Mon | Nov 19, 2018

Short-term rental boom adding to housing bane - Authorities urged to guard against community deterioration

Published:Monday | October 22, 2018 | 12:00 AM
Dr Carol Archer

The boom in the short-term rental market has created a new source of income for many Jamaicans, particularly in the Corporate Area and along the north coast. However, while it allows many homeowners to earn directly from the accommodation sector, there is concern among housing experts that its growth could, in the absence of specific regulations, be contributing to an already-significant housing shortage.

The point was one of several issues raised at the recent RAJ Symposium 2018, organised by the Realtors' Association of Jamaica (RAJ), in partnership with JN Bank, to examine 'The Impact of Airbnb on Real Estate Investments and Tourism'.

One example of the emerging issues was captured by Rose Bennett Cooper, chairman of the Rent Assessment Board, in her story about a young divorcee in the Corporate Area who was forced to rent after selling the matrimonial home in which she, her ex-husband and children lived, in order to divide the proceeds from the sale between her and her former partner.

"The places that she could have afforded to rent two years ago she can't anymore, not on her salary. And why is that? Because of short-term rental," she posited, underscoring that short-term accommodations are significantly more expensive, and does not afford tenants long-term residency.

"She called me, quarrelling, asking what is the Government doing to help people like her so that persons are not pushed out of the rental market as a result of short-term rentals," Mrs Bennett Cooper highlighted. "What about the locals? Where do we go? How do we live? Is the Government planning some kind of social housing [or] some kind of intervention to help the rest of us?"

 

DEMAND HIGH

 

Dr Carol Archer, former dean of the Faculty of the Built Environment at the University of Technology, Jamaica (UTech), acknowledges that the expansion in short-term rental has indeed created a conundrum in the housing sector. Jamaica has an effective annual housing demand of between 15,000 to 20,000 units for the next 15 to 20 years, according to the National Housing Policy, which the annual supply has not been able to meet.

"One of the things we included in the Housing Policy was that more emphasis should be placed on the rental market and that there [should be] an incentive for persons to have rental units available," said Dr Archer, who is one of the authors of the policy. She noted, for example, that developers could be given an incentive to construct multi-family developments for rental.

"These multi-family homes would be available for various income groups. So you put up six stories and 'X percentage' would be for rental," she explained, noting that this could meet the needs of groups of persons, such as young professionals, who would not immediately have the capital to purchase a home.

 

DRAMATIC EXPANSION

 

However, the dramatic expansion in the short-term rental market may have turned those recommendations on its head. She argued that the situation means that units which may have been developed to plug the housing shortage could now be lost.

"Let's say, for argument sake, you negotiated with a developer for residential units. The local authority would approve this because it's contributing to stemming the housing shortage; but, then it is not, because you're not putting it up for long-term rental, because it's being used for commercial purposes. It means that we would still have a housing shortfall," Dr Archer argued.

Her colleague, programme director of real estate management and valuation at UTech, Anetheo Jackson, said the chronic shortage results in higher prices for long-term rentals, particularly those located in prime areas of urban spaces.

"Once you notice that there is a shortage, which we've always had, it means that demand would be stronger than supply; and, in that context, you would expect to see housing prices go up," she observed.

"Therefore, it stands to aggravate what is already an issue for Jamaica in terms of the housing market," she posited.

However, she notes that the situation affects mainly those in the middle- to-upper-income bracket.

The conversion of residential homes into commercial property, based on short-term rental, also creates problems for the planning authorities, Dr Archer opined.

"There is an implication for the type of use because there is a distinction in the approval for residential versus commercial. What technically should happen is, if I am providing a service, which is in line with a hotel, then that is a separate approval from residential," she explained, noting that the building code and fees for each establishment would be different.

Importantly, Dr Archer reasoned that the rapid growth of short-term rental has implications for the development and maintenance of communities. She said that short-term rental should be managed at a community level to guard against transient patterns of development, which may lead to the eventual deterioration of communities.

For example, she noted that there should be a process of registration for these accommodations, particularly within the context of the country's safety and security issues.

"Do we have the requisite infrastructure - social and otherwise - to support this kind of activity? It's similar to student housing, where there is an infrastructure, working with the universities in Mona, for example, to support that high turnover of population in a community," she stated, noting that in cases of strata developments, amendments to strata laws should also be contemplated.

"Thanks to the boom in short-term rental, we are now forced to consider these issues," she said.