A ‘crazy idea?’ Turn short-term rentals into long-term affordable housing on Hilton Head

About 23% of homes in the Hilton Head Island-Bluffton area are vacant at least part of the year, and “seasonal, recreational or occasional use” homes account for most of that number, according to the U.S. Census Bureau.

For some locations, vacant homes might represent an economic downturn. But in Hilton Head, it marks a hot spot for second or even third homes for some, with owners capitalizing on the opportunity to rent their homes during the tourist season for extra cash.

The data comes from the Census Bureau’s 5-year American Community Survey. A home is considered vacant if no one is living in it when the census interviewers come around, unless its occupants are only temporarily absent, say for an extended trip. But it is considered vacant if renters whose main residence is elsewhere answer the door.

It’s a stark contrast to the thousands of year-round residents struggling to find an affordable place to live, despite there being nearly 1,000 more rentals in 2021 than in 2011, according to the data.

But one Hilton Head non-profit director, Sandy Gillis, says she has a “crazy idea”: The Deep Well Project director wants Beaufort County to explore the possibility of providing incentives to property owners to turn vacation rentals into year-round homes for those in need of affordable housing.

The idea is that owners could make as much money or more renting their homes for less year-round instead of at a higher rate for only a few months out of the year.

Gillis said over her decades on the island she’s seen workforce apartments and complexes shift from being where workers rent housing to short-term vacation rentals.

“It’s not the oceanfront 10,000-square-foot Sea Pines mansion” we’re talking about, she said.

Breakdown of vacant homes

Of the 110,075 housing units in the Hilton Head Island-Bluffton area, here is the breakdown of the estimated 25,654 vacant homes:

• 17,537 are for seasonal, recreational or occasional use (15.86% of total units)

• 3,602 units are for rent (3.27% of total units)
  
  

• 1,303 units are for sale (1.18% of total units)
  
  

• 269 units are sold but not occupied (<0% of total units)

• 97 units are rented but not occupied (<0% of total units)

• 0 are for migrant workers

• 2,846 are not categorized (2.58% of total units)

The U.S. Census community survey 5-year data was released in December and compiles data collected from 2009 to 2021.

Based off of the Census Bureau’s 2021 supplemental data, released in September 2022, the Hilton Head-Bluffton area ranked 11th nationwide for metro areas with the most unoccupied homes. That data only analyzes responses from 2021 and is less reliable than 5-year data.

In the top five were other popular vacation destinations, including Ocean City, New Jersey; Barnstable Town, Massachusetts; Salisbury, Maryland; Myrtle Beach, South Carolina, and Naples, Florida.

Short-term rental costs rising

When the U.S. census-takers come around, Gillis wants affordable housing tenants opening doors instead of short-term renters — something she said could be achieved with incentives from government programs like the Beaufort-Jasper Regional Housing Trust Fund.

The trust fund was established in October and aims to address the need for affordable homes for working families across the Lowcountry.

In the spring, short-term rental rates average up to $278 a day on Hilton Head Island, according to AirDNA. Though property owners might not make as much money per day for a long-term rental, between a potential government subsidy, year-round rent and lower maintenance costs, renting year-round at a lower rate could be comparable to renting only a few months at high prices, Gillis said.

Island Time Hilton Head, a local short-term property management firm founded in 2019, manages property for about 125 home and villa owners on the island.

“There’s more costs associated with short-term rentals on Hilton Head than ever before,” co-founder Dru Brown said.

Both short-term and long-term rental owners are required to obtain a business license, but those renting residential property to the same person for less than 90 days must pay 10% state and local taxes collected on gross rental income. Brown says those taxes run in the hundreds or thousands of dollars depending on how expensive the rental is. There is also a yearly $250 short-term rental permit fee.

“You have all of these additional costs associated with short-term rentals that would go away with a long-term rental,” Gillis said.

Brown also said you have to consider cleaning costs in-between renters, and utilities.

“If homeowners were to consider (renting long term) they would not have to worry about the phone, cable, internet, those types of things,” he said. “Those costs would be put onto the tenant.”

Wouldn’t be the first

Beaufort County wouldn’t be the first to pilot a long-term rental incentive program. In North Lake Tahoe, California, the housing affordability situation is similar, if not worse.

In North Lake Tahoe, 65% of single-family homes are second homes and short-term rentals, according to a 2021 Mountain Housing Council study. But the seasons are flipped — booked in the winter for skiing, and vacant in the summer months.

In August, a year-long pilot program was launched in North Lake Tahoe that pays homeowners up to $24,000 to rent long-term to locals.

When reading an article about the program, “you could have literally substituted Hilton Head Island for Lake Tahoe,” Gillis said.

Programs incentivizing long-term rentals are popping up in vacation towns across the United States.

In August, the Sedona, Arizona, City Council approved a program that would pay up to $10,000 to homeowners willing to trade their short-term leasing for a long-term lease to locals. Other areas with similar programs include Portland, Maine, and Big Sky, Montana.

Would people do it?

Both Gillis and Brown said whether homeowners would accept a long-term rental incentive program would come down to how much the subsidy was and whether it outweighs the benefit of renting short-term.

It could be especially attractive for homeowners struggling to rent or who don’t have deluxe rentals, Brown said.

“It could be a way of offsetting costs for those that don’t have exactly the most desirable properties,” Brown said. “Maybe a home somewhere that doesn’t have a pool, it’s not close to the beach, and it hasn’t been (successful) renting short-term. That would be a good option for something that could be rented long-term.”

Many homeowners in long-term rental subsidy programs across the U.S. say the subsidy isn’t enough to offset the costs. Homeowners also lose the ability stay in their homes some of the time because renters are there year round.

“The incentives would have to be good enough that homeowners aren’t in a position that they’re (losing money) or making a ton less money,” Brown said.

There also may be negative attitudes toward affordable housing, to which Gillis asks, “What is the stigma of having a short-term rental next door, where it’s a party house every weekend and you don’t have neighbors that you chat with at the mailbox anymore?”

‘Could possibly be a solution’

Beaufort County community development director Eric Greenway said it’s not “something in the works right now,” but it could possibly be a solution.

“I would be willing to explore learning about those programs to see if it’s a tool that we can put in the toolbox underneath the Regional Housing Trust Fund to help address the affordable housing needs of the county and the region,” he said.

Though her idea hasn’t gained traction so far, Gillis said she is hopeful, and keeps in view the impact it could have on the community.

“Would you like to have somebody who works here, who lives here, whose kids go to school here,” she said. “Would like to have somebody like that living next door to you? Or do you like having the constant turn over every week and there’s a different tourist family in there?”