Just before the pandemic, Peter Holley returned to his hometown of Austin, Texas, his hometown, and was surprised by what he saw. He knew Austin was booming with tech jobs and tourist attractions, following the basic plan of gentrification. But Holley, editor of Texas Monthly, also noticed that there were just fewer people who live here: “There are streets in the neighborhood where people used to hang out on their porches and talk. And now you see them replaced by these McMansions that people come in on the weekends and use to throw big parties and then take off, ”he explains. McMansions and big parties are possible because houses that were once rented for one year by people who live in Austin are now rented for a weekend by people who come visit Austin. Holley learned from someone that Galveston Island, which is less than an hour’s drive from Houston, is even worse than Austin when it comes to this trend. It has been a vacation destination for decades, but previously it had a more working-class population. As Holley told me, “We had a handful of neighborhoods with predominantly Hispanic and black communities that quickly became hot spots for Airbnbs and vacation rentals, turning these tight-knit areas into playgrounds for people. rich and for party people. ” On Tuesday’s episode of What Next, I spoke with Holley about how Galveston shows the pitfalls of the short-term rental boom and what happens when the people who make up an entire neighborhood are just visiting. , not live there. Our conversation has been edited and condensed for clarity.
Mary Wilson: Can you describe how a short term rental in Galveston is typically used?
Peter Holley: Well, usually these are people who come and spend a long weekend there, often from Houston. It is the main source of tourists. But during the pandemic, you also had a lot of people coming from New York and California and other places, spending several months there at a time. Some of these homes, especially old and historic ones, can cost over $ 1,000 a night. So, if you are a homeowner, there is a huge incentive to rent out your home and earn a lot more than you could ever rent the property in the conventional way.
There are all these property management companies that market their services as being able to manage your property for you. So you just buy the house and clean it, I guess, and then they’ll handle the rental for you. And what they’re telling potential buyers is that average customers spend around $ 240 a night on a vacation rental in Galveston.
That’s a lot of money and it adds up very quickly. If you think about it from an investor’s point of view, if you know you can make $ 250 a day just by buying a house that you can convert … it’s a great investment for a lot of people, and there is a real incentive to invest and then not to live on the island.
You went to Galveston to get a feel for what it was like with these booming short term rentals. What is it like walking around neighborhoods where short-term rentals have dominated?
It’s really strange because on the one hand, when you walk around these neighborhoods, they are really beautiful. The flip side is that there is a feeling of complete emptiness. We went to a particular neighborhood where there were maybe 20 short term rentals in a block of two. And as we were walking around, I didn’t see anyone, but I saw maids rushing from one short-term rental to another, like on some sort of timed clock, carrying products from cleaning. It was like being in a big open-air hotel, except it was outside and in the middle of the day. It was a really strange experience.
You have figures from the city that show that there are about 5,000 houses on the island used as short-term rentals, and the island only has about 30,000 houses. Have you had any idea if this is a large number or a small number compared to those in other vacation towns?
What’s remarkable about this number is that since 2019 there have been around a thousand new short-term rentals in Galveston every year. So, at the current rate, about a third of the island’s housing stock would be short-term rentals in the next five or six years. It’s a really surprising fact, the idea that one third of the homes in your city are essentially empty.
This boom helps economically: the city must levy a 9% tax on each short-term rental. Another 6 percent tax goes to the state. It is therefore a lot of money to reinvest locally. But so far, that money has not been enough to prevent long-time residents from being displaced.
There is a discussion that has just started as to whether this money can be spent on affordable housing, as there is a significant shortage of affordable housing in Galveston. Short-term rentals have grown so rapidly, so drastically over the past year, that it’s been hard to get them to stop and say, “Hey, that’s a problem too. Should we change it? “People kind of revel in the cash flow, and I think it’s going to take a few years and maybe even greater injustice for people to step back and say,” Hey, we’ve got to fix this. ” .
Galveston is also traditionally a middle class paradise. So it’s more difficult, I think, for people there than in a place like Austin, where you have a lot of money for technology and where people can adjust more easily to the housing wave.
Galveston is where the original Juneteenth celebration took place. He has a very important history for the Black Texans. But it has lost more than 40 percent of its black residents in the past 20 years. I was wondering if you had spoken to anyone on the island who was frustrated with this.
People are really frustrated because one of Galveston’s claims to fame, if you will, is the feeling that it was this egalitarian and racially diverse refuge for Texans, and losing 40% of the black population over the years. last two decades is devastating. It changes the culture of the island, and it changes the historical legacy: with more investment and more foreigners, it’s an older, whiter population.
Galveston sits on the Gulf of Mexico. It’s part of the charm of the city – there’s a beach – but it’s also right on the way to high intensity storms. One thing you heard was that when people started getting paid off the island, Galveston lost this bunch of locals who knew how to weather a bad storm and what to do when it passed.
A woman I spoke with moved to Galveston from Idaho, and she found that the island had this kind of routine where after a big storm people would go out on the streets and clean the shingles. , were picking up trees, looking for fallen power lines, and checking their neighbors. There was a storm last month, and this woman realized she didn’t even know her neighbors anymore. There was no one to check the homes she normally inspected – they were once full of families and were all short-term rentals now. What really struck her was that she no longer had a community, and that she no longer necessarily felt safe or that she was being taken care of.
Do the people of Galveston see a connection between storms and gentrification?
They absolutely do. I think there’s a real feeling that if even our firefighters can’t live here, what are we going to do when the island is flooded? You may end up with the elderly and vulnerable residents trapped there. There is a very real possibility that a storm will hit Galveston and people will not have first responders there to help them.
In 2008, Hurricane Ike completely destroyed the island. It destroyed 60% of the social housing on the island, and this is one of the first changes that ushered in this new era on the island: you lost social housing and it was replaced by high-end housing. range and homes that have since become short-term rentals, so there is a connection between hurricanes and affordability that continues to this day.
I think this is really storm insurance. People who can afford expensive storm insurance will always have the option of rebuilding, and people who cannot afford storm insurance find themselves at a real loss. This makes it less likely for people to return to the island, because if you can’t afford the insurance and another hurricane is coming in a decade, why would you invest there?
What remedies are available?
Some of the remedies are like what New Orleans has done with its short-term rental market: capping the number of rentals in some neighborhoods and outright banning short-term rentals in other neighborhoods. The city realized that it was losing its culture and its history to the benefit of the Airbnbs of the world. It took some really decisive action, and from what I understand, it has already helped a lot.
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