Rents are higher and rising faster on Hilton Head than in other coastal cities. Here’s why

When Chris DeMuro left the high slopes of the Pocono Mountains in Pennsylvania for the Lowcountry salt marshes, he faced a quick turnaround time to find a home for his family.

DeMuro came for work at the Firestone autocare shop in Okatie, but his housing search turned up very few options closer to his job, and those he did find were out of his price range. So he settled in Savannah.

“Preferably we’d be in South Carolina,” DeMuro said. “I didn’t find many long-term rental options around Okatie.”

DeMuro is one of the many workers in and around Hilton Head to discover that rent prices in the area are rising far beyond the regional average. They’re increasing more quickly than in other communities, too.

Chuck McShane, director of market analytics for commercial real estate firm CoStar, said the average rent in the Hilton Head metro statistical area — which includes Beaufort and Jasper counties — is $1,958.

In the Charleston area, average rent for all unit types is $1,654. The average prices in Savannah and Myrtle Beach are roughly equivalent, at $1,539 in Savannah and $1,534 in Myrtle Beach.

In the city of Beaufort, CoStar’s data showed the average rent for available units was $1,768. In communities closer to Hilton Head Island, costs tended to climb. In Bluffton, average asking rent for available units was $2,054 a month.

“A lot of coastal markets have seen a real increase in demand, and in Hilton Head you haven’t seen an increase in supply,” McShane said. “We’ve seen near-record low vacancy rates, and that’s led to record rent growth — it’s felt particularly strongly in Hilton Head.”

In other coastal areas like Savannah and Myrtle Beach, there has been more recent construction to address the housing demand. Those communities built 675 and 1,931 new multi-family rental units, respectively, in the past 12 months, according to CoStar’s data.

In the Hilton Head area, McShane said no new multi-family units were completed in the past year. But there are 818 under construction, the data show.

For the rental options that do exist, Hilton Head is seeing rents rise more rapidly than other markets. CoStar’s data showed a 17.3% growth rate in the last 12 months. At that rate, an apartment renting for the average $1,958 would rent for $338 more this time next year.

Hilton Head recently peaked at a 26% rent growth rate in the first quarter of 2022. Nationally, the current rent growth rate is 7.5%, according to CoStar data.

Charleston’s 12-month rent growth was 11.4%, according to CoStar. Savannah’s was 13.4%, and Myrtle Beach’s 12%.

Hilton Head has been grappling with high rent costs and lack of workforce housing for years. The island’s housing supply problem stems from multiple factors: Available land limited by geography, construction costs, and the town’s preservation of green space.

Rent growth around inland markets is stabilizing, McShane said, but the projection for coastal areas shows continued increases.

This is partly because the pandemic introduced a new group driving demand, McShane said — remote workers. These workers are new competitors against traditional employees who have to live near their jobs.

It’s also due to the limited area most coastal markets have to build on, McShane said, restricting the supply of housing some can provide compared to inland cities.

The rising cost of rent creates a bleak outlook for workers across the Hilton Head area. The current average rent means a resident will pay about $23,000 each year for a roof over their head.

In a 2018 report, the Town of Hilton Head identified the two fastest-growing economic groups as people who make over $150,000 and people making under $25,000. Residents in the latter bracket would pay at least 92% of their yearly income in rent to live in the average Beaufort or Jasper County rental today.

But the town has acknowledged a need for housing across all income levels. In a special meeting called Tuesday to address the recently rescinded evictions of about 300 people at Chimney Cove — most of them island workers — Assistant Town Manager Shawn Colin said he has commuted to the island for the entirety of his 16-year tenure in town government, as do many town employees. Transportation issues also play a role in this, Colin said.

Ward 6 Councilman Glenn Stanford said he’d support reducing obstacles like impact fees to promote housing construction.

In that same meeting, Town Manager Marc Orlando pointed to a lucrative market that could further limit the already scarce housing around Hilton Head — short-term rentals.

The ‘Airbnb effect’

Clarissa Shaffer said she’s lived on the island her entire life. In the 1960s, her grandparents built a home near Tower Beach in the Sea Pines community. Her whole family has homes on Hilton Head, she said.

“I’ve been on this island at different times in my life: When I was single, when I was a young college student, when I was a divorced mom, and now with a partner and adult kids. It was always easy to find a place to live,” Shaffer said. “Now I’m going to have to move away from everyone, my whole support system, my whole family.”

This year, Shaffer said she was forced out of her home at Forest Cove because the owner decided to transition to short-term rental. She was given 10 days to vacate.

“We got very, very lucky, otherwise I would have been gone last year,” Shaffer said. “A friend, of a friend, of a friend heard that we needed 10 days to find a place, and they said, ‘We’ll take your dogs, we’ll take you,’ so it just kind of fell out of the sky.”

Unable to find more long-term housing near Hilton Head, Shaffer said she’s now considering her options, from Florida to Savannah. Even as a paramedic who waits tables as a second job, she said the housing costs around Hilton Head are too much.

Shaffer is only one of the most recent lifelong islanders forced to leave Hilton Head due to short-term rental conversion. Gullah chef David Young was pushed out of Hilton Head after 40 years and generations of family when his landlord also decided to use their property for short-term rentals.

Town officials are cognizant of short-term rentals’ effect on housing.

“I do not have an agenda here, but short-term rental conversion on Hilton Head Island has affected the long-term rental options,” Orlando said. “I have nothing against the rental market ... but that has affected a supply-and-demand issue on our island.”

An apartment that could be rented for $1,500 a month can easily be shopped to tourists for $1,500 a week. In July, short-term rentals on Hilton Head Island were listed around $447 a day on average, according to data from AirDNA, a company that tracks short-term rental trends worldwide.

Like other tourist destinations, Hilton Head is a busy short-term rental market. Madeleine Parkin, public relations specialist for AirDNA, said there were 7,527 Airbnb and Vrbo listings on Hilton Head in July.

AirDNA’s data shows more listings on Hilton Head as travel rebounds from the pandemic. In July 2019, there were 7,363 rentals listed. July 2020 and 2021 saw a pandemic dropoff with 6,631 and 6,537, respectively.

Renting houses is popular

The Island Packet contacted Airbnb for comment on whether the company tracks housing availability in markets with rising housing costs and received a statement from policy associate Joey Planz, who noted the typical Airbnb host “shares just one home.”

“The need to prioritize building new housing is an issue in communities large and small across the country and Airbnb is committed to being a good partner and working with local officials on efforts to help support housing solutions.”

Some local regulation for short-term rentals will begin on Jan. 1, when Hilton Head’s ordinance requiring owners to buy a permit for properties rented for fewer than 30 days takes effect. Hilton Head Communications Director Carolyn Grant said the permits will cost $250 and must be renewed annually.

Over-saturation of short-term rentals inflating rent costs could eventually negatively impact local businesses, said DeMuro, the Firestone employee.

“If you don’t have people that can withstand the cost of living there long term,” DeMuro said, “you’re not going to have employees that want to travel there to work.”

Shaffer said over her decades in Hilton Head, she’s noticed a shift from community focus to profit.

“Everything increasingly is geared towards, ‘How much money can we bring in? Where are these people going to come from? How many more visitors can we get,’ ignoring the fact that the more visitors you have, the more staff you need,” Shaffer said. “People can’t afford to live on Hilton Head ... why would they commute from Ridgeland or Bluffton where they can find the same job? They’re not being paid more to work on Hilton Head.”

One island business owner has even bought properties with his own money to house employees at an affordable price.

While the Town Council hasn’t publicly discussed further rental regulations, officials have expressed support for constructing more affordable housing on the island, such as the North End’s pending public-private partnership. Ward 2 Councilman Bill Harkins said he knows there will be pushback from islanders who don’t want workforce or affordable housing near their properties.

This sentiment partly illustrates how Hilton Head has changed, Shaffer said.

“Affordable housing has become such a derogatory word,” she said. “But who’s going to cut your grass, clean your house, wait on you and take care of you at the country club? ... This is not the way this island was supposed to be.”