Sedona "Rent Local" Pilot Program
Short-Term Rental (STR) vs "Rent Local"
The only way I can make a true comparison is through my experience in selling STR. I have sold nine different properties this year that are STR capable. All of this hit the national news because we just can't find housing for local workers.
I am going to use an example of one of my recent sales that had a documented history of rental income of $10,000 a month. STR properties have been selling for 10% to 20% more than that same home could sell for in an area that does not allow STR.
The property I am going to use as an example is in the video below. It will add context to my opinion. I sold this property for $1,200,000. It has no views, but it is an awesome STR that fits all the requirements for vacation rentals. Ironically, the people that bought this property are going to live in it and not use it as an STR! But the option to rent it out is there.
If this same home was in any other neighborhood that did not allow STR, it is my opinion that it would sell for 10 to 20 percent less! Many of the short-term rentals were receiving multiple offers because of the rental income. One of my associates just sold his STR. It was making $25K a month! This home has gorgeous Sedona views.
Since enacting the law, vacation and STR have exploded in popularity. However, many subdivisions and HOAs already had minimum restrictions for rental occupancy, generally, one-month minimum. I live in a community with a 1-year lease restriction for rentals. These communities, subdivisions, or HOAs were grandfathered.
Sedona 'Rent Local' Pilot Program
It is important to know that Sedona local workers cannot find housing. Either rentals are too expensive, or there is nothing to rent at any price. This is now a major issue. One resort has decided to purchase homes for their employees in a neighboring city and then transports them to the resort. The employees pay a reasonable rent.
As a reminder, Sedona is a huge tourist destination that can command anywhere from $5000 to $25,000 monthly in rental income per property.
Image courtesy of the Host Committee.
Also, remember that the Superbowl will be played in Arizona in February 2023, and people coming to be a part of the celebration will spill over to Tucson and up to Sedona. Rents will explode this winter and spring.
Here is the context of the new program.
- Terms of the Rent Local pilot program that was approved by the Sedona City Council on 8/9/22 are as follows: One-year minimum lease to a verified local worker in exchange for a cash incentive, applicable to registered STRs, 1-year minimum lease, at least one renter is a verified local worker, "local worker" is to be employed in the community for a minimum of 30 days at 30+ hours a week, the homeowner to refrain from renting short-term for three years, maximum rent charged is $2200/mo., cash incentive to homeowner runs from $3,000 for a room to $10,000 for a single family (3 bed) home, $240,000 in total funds are being allocated to the pilot program.
You Be The Judge...
If an owner decides to participate in the rental program and gets the maximum of $10,000, they could lose $110,000 a year for 3-years if they get an average of $10,000 a month. That is $330,000 total. Each of these homeowners paid a premium for an STR-capable property. Do you think an investor or homeowner might be willing to make that change?
My guess is that this may benefit borderline properties that are not able to command a high rental fee and have registered as an STR with the city. There is only $240,000 allocated to the initial pilot program.