is expensive and a very complicated issue. We arrived at this shortage due to a number of factors and, at the local level, we have limited corrective tools at our disposal. Regardless, I remain optimistic that we can make some meaningful progress on this issue.
For all of my years of public service in Rapid City, I have never seen such widespread consensus that something tangible needs to be done to address the shortage of affordable housing. This crisis affects a broad cross section of our community – from the financially strapped, single parent to the wealthiest business executive and the many, many people in between.
Let’s face this challenge with the same energy and determination that we had in 1972, which transformed the tragedy of a devastating flood into a brighter future.