PORT ANGELES — Port Angeles’ recently updated short-term rental regulations have several goals, largely surrounding affordable housing accessibility.
The full impact of the regulations, which will be enforced beginning Nov. 1, may take years to realize. However, several sources have said initial impacts and projections indicate they may not immediately meet the goals that the city council was hoping for and may negatively impact Port Angeles’ tourism industry.
Some of the city’s goals include increasing the affordable housing inventory, collecting data and providing regulation to an industry that had been largely unregulated, according to council discussion during a work session in 2022.
To accomplish those ends, the city updated its short-term rental code this March. The regulations require all short-term rentals, or dwelling units rented for less than 30 continuous days, to be licensed, undergo a fire life-safety test and comply with certain limits.
Those limits include only allowing 200 Type 2 short-term rentals within the city and only allowing one Type 2 license per owner, per marital unit and per parcel except under specific situations. Type 2 short-term rentals are dwellings that are not the owner’s or lessee’s principal residence.
“These new regulations ensure basic safety precautions are met, protect the public and help manage the impact of short-term lodging operations on our neighborhoods,” city communications coordinator Jessica Straits wrote in an email interview.
Affordable housing
“Housing accessibility is a critical issue and remains one of the city’s top priorities,” Straits said.
By imposing limits on the number of Type 2 units that can exist in the city or be owned by individuals, city council members indicated in the 2022 work session that the regulations could increase the stock of affordable housing.
However, many units that used to be short-term rentals do not seem to meet the definition of what one might consider “affordable” when they are sold.
According to the Olympic Peninsula Lodging Alliance (OPLA) website, in November 2023 there were 45 homes for sale in Port Angeles that had been short-term rentals at one point. Their average listing price was $453,000.
After the code changes, Steven Pelayo, president of OPLA, said that, based on discussions with local real estate agents, more than 17 short-term rental homes have sold or are pending sale. The average sale price was about $495,000.
The U.S. Department of Housing and Urban Development (HUD) defines affordable housing as housing that, in total, costs no more than 30 percent of a household’s gross monthly income.
Timothy Dalton, Clallam County housing and grant resource director, said the individual median income in Clallam County is about $64,000. That means a monthly affordable housing payment for an individual should cost no more than $1,600. That would mean an affordable house for an individual, with a very low debt-to-credit ratio, would have to be priced about $240,000, Dalton said.
The median income for a family of four in the county is about $94,000 a year, Dalton said. That works out an affordable monthly housing payment of about $2,350. Affordable housing for a family of four with a very low debt-to-credit ratio should cost no more than $350,000, Dalton said.
The current average short-term rental selling price of $495,000 is between $145,000 and $255,000 above what the price tag of an “affordable” house should cost.
“This whole exercise is not creating affordable housing in any way at all,” Pelayo said.
“Short-term rentals were a low-hanging fruit,” Dalton said. “There are so many levels to the affordability problem on the Peninsula.”
Long-term rentals
In addition to increasing affordable housing stock, the city council hoped to “encourage more long-term housing opportunities of all kinds, including long-term rentals,” Straits said.
Council member Lindsey Schromen-Wawrin said during the 2022 work session that limitations on Type 2 short-term rentals could have long-term benefits on housing prices, especially for renting.
He cited a 2019 Harvard Business Review study that found that the growth in absentee landlords who are renting short-term contributes to about 20 percent of the average annual increase in U.S. rents, and about 14 percent of the average annual increase in U.S. housing prices.
It remains to be seen what the long-term impacts are of regulating short-term rentals, which made up between 2 percent and 3 percent of Port Angeles’ housing stock prior to the code changes.
However, many of Port Angeles’ short-term renters said they won’t transition to long-term renting due to Washington’s rental laws, which are generally considered to be tenant-friendly.
“Washington has made long-term renting kind of a problem,” Dalton said.
Instead, Pelayo said many people are keeping the units for family use or offering them for tenants staying longer than 30 days, such as traveling nurses, corporate individuals and more.
One short-term rental owner, Sara Olson, said she’s afraid of long-term renting because she thinks Washington’s laws don’t equally respect the landlord and the tenant.
Skip Hutchinson said he won’t long-term rent his additional units, either. He used to rent long term, but he said his last tenant trashed the place and moved out owing thousands of dollars. He had to get a loan to fix it back up.
Hutchinson said he and his wife don’t make “beaucoup bucks” short-term renting, but they can usually make about the same amount as long-term renting without having to worry that someone is going to trash the place.
Housing for tourists
Prior to the short-term rental regulations, data indicated there were a little more than 230 short-term rentals in the city, Straits said. Pelayo said that number could have been as high as 300.
As of last Friday, city information indicated that 27 Type 1 and 181 Type 2 short-term rental applications were active or pending.
With between 22 and 92 short-term rental units ceasing operation, Pelayo estimates that, based on an average of three to four guests per short-term rental, the city has lost at least one, and up to two, Red Lions hotels’ worth of lodging capacity.
Marsha Massey, executive director of the Olympic Peninsula Visitor Bureau, said the loss of inventory will certainly impact tourism.
“Any reduction of inventory, especially during peak season, makes it more difficult for people to find lodging,” she said.
Sean Coleman, president of Lincoln Park BMX, said he will never again try to host the USA BMX Gold Cup Finals because he doesn’t think the decreased tourist capacity could handle it.
“As hard as it was for people to find rooms last time [in 2022], I don’t think there would be enough rooms for people to stay in to be able to host the event,” Coleman said.
He said he’s also worried about having enough tourist capacity if the park is selected to host next year’s state finals. At the very least, he said the decreased capacity will affect the event’s scheduling.
“I’ll probably try to put it off as late as possible so it’s not during busy season,” he said.
He said he’s also going consider starting the races later in the day so people can drive from Seattle, do the race and go home on the same day.
“[The short-term rental regulations] are going to make all events re-evaluate how they’re going to schedule,” Coleman said.
Steve Raider-Ginsburg, executive director of the Field Arts & Events Hall (FAAH), said the regulations are going to complicate hosting overnight events as tourism grows and short-term rental capacity remains static. During the Clallam County Economic Development Council’s Coffee with Colleen chat on Sept. 11, he said FAAH already has lost conferences because of a lack of lodging capacity.
“Event planners will choose to go to places that have affordably priced and accessible lodging,” Raider-Ginsburg said in an interview.
Planned future development, such as the Lower Elwha Klallam Tribe hotel, would increase tourism capacity, but it appears to be years away from completion.
Lodging tax impacts
With a decrease in short-term rentals, the city also could lose out on the lodging tax income those units generated.
“There’s no question that a drop in inventory is going to have a financial implication,” Massey said.
Lodging tax is an excise tax of 2 percent applied to hotels and motels, RV parks, camping sites and more for lodging for periods of less than 30 consecutive days.
In 2023, lodging tax revenue brought in about $1.327 million to the city. In 2022, it brought in about $1.146 million.
Massey said the January through June lodging tax report in 2024 has Port Angeles up 3.6 percent compared to last year. However, the rest of the county was, on average, up 19 percent in its lodging tax income, she said.
“What that tells us is that Port Angeles is losing pace,” she said. “I would say Port Angeles is on the track to be flat to down a little bit by the end of the year, whereas everybody else is going to be up.”
While that trend isn’t necessarily entirely due to decreased short-term rental capacity, Massey said the loss of inventory is one of the factors.
Once more time has passed, data will be accumulated regarding how well the code contributed toward its intended goals.
“We will have more data to share after code enforcement begins on Nov. 1, 2024, and as time goes on,” Straits said.
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Reporter Emma Maple can be reached by email at emma.maple@peninsuladailynews.com.
