I first moved to the Tri-Lakes region in 1981, moved away, moved back, and moved away from the region in 2016. Since then, I’ve continued to read the Adirondack Daily Enterprise and to follow your local real estate market. I’ve been impressed, but also troubled by what I’ve seen.

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Surging property values

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“In November 2022, the median listing home price in Lake Placid was $640,000, trending up 70.7% year-over-year” (https://www.realtor.com/realestateandhomes-search/Lake-Placid_NY/overview). “In November 2022, the median listing home price in Saranac Lake was $394,500, trending up 27.5% year-over-year” (https://www.realtor.com/realestateandhomes-search/Saranac-Lake_NY/overview).

Over the past three years, 747 properties with at least one bedroom sold at a price of at least $100,000 across the Lake Placid-to-Saranac Lake region (Zillow.com), with 310 sales at $500,000 or more (1 out of 2.4 sales above $100,000), and 173 property sales at $750,000 or more (1 out of 4.3 sales). Looking at residential property sales since June, 2022 (Realtor.com), the picture is similar. Of 119 properties with at least one bedroom selling for $100,000 or more, 48 sold for $500,000 or more (1 out of 2.5) and 27 sold for $750,000 or more (1 out of 4.4).

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What has driven the surge?

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Why has there been such a surge in property values? Perhaps some recent home buyers are retirees, remote workers, people fleeing COVID, or vacation home owners. However, a search of Airbnb.com within the Adirondack Park delivered “over 1,000” properties available for June 2023. Narrowing the search to the Lake Placid-Saranac Lake region delivered 429 available properties. I found 283 LP-SL properties available next June at VRBO.com. Clearly, very many housing units in and around your small villages are now dedicated to “short-term rental” (STR) use. The surge in STRs across the region, with the surge in residential property values, appears to support a conclusion that STR use is being driven by greater returns than are available from year-round rental or sale of properties.

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A local housing and staffing “crisis”

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Your population is declining, and residential rental units are scarce and costly, with a widening chasm between local wages and the cost of housing. As reported upon often in the ADE, there is a rising alarm across the region about what STRs are doing to your communities.

This acute shortage of available housing results in substantial potentially adverse consequences across your region, including a worker shortage. Over time, they can cause irreparable damage to local institutions without which your community may not survive as you know it. Already facing great challenges, Adirondack Health, Paul Smith’s College, public schools, biotech, retailers, service providers and other employers are potentially at risk.

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The “new economy”

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The “new economy” presents new opportunities, but also new challenges. People who sell or buy through Craigslist are sometimes scammed or robbed. People have invested great sums of money in cryptocurrency, with millions of dollars in “assets” seemingly vaporizing overnight. Social media now exists primarily as platforms to harvest and sell your personal data to big corporations eager to market goods and services to you. STRs represent another dimension of this “new economy.”

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Regulation of STRs?

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STRs expanded across the region without benefit of local government regulation, and local governments are reacting to the housing crisis by considering taxation, regulation and even limiting STRs. Many local STR owners have reacted with alarm, arguing that they are legitimate participants in the local economy and that local governments have no right to limit or prohibit their participation in the STR market.

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Where do you go from here?

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Viewing this very important debate from a distance, I’ll offer some observations for your consideration: 1. A “bubble” in residential property values appears to have developed in and around Lake Placid and Saranac Lake, resulting in housing costs that are not sustainable for a very large proportion of people working in the local economy. Eventual deflation of this “bubble” will not be without pain.

2. A significant local worker shortage has resulted from the local housing shortage, with employers in all sectors potentially affected.

3. STRs appear to be the primary driver of this “bubble” in residential property values, to the benefit of many local property owners but also broadly to the detriment of local residents, local businesses, and critically-important local institutions.

4. The only way out of this crisis may involve limiting local housing conversions to STR use, and even adopting measures that motivate some STR owners to sell their properties or rent them to full-time tenants.

5. STR owners undertook these investments in a new area of our economy, with no formal permit. They often engage in commercial activity within residential neighborhoods, sometimes to the detriment of their neighbors. Meanwhile, hotels and motels pay taxes and operate in commercial districts to provide housing for visitors to the region.

6. Without local workers and housing for them, and key institutions like Adirondack Health and schools, there can be no local economy to staff hospitality positions to serve visitors to your region. If your hospitality industry is all that remains, it can offer relatively few jobs capable of supporting meaningful participation in your local economy. Remember Aesop’s fable, “The Goose that Laid the Golden Eggs.”

7. Local governments exist to serve and sustain local communities. When a local business or business sector threatens your community, either deliberately or as an unintended consequence of their enterprise, your local government has a responsibility to develop and enforce new rules to limit negative externalities resulting from that form of business. I believe this responsibility extends to a situation where the negative externality is a collapse in access to local housing due to STRs.

8. An economist would describe money invested in an STR as a “sunk cost,” defined as “costs that have already been incurred and cannot be recovered.” While local governments should not be insensitive to sunk costs incurred by STR investors, it appears to me that governments have no responsibility to broadly protect STR investors and their assets if they can do so only by disregarding other factors that are critically important to your community.

9. Many local government officials across the region are demonstrating great wisdom and courage as they wrestle with the STR issue. It’s your community, and local governments need your participation and support to successfully address this rapidly-developing and contentious situation.

David Banks is a resident of Rockville, Maryland and former resident of Lake Placid, Saranac Lake and Lake Clear.

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Sources:

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Where are the workers?

In competitive rental market, families struggle to find homes

Housing shortage hits the health care field

https://en.wikipedia.org/wiki/The_Goose_that_Laid_the_Golden_Eggs

https://www.investopedia.com/terms/s/sunkcost.asp