Short-term rentals diversify the housing market. They give travelers a budget-friendly alternative to hotels and allow homeowners to earn passive income by hosting vacationers. However, these properties can negatively affect real estate markets — particularly a hot one like Florida — over the long term.

The Airbnb State

Airbnb has disrupted the hospitality and real estate industries nationwide. This short-term homestay platform usually has a presence in almost every state, but its listings are primarily in the biggest cities. The Land of Flowers is an exception to this rule.

Florida is one of the few states with significant quantities of Airbnb rentals in multiple towns. Most Floridian Airbnb hosts are in Miami, Tampa, Orlando, Fort Lauderdale, Kissimmee, Saint Petersburg and Davenport.

Regarding density, Broward County has 9.1 listings per 1,000 inhabitants. It’s less than half as densely Airbnb-hosted as Hawaii. Still, it’s impressive because the county is the second-most populous in Florida — the country’s fastest-growing state and third-largest demographically.

Transient rental is a huge business in the Sunshine State because it’s America’s top tourist destination. In 2022, a historic 137.6 million vacationers visited the Citrus Capital.

Airbnb already has a massive footprint in the Sunshine State and is on track to expand further in South Florida. Many developers are building hotels masquerading as condominiums with hundreds of doors licensed as short-term rentals.

More similar commercial real estate projects are likely to get underway because the demand for short-term rentals in the peninsula remains strong. The units sell like hotcakes while the wait list of interested buyers continues to grow longer.

Why Do Cities Not Like Short-Term Rentals?

Some cities dislike short-term rentals for various reasons. Many homestay hosts evade taxes and take business away from tax-paying establishments. However, Airbnb has begun deducting taxes from host incomes and remitting them to the authorities in specific jurisdictions.

Critics say Airbnb rentals aren’t subject to health and safety codes like traditional lodging businesses. That’s why some property developers catering to aspiring Airbnb hosts put a premium on hygiene to win over hotel customers.

Many neighbors of Airbnb hosts in multi-family dwellings complain about disrespectful guests. Some transient occupants can be noisy and bother residents.

Year-round residents of touristy locations who don’t own a home — and have no means to do a cross-country move — are the biggest haters of Airbnb because they feel the pinch. Many landlords in these places find homestays more lucrative, compelling them to target transient occupants instead of renting to long-term tenants. The advent of Airbnbs in tourist destinations with low housing inventory creates a chain of adverse events for people who desire to reside there over the long haul.

The non-owner-occupied landlords too eager to make bank off the Everglade State’s scorching tourism sector convert their long-term rentals into short-term accommodations. This decision reduces the number of local properties for rent. Less housing supply drives up the rent.

This situation also makes home buying more challenging. Absentee homeowners have less incentive to sell an income-generating property, leaving homebuyers to fight over fewer houses for sale. Although building costs can jump by 2%, a new construction project can appear more enticing when buying an existing home means bidding higher than you should.

Is Florida Banning Short-Term Rentals?

No, Florida isn’t banning short-term rentals. On the contrary, the legislature places obstacles to prevent curbing short-term rentals.

In 2011, state lawmakers passed a bill barring local governments from using zoning to disallow vacation rentals. Due to public backlash, the legislators revised the law three years later, reempowering communities to regulate such properties as long as they don’t restrict their duration or frequency, or ban them altogether.

Effects of Short-Term Rentals on the Florida Real Estate Market

Short-term rentals contribute to higher rents and home prices in the Gulf State.

Rising Rents

The growth of home sharing in Florida has aggravated its rental crisis. The state has a dim view of rent control. Governor Ron DeSantis has given landlords the green light to charge a monthly nonrefundable fee instead of a security deposit. When you add short-term vacation rentals into the picture, the shortage of available units for year-round tenants becomes even more pronounced.

The Waller, Weeks, and Johnson Rental Index offers insight. As of November 19, 2023, Miami ranked 7th in the top most overpriced markets in the United States. The average rent in the city was $2,768.53 when it should be $2,572.02, translating to a premium of 7.64% and an increase of 2.88% year over year. You need to make at least $110,741.08 a year to avoid spending more than 30% of your annual income on rent in the 305.

Eight other Floridian metros made it to the top 80. In order based on rental premiums paid ranging from 6.15% to 1.96%, they were Cape Coral, North Port, Tampa, Deltona, Orlando, Lakeland, Palm Bay and Jacksonville. In an environment where property owners can rent out to anyone and jack up prices as they see fit, the market typically would correct itself and punish overly greedy landlords with vacancies. This notion is true to some extent.

One study revealed Airbnb hosts in college towns saw 36% fewer bookings when raising rents by 20% or more during weekends when rival teams visit. This phenomenon resulted in 78% lower rental income.

Affiliation bias played a role in this noticeable drop in occupancy, but greed and animosity toward rival fan bases did, too. The wealthier the landlords, the more they’re unlikely to shape up.

Soaring Home Prices

Airbnb inflates home prices higher than rents in zip codes with fewer owner-occupied properties. Florida attracts snowbirds, so it’s home to many absentee homeowners who regularly live elsewhere for a significant portion of the year. Whether they host transient vacationers or not, they don’t intend to sell their secondary residences and indirectly keep the housing supply low.

Research shows house prices rise by 0.026% for every 1% increase in Airbnb listings within the zip code. The “Airbnb effect” accounts for 1/7 of the overall property price growth, so it’s one of the forces making home ownership out of reach for many.

Will Short-Term Vacation Rentals Be Profitable in the Future?

Florida will remain a fertile ground for home sharing as long as two conditions persist — it continues to magnetize countless visitors and its lawmakers maintain friendly policies for vacation rentals. The first domino will fall when at least one of the two is missing. Landlords may get fewer reservations or face more restrictions on how they operate. Either way, rents and home prices decrease when transient rentals bring in less return.