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‘We like to know our neighbors:’ How short-term rentals affect Hilton Head home values

Oceanfront mansions, yachts — even a treehouse. Here’s what’s for rent on Hilton Head

Looking for a room on Hilton Head? The island's short-term rentals include oceanfront mansions, homes in exclusive gated communities, overnight stays on a yacht — even a few treehouses. Here's what we found on Airbnb and VRBO.
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Looking for a room on Hilton Head? The island's short-term rentals include oceanfront mansions, homes in exclusive gated communities, overnight stays on a yacht — even a few treehouses. Here's what we found on Airbnb and VRBO.

It’s a question many who live in Hilton Head’s gated communities ask themselves: If short-term rentals are allowed, will it lower my home’s value?

Hilton Head Plantation, the largest gated community on the island, will take up the issue later this month when residents vote on an amendment that would ban rentals under six months.

Those who oppose such rentals say they lower home values and bring excessive noise and parking problems, according to residents’ feedback at an October meeting at Hilton Head Plantation.

But some Hilton Head Realtors said they haven’t seen home values adversely affected by rentals.

“Home values are higher in places that allow short-term renting,” John McMahon of Re/Max Island Realty said. “It’s pretty simple. When you have the option to rent your second or vacation home, it makes it more affordable. Affordability (for owners) means demand is higher.”

McMahon said his firm’s 278 sales in Hilton Head Plantation and 231 sales in Sea Pines in 2018 show it’s “pretty obvious that short-term rental availability does not hurt prices.”

In McMahon’s list of Re/Max’s 25 most recent transactions, the average selling price in Sea Pines was around $2.8 million. In Hilton Head Plantation, it was around $902,000.

Although there are many contributing factors to home prices and McMahon’s transaction lists only represent one firm on the island, he said home prices in Sea Pines are generally higher.

Airbnb debates across the country

Nationwide, scholars and real estate agents are debating the effects of a peer-to-peer short-term rental market such as Airbnb.

In a 2018 study called “Estimating the Impact of Airbnb Activity on Housing Prices in New York City,” professor Stephen Sheppard and thesis author Andrew Udell of Williams College explored the effects of Airbnb on home markets in the city.

Udell defined conditions that would lead to both increases and decreases in surrounding home values.

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Estimating the Impact of Airbnb Activity on Housing Prices in New York City

Udell concluded that “this impact would be for house prices to increase in response to Airbnb listings as long as the Airbnb properties themselves are not the source of extensive or concentrated negative externalities.”

He defined negative externalities as safety concerns, noise or a higher demand for amenities.

Short-term renting on Hilton Head is done through several channels, including private companies, VRBO and Airbnb.

What about the Hilton Head market?

Beth Drake is a Realtor on the island who said she sells homes in all the gated communities. In her experience, Drake said homes that have rental potential sell for significantly more than those that do not.

“Investors can say they have someone else pay their mortgage and still get the house to vacation in during the year,” Drake said.

For example, Drake said she’s sold several oceanfront homes in Port Royal Plantation and Palmetto Dunes recently.

She said one Palmetto Dunes home — where short-term rentals are allowed — sold for $3.9 million.

In Port Royal, she said she sold two oceanfront homes for $2 million and $1.5 million, respectively. Neither allow short-term rentals.

Although many factors go into buying oceanfront homes, she said homes that allow short-term rentals can be listed for “20 to 40 percent more” — and whether a client plans to rent is always part of the conversation.

“Right away when they call me and say they’re looking for a home on Hilton Head, one of my first questions is, ‘are you looking to rent this out short-term or will this be your primary home?’” Drake said.

“We like to know our neighbors”

In the October community meeting, Hilton Head Plantation general manager Peter Kristian told residents that the community “is not overrun” with Airbnb guests, and that any change in short-term rental rules would affect “... under 25 properties at this point.”

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Katherine Kokal, The Island Packet.

McMahon is a Hilton Head Plantation resident and Realtor who mostly sells in Sea Pines and Palmetto Dunes. He said clients choose his home community when they aren’t as interested in renting their property.

“In Hilton Head Plantation, the selling points are the great community. (It’s) diverse, it’s close to schools and hospitals,” McMahon said. “People who are buying here aren’t looking for the short-term rentals.”

Publications from the community appear to agree.

“We like to know our neighbors, but that same dynamic doesn’t happen with short-term renters who stay a few days or a week and leave,” Hilton Head Plantation leaders said in a statement sent to the community’s residents.

In order to change the community’s covenants, 67 percent of all property owners in Hilton Head Plantation must vote in favor of the amendment, according to Kristian.

Elsewhere on the island, Leamington, a community that prohibited short-term rentals when the 365-home residential development opened in 1986, isn’t second-guessing its ban.

Bryan Flanagan, the treasurer of community’s homeowners’ association, said residents who bought property there did so because of the absence of “renter issues.” He cited overcrowding, privacy violation and turnover of guests as potential problems.

“That’s not what we wanted when we came here,” Flanagan said. “Tourists are great for the island economy ... but when we bought in Leamington, we bought because they don’t allow short-term rentals.”

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