Good News in Scottsdale: Basic Economics is Impacting the STR Market

Photo Credit: Everett Collection

Short-term rentals (STRs) have long been a contentious subject in Scottsdale; its status as a vacation destination has meant that plenty of people renting out their homes with extremely little oversight or regulation to tourists who are unconcerned about the surrounding neighbors. The resulting issues have been a common source of grievance for many residents and is a subject we have covered often, which you can find here.

We have long been on board with more robust regulation, as lobbying at the state level hamstrung efforts from local municipalities to impose local control and deal with the issue themselves. That said, the invisible hand of the markets and economics will often be a stronger mitigating factor than government, as the Super Bowl recently showed.

As you’ll remember, the Super Bowl was held in Glendale this year, and Scottsdale lit up at the prospect of being one of the centers of tourism catering to out-of-town visitors. And apparently a strong oversupply of STRs led to very disappointing profits for those owner/operators during the Super Bowl. Alas, everyone had the same idea, which by nature will turn it into less of a good idea. Supply vs. demand, Economics 101.

The economics of STRs have often been a bit tenuous; if you are in a high demand area, great, but few things are guaranteed. But as noted in the article, this seems to be a possible last straw for some people in their usage of the property; if they couldn’t make great money during the Super Bowl, well known as a potential goldmine, and there is obviously so much competition in the area in this same space, what are they doing remaining in that space?

The great possible news is that if even a fraction of these homes go up for sale or for rental, the downward push on rent and housing prices when it is so sorely needed wouldn’t be negligible. At over 5,000 STRs in Scottsdale alone in 2021 and a statewide number that is likely to be an order of magnitude more, a decrease in that number would be a significant flood of homes on the market, an undeniably positive development for many in the state who are struggling with housing costs.

By nature, we do not prefer a heavy hand from government. In this case it was more necessary due to, ironically enough, a heavy hand from state government in the name of doing away with local control. STR regulation has been horribly mismanaged for quite some time. But one concept that you can nearly always trust (much more so than government) is basic economics. And it seems as though the economics of the STR market has gotten out of whack, and the invisible hand is pushing it back. It’s about time.