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How vacation rentals affect the cost of housing in Sonoma Valley

The last decade has seen a meteoric rise in the number of vacation rentals in Sonoma Valley, but it’s come at a cost: the annoyance of neighbors and, according to indications in academic studies, higher rents locally.

More than 600 residences in Sonoma Valley have been permitted to operate as short-term rentals in the past 10 years, according to data from Permit Sonoma. The spike in the number of vacation rentals throughout the county led the Sonoma County Board of Supervisors to issue a moratorium on new vacation rentals on May 10 to stem the flow of new applications.

“While vacation rentals play an important role in Sonoma County’s tourism economy, they also have the potential to cause detrimental impacts and pose a risk to the public safety, health and welfare of the county and its residents,” a press release announcing the moratorium said.

In addition to the nuisances created by short-term rental guests - such as excessive noise and parking scarcity - a Sonoma County report released in December 2021 found that while conclusions as to the effects of vacation rentals on the housing market are “mixed,” these studies “lean toward the conclusion rental prices are more likely affected than prices for homes for sale by rising volumes of short-term rentals.”

One of the most contentious areas involving vacation rentals is Theodor Lane in Boyes Hot Springs, where at least nine vacation rentals operate within two short blocks, according to county data. Liza Graves, president of the property management company BeautifulPlaces, has followed the public discussion on Theodor Lane through Board of Supervisor and county Planning Commission meetings.

“The primary complaints have to do with the fact that there's a lot of vacation rentals in that particular area, a lot of complaints about noise, over occupancy, parking and neighborhood disturbances,” Graves said.

Graves grew up on the East Coast where her family stayed in vacation rentals through the 1950s and ‘60s. But the impacts from the vacation rentals along Theodor Lane have “painted the whole industry in a bad light,” which she blames on the lack of oversight from corporate owners.

In response to the continued issues from Theodor Lane vacation rentals, Graves and Madeleine Yankee, owner of the property management company Woodfield Properties, wrote an open letter to the owners of the Theodor Lane vacation rentals to address how they can reduce their negative impact on the neighborhood.

They advised owners to limit overnight capacity and prohibit day guests, increase the minimum stay to between five and seven nights during high season, and install a noise meter on the home. To the county, they urged officials to implement harsher penalties for violations.

“You’ve got to manage not only the guest experience but also the impact and the experience on neighbors,” Graves said. “There’s a few number of bad actors — whether they don’t care or they’re motivated by money — it hurts everybody.”

Even more than neighbors, vacation rentals hurt renters, some research concludes.

A study published in the Journal of Urban Economics points to two effects that may increase the costs of rental units in areas surrounding vacation rentals.

The “efficiency use effect” uses residential properties and maximizes their profits by establishing vacation rentals, which spurs housing demand and leads to increased housing costs. The “rental housing supply effect,” meanwhile, reallocates “existing housing stock away from the long-term rental market towards privately-owned housing, which increases rents.”

By converting what would otherwise be a long-term rental unit into a vacation rental, property owners often see a hefty return on investment. In the ZIP code for Sonoma, the average daily rate of an Airbnb is more than $600 per day according to AirDNA, a vacation rental research tool.

But the study is divided for some of the same reasons Graves has concerns about vacation rental guests. The consequences of irritant guests in a neighborhood may have a negative impact on property values, the study suggests.

The moratorium on vacation rentals — originally set for 45 days — was extended for up to a year by the Board of Supervisors on June 13 as the county works to find an equilibrium between the interests of vacation rental owners and the residents who may face the negative consequences of vacation rentals.

Graves, meanwhile, is working on a set of recommendations to formally propose to the county to enhance regulations of vacation rentals moving forward.

“We care deeply about the community,” Graves said. “We think it's the responsibility of all vacation rental owners to respond to neighbors and make adjustments as needed.”

Contact Chase Hunter at chase.hunter@sonomanews.com and follow @Chase_HunterB on Twitter.

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