How Short Term Rentals Affect Raleigh Real Estate
October 24th, 2024
How Short-Term Rentals Affect Raleigh Real Estate
Curious about how short-term rentals affect Raleigh's real estate? Continue reading to discover everything you need to know about the impact of short-term rentals in Raleigh.
Raleigh is a city known for its vibrant culture, diverse neighborhoods, and robust technology sector. The growing number of visitors and business travelers has made short-term rentals an attractive investment opportunity for homeowners and investors alike.
In North Carolina, a short-term rental refers to a residential property rented out for vacation, leisure, or recreational purposes for fewer than 90 days by someone with a separate permanent residence to which they plan to return.
To manage this expanding market, Raleigh has implemented a set of guidelines for short-term rentals, which are allowed as a Limited Use in various zoning districts. These regulations aim to balance homeowners' income potential with the need to maintain residential neighborhoods' character and safety. Overall, these measures strive to promote economic stability within the community.
According to the NC Realtors, a study has determined that short-term rentals account for less than 3% of the country's total housing stock. While short-term rentals are not the primary cause of the region's affordable housing issues, they do impact taxes, average rent costs, and various other factors, making it challenging to find affordable housing.
If you are thinking about investing in a short-term rental or wondering how short-term rentals are affecting Raleigh real estate, keep reading to learn more.
Here is everything you should know about short-term rentals affecting Raleigh real estate.
Chapters
1. Demand for Homes
The interest in short-term rentals has greatly increased, mainly due to the rise of remote work and leisure travel. Properties that boast unique features or historical significance are especially appealing to travelers. Additionally, short-term rentals often command higher rates compared to traditional long-term leases.
Raleigh's growing status as a popular destination allows property owners to set premium prices, particularly for homes situated in sought-after locations or with distinctive attributes. Many homeowners, recognizing this trend, are investing in second properties to take advantage of the demand.
Typically, short-term rental owners choose to invest in prime areas, such as picturesque mountain towns, vibrant beach communities, and bustling cities. While this strategy can yield significant returns during peak seasons, it's important to consider that income may fluctuate during quieter times.
The demand for short-term rental properties can significantly differ depending on their location. For example, Asheville, NC, enjoys a vibrant influx of visitors throughout winter, while places like Wilmington have the most visitors during summer. Conversely, certain mountain towns may experience a decline in tourist activity during the warmer seasons.
This seasonal variability poses a challenge for short-term rental owners. Hence, creating a thoughtful strategy to draw in renters during off-peak times is vital, ensuring consistent engagement with potential guests year-round.
2. Regulation of Rentals
Local governments have implemented regulations to oversee short-term rentals, encompassing zoning permits, special event restrictions, and limitations on the number of rentals within multifamily buildings.
These local authorities play an essential role in ensuring that short-term rentals are consistent with Raleigh's zoning and housing policies. They enforce ordinances that may necessitate permits or licenses and outline the specific locations where these rentals may operate.
Furthermore, local regulations address the duration of short-term leases. In Raleigh, for instance, a short-term rental may be occupied by a single tenant for no longer than 30 days.
Here are some more short-term rental regulations you should know about in Raleigh, NC:
- Every short-term rental operator shall first apply for a procure zoning permit from the City.
- No exterior advertising shall be allowed.
- In residential zoning districts, short-term rentals shall not utilize the premises for holding special events or gatherings.
- Every short-term rental operator shall maintain a list of all short-term rental lodgers staying on the premises for a period of three years.
- The zoning permit number authorizing the short-term rental shall be conspicuously posted on all short-term rentals and the subject property advertisements.
As a short-term rental property owner, you should be aware of all local and state regulations where the property is located. If you do not adhere to these regulations, then you risk losing the property or paying fines.
3. Taxes for Short Term Rentals
Short-term rental hosts in Raleigh are obligated to collect sales and room occupancy taxes from their guests. As of 2024, the state of North Carolina imposes a sales tax rate of 4.75%.
In addition, Raleigh, situated in Wake County, enforces a local sales tax and room occupancy tax that can vary between 2% and 6%, depending on the specific location within the county. These taxes contribute to funding various services and activities associated with tourism.
Short-term rental hosts in Raleigh are responsible for numerous taxes, many of which mirror all homeowners' requirements. The following outlines the applicable taxes for short-term rentals:
- State Sales Tax: 4.75% as of 2024
- Local Sales Tax: Varies throughout Wake County, although it is typically between 2% and 6%.
- Room occupancy tax: Also known as the Vacation Rental Tax, this varies depending on the location and type of rental property.
Hosts may utilize automated systems for tax collection. Yet, it is essential for all hosts to diligently maintain records of their rental income, tax obligations, and exposure for a minimum of three years. This practice aligns with the importance of preserving vital documents related to your property.
Platforms such as Airbnb and VRBO offer the convenience of collecting and remitting taxes for hosts. However, please note that when guests book directly through the host, the responsibility for remitting state taxes rests solely with the host.
4. Neighborhood Impact
Some community members have raised concerns regarding the adverse effects of short-term rentals on property values and overall quality of life. Establishing positive neighbor relations is vital for sustainably integrating short-term rentals within communities.
Hosts are encouraged to actively engage with their neighborhoods to cultivate support and address any emerging concerns. This engagement should include transparent communication and strict adherence to community guidelines related to noise levels and property maintenance. Adhering to neighborhood norms is fundamental to the acceptance of such rentals.
Depending on the property's geographical location, restrictions may exist regarding the hosting of events or large gatherings at short-term rentals. Such regulations typically arise from concerns about excessive noise, disruptions to neighboring residents, potential property damage, and violations of local zoning laws.
Large gatherings pose a heightened risk of damage to the property, affecting elements such as furniture, appliances, and the overall structure. Furthermore, noise disturbances are particularly significant in residential areas.
Should a tenant conduct a special event or large gathering, there may be legal ramifications, including potential penalties for violations. To effectively manage gatherings at short-term rentals, hosts should explicitly state in their listings that gatherings are prohibited and clearly define the maximum occupancy allowed.
5. Housing Cost
Some say that many short-term rentals are not affordable for families and that the focus should be on more affordable housing. As short-term rentals expand across the nation, many studies have tried to identify their impacts on the overall housing market for local residents.
The Economic Policy Institute found that the "cost of Airbnb expansion to rentals and local jurisdictions likely exceeds the benefits to travelers and property owners." The analysis found that Airbnb's biggest cost to local residents is the reduction in the supply of housing.
Due to high demand and changes in the housing market, owning a rental property may be more expensive, leading to an increase in rent. With limited inventory available, many individuals are facing high housing costs, making it challenging to live affordably.
6. Affect on Real Estate
Short-term rentals can significantly impact real estate in various ways, including changes to housing supply, neighborhood dynamics, gentrification, housing policies, and economic effects.
In Raleigh, short-term rentals may lead to increased property values in high-demand areas due to the potential for higher rental income. However, these rentals can also create neighborhood disturbances, which may result in wear and tear on properties and reduce long-term rental opportunities for residents.
Many businesses are relocating to Raleigh, and the presence of popular universities makes the city an attractive location for short-term rentals. This high demand often results in higher prices in desirable areas. If you are thinking about buying a home in Raleigh, it's important to keep an eye on market conditions to identify the best time for your purchase.
Pros and Cons for Short-Term Rentals:
Pros:
- High potential income
- Market appeal for specific locations
Cons:
- Neighborhood Description
- Increased Maintenance Cost
- Reduced Long-Term Availablity
7. Things to Consider
Like Raleigh and many other popular places to live, there are regulations governing short-term rentals, including permit requirements and restrictions on where they can be located, for many reasons.
The demand for short-term rentals in Raleigh can fluctuate depending on factors such as tourism, events, and remote work trends. These laws and restrictions protect the landlord, tenant, and neighboring homeowners.
Methodology
We used information from different sources and our data to create this guide on how short-term rentals affect Raleigh real estate.
The following are a few sources we used to gather most of our information about short-term rentals in Raleigh and their impact on real estate.
FAQS
Does Raleigh allow Airbnb?
In Raleigh, annual permits are required to operate a short-term rental legally. Special events are prohibited in residential zones, and compliance with fire, building, and housing codes is mandatory.
Is Raleigh real estate slowing down?
The real estate market in Raleigh is slowing down more than it has in the past, with houses taking longer to sell. While supply has fluctuated, the monthly inventory levels are now considered ideal for a balanced market.
What is the short-term rental law in North Carolina?
The North Carolina Vacation Rental Act protects consumers who rent vacation properties for less than 90 days. According to this law, landlords or real estate brokers must provide a written rental agreement that outlines your rights and responsibilities.
Do you need a permit for Airbnb in NC?
In North Carolina, Airbnb hosts must obtain a zoning permit, which they need to display on their listing and within the rental units. Short-term rentals are permitted only in residential dwelling units and must be located at least 750 feet apart.
How Short-Term Rentals Affect Raleigh Real Estate - The Bottom Line
Investing in short-term rentals can be a rewarding investment, especially for those looking to enhance their income. However, like any other real estate investment, there are challenges to consider and things to remember, especially in high-demand areas.
With the popularity of platforms such as Airbnb and VRBO, a growing number of investors are enjoying the potential for higher returns compared to traditional long-term leases. Although there are risks, the benefits can be quite compelling.
To determine whether investing in short-term rentals is for you, check out the pros and cons of investing in these rentals to help give you the information you need for this decision. Just like buying any other property, there are things you should consider before jumping right in.
If you are considering moving or selling, contact us or visit our website. Our team at Raleigh Realty is here to help you with any home buying or selling needs.
Ryan Fitzgerald
Hi there! Nice to 'meet' you and thanks for visiting our Raleigh Real Estate Blog! My name is Ryan Fitzgerald, and I'm a REALTOR® in Raleigh-Durham, NC, the owner of Raleigh Realty. I work alongside some of the best Realtors in Raleigh. You can find more of my real estate content on Forbes, Wall Street Journal, U.S. News and more. Realtor Magazine named me a top 30 under 30 Realtor in the country (it was a long time ago haha). Any way, that's enough about me. I'd love to learn more about you if you'd like to connect with me on Facebook and Instagram or connect with our team at Raleigh Realty. Looking forward to connecting!
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