The Saranac Lake Village Board is unable to reach consensus regarding short-term rentals. Specifically, there is profound disagreement regarding the upcoming expiration of the moratorium on new STRs in the village. The reason for this difficult negotiation is inherent in the subject itself. Short-term rentals, or, vacation rentals, destroy community. They are a known toxin. Therefore, discussions about safe levels become awkward and unclear.

STR’s convert residential living space, whether houses or apartments, into commercial units. It is the monetization of homes. A home is where people live. A hotel or motel is where people come for the weekend. Period. Therefore, a key aspect of this problem begins with the definition.

The Saranac Lake Village Board voted to define STRs as residential use. If they were commercial use, they would pay the same taxes and fees as a hotel or motel, which is what they are. Governor Hochul appears ready to sign Senate Bill S885B which will keep track of who and when someone stays at a rental property, and a sales occupancy tax will be charged to those staying at the rentals, as paid by hotels and motels. The bill is described in more detail in the Watertown Daily Times article on page 9 of the June 18 Enterprise titled “Vacation rentals could see new taxes, regulations in NY.”

The reasons for that vote defining STRs as residential use were several. Significantly, there were already multiple (unpermitted/illegal) vacation rentals in existence at the time. The board anticipated that New York State would come to define STRs as commercial use and concluded to wait until then to possibly do the same. The fear was costly lawsuits. That said, many municipalities across the state have successfully defined STRs as commercial. If defined as a commercial use, they would be zoned out of residential neighborhoods within the village, as they should be. If the state moves to tax the STRs as commercial units, will the village board change the definition? Consider what a life-long resident of Lake Placid described to me. There’s a new party every weekend at both neighboring houses on either side of her home. She and her husband have no idea who owns those properties.

Saranac Lake is in the midst of a housing crisis. We are not alone. The crisis is worldwide. What makes it a crisis? Affordability is a crisis caused by high property values. We have that. An insufficiency of available units is another cause. We have that, too. So why convert housing into vacation rentals?

Consideration of national trends is helpful. As individual homeownership declines, investor or corporate home ownership increases. A lot of this goes back to the 2007-2008 Great Financial Crisis (GFC) when the stock market lost over 50% of its value, the worst decline since the Great Depression. Home prices peaked in Saranac Lake in 2008, as I remember it, then crashed. There were numerous foreclosures here. Today’s home values are even higher than in 2008. RealtyTrac, the online marketer of foreclosed homes, reported that one in 45 households — or 2,824,674 properties nationwide — were in default in 2009 (1). Most beneficiaries of that foreclosure catastrophe were not first-time home buyers. Instead, they were a new breed of corporate landlord — vulture funds — that bought-up entire neighborhoods and held the homes in shell companies, with the true identities of their owner unknown to most tenants. REIT stands for Real Estate Investment Trust — the 1960 REIT Act began as a way for average people to invest in commercial real estate and to encourage such development. Today, an SF REIT is a Single Family REIT which collects rent from tenants and distributes this rental income to its investors while most often building nothing. In essence, it functions as a large-scale landlord for single-family homes. SF REITs arose after the GFC in 2008 (2). They have since extended into residential real estate around the world. The current election in Ireland is very much about their housing crisis. In Barcelona, residents are protesting tourists because apartments have become scarce and too expensive for local residents, with so many units converted to short-term rentals.

Cerberus Capital Management states on its website: “Since 2008, our Residential Opportunities team has continued to build upon its extensive knowledge and experience in residential debt” (3). Yes, the “opportunities” began in 2008 — after the crash. Those so-called opportunities came on the backs of foreclosed homeowners. The average homeowner’s net worth is a hundred times greater than that of a renter: $200,000 for homeowners compared with $2,000 for renters, according to the U.S. Census Bureau (4). This isn’t because homeowners make a hundred times more money than renters. Rather, it’s because owning a home represents the only way for most middle-class families to save money. Cerberus, in Greek mythology, is a three-headed dog guarding the gates of Hell, a fitting name for the company that made a fortune by driving Remington Arms, an Ilion, New York employer for 200 years, into bankruptcy with clever financial maneuvering (5).

Wall Street’s increasing control of single-family homes nationwide is closing the door on homeownership for countless families, making the American Dream harder than ever to achieve. The Stop Wall Street Landlords Act of 2022 would ban private equity firms (vultures) from obtaining loans backed by the Federal Housing Finance Agency for the purchase of single-family residential homes.

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Dan Reilly lives in Saranac Lake.

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Sources:

(1) https://fcic-static.law.stanford.edu/cdn_media/fcic-docs/2010-01-14 RealtyTrac Year-End Report Shows Record 2.8 Million US Properties with Foreclosure Filing.pdf

(2) https://www.philadelphiafed.org/the-economy/banking-and-financial-markets/bt-the-rise-of-the-single-family-reit

(3) https://www.cerberus.com/investment-platforms/residential-opportunities/

(4) https://www.census.gov/data/tables/2014/demo/wealth/wealth-asset-ownership.html

(5) https://www.nytimes.com/interactive/2019/05/01/magazine/remington-guns-jobs-huntsville.html