Simplified: The number of short-term rental properties in Sioux Falls is growing, and as more of these Airbnb-like places appear, it’s possible (and even likely) that we’ll see more conversations around town and we’ll explain how these properties are registered, taxed and regulated.
why is it important
- Assessing the exact number of short-term rentals is tricky, and while estimates vary across industry reports, the the upward trend is clear. AirDNA, a company providing analytics for the short-term rental industry, estimates active rentals will grow from 170 at the start of 2019 to more than 300 by the end of 2021.
- The increase in demand follows the increase in supply. Short-term rentals experience occupancy rates of up to 80% during peak summer periods and between $1,000 and $2,500 in average monthly income, according to data from another industry analysis group, PriceLabs.
- It’s still more complicated, within the broader community context taking into account existing housing shortages, taxes and rent registration. But Sioux Falls is nowhere near the level of places like New Orleans and Los Angeles that have clamped down on short-term rentals.
“We’re not as overcrowded as some cities with an abundance of Airbnbs,” said Kayla Huizing, co-owner of Huizing Properties, which helps owners of short-term rentals in town. “It’s not hard to make a name for yourself in Sioux Falls with your property, and it has proven to be a success.”
What’s behind the increase?
The same behind most trends in Sioux Falls: growth.
Sioux Falls has a growing population as well as growing importance in the tourism industry.
“I have people who literally contact me every week saying they just bought an investment property,” Huizing said.
She added that the short-term rental market can also be more attractive to owners than long-term rental, both in terms of revenue and supervision.
“When you have a long-term tenant, you can’t get into that unit for a year and you have no idea what damage is being done,” Huizing said. “When someone stays for two nights, it’s hard to do a lot of damage.”
There has also been an increase in demand for short-term rentals in the middle of the pandemicsaid Teri Schmidt, executive director of Experience Sioux Falls.
What is the impact locally?
For Schmidt, it’s complicated. Experience Sioux Falls is focused on ensuring visitors have the amenities they want when they arrive here, but the group is also funded by resort tax paid by local hotels (but not short-term rentals).
“So when someone chooses to come to Sioux Falls and stay in an Airbnb instead of a hotel, it hurts us budget-wise,” she said.
There is also the dynamic of an increasing number of short-term rentals coinciding with a housing shortage.
- It’s a trend to watch out for, but far from the situation in the big cities who had to limit the number of short-term rentals.
- Minneapolis, for example, put on a hat on the number of short-term rentals a person can own.
“I don’t think we’re there yet,” said Matt Tobias, director of city development services.
What are the current city rules for Airbnbs?
Short-term rentals are treated like long-term rentals in the city, Tobias said.
- Owners are requested to register their rental property with the city free of charge.
At the state level, properties are subject to 1.5% state sales tax and tourist tax. Companies like Airbnb already factor these taxes into the equation when billing tenants.
What happens next?
Schmidt said conversations about the tourist tax and Airbnbs have lasted for years and will continue to perform at the state level.
From the city’s perspective, Tobias said he hadn’t heard any rumors of people wanting to set stricter rules for short-term rentals in terms of where they can be, how many can be in a certain area, whether they need to be inspected. , etc
And for Huizing? She is capitalizing on the industry’s growth by starting her own business alongside her husband to help a growing number of people manage their short-term rentals.
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