Will $10,000 convince Sedona homeowners to rent to locals instead of tourists? City wants to find out

Sedona will offer up to $10,000 as an incentive for homeowners to rent to locals in an attempt to address the city’s affordable housing crisis.

Homeowners who currently use their properties as short-term rentals are eligible for the program, where they will provide at least a one-year lease to a local worker or a displaced long-term resident.

“If 35 people were housed in the pilot program, that would be great,” said Sedona housing manager Shannon Boone.

The program will initially run for one year, or until $240,000 in incentives are distributed. The city will accept applications from qualifying homeowners starting Sept. 1.

The cash incentive is not only intended to encourage homeowners to rent locally but will require them to refrain from using their properties for short-term rentals for the next three years. Other goals include converting 25 previously short-term rental properties while maintaining an average rent that is less than 35% of the household income.

Out of the estimated 6,671 housing properties in the city, 978, or almost 15%, are short-term rentals, according to city data.

The median home value in Sedona now exceeds $900,000, more than $400,000 greater than the typical price of a home across the state. The city also falls well below the average number of rental units, at just 4% compared to 16% statewide.

Historically, about 75% of homes in the city are owner-occupied, which leaves few homes remaining to rent to locals.

“We haven’t been tracking median rents because honestly, we have very few apartments here, so it’s almost not relevant. The waiting lists are so long that by the time you could get in the rent would be higher,” she said.

Success in other tourist locations

When Boone was hired as the city’s housing manager last fall, she began researching strategies other resort towns that rely on tourism have used to combat housing troubles.

A similar rental incentive program has proved successful as at least one method of tackling affordable housing shortages. In Big Sky, Montana, the effort resulted in the creation of 20 new rental units in just three months and since 2020, Truckee, California, has generated 75 units for the local workforce, ultimately housing more than 130 residents near Lake Tahoe.

In addition to possibly helping create housing for the local workforce, the program could reduce commuter traffic and pollution, protect natural resources and support the local economy.

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Since the Sedona City Council first discussed the program on Aug. 9, Boone has already received 70 inquiries from residents, she said.

A 2020 Housing Needs Assessment found an affordable housing gap of around 1,500 houses as nearly 58% of Sedona’s renters at the time were cost-burdened, spending more than 30% of their household income on rent. In the two years since, the problem was exacerbated by inflation and the pandemic, which generated more remote workers and resulted in the conversion of many homes into short-term rentals.

The need for affordable housing has affected more than just potential renters. Businesses have regularly reported having trouble finding employees, resulting in reduced operating hours.

According to data from 2020, only 30% of the city’s workforce actually live in Sedona, bringing in a swell of commuters to a city where traffic already is a problem.

'They're letting money take over'

Lysette Anderson went to high school in Sedona and has moved away multiple times since but has always found her way back to the Verde Valley. Now living in Cottonwood with her teenage daughter, Anderson is a chef and part-time server who commutes to Sedona daily for her jobs.

“The only money to be made is in Sedona but it's too expensive to live there and it's growing increasingly more expensive in the surrounding cities like Cottonwood and Cornville, which is why I have two jobs,” Anderson said.

In peak tourist months, the length of her commute can easily double as the roads jam with both visitors and a large part of the city’s seasonal workforce.

“It’s so disheartening that these towns aren’t taking care of the actual residents that have helped build these communities and these businesses,” she said. “They’re letting money take over.”

Like Anderson, almost all of Shannon Nolan’s work as a photographer is in Sedona and her commute to work can easily reach three hours round trip from Prescott or Flagstaff, she said.

“I probably spend $100 a week on gas, which is insane,” Nolan said.

But despite the long commute, Nolan wouldn’t necessarily jump at the opportunity to move her and her kids to Sedona right away if she could, she said.

“For me, primarily it’s the schools,” Nolan said. “Obviously the housing costs are really high, not just in Sedona but northern Arizona as a whole, but I don’t want my kids to grow up in a town without a lot of other kids. It’s too touristy for me as a parent.”

The Sedona Oak Creek Unified School District has struggled to maintain enrollment levels, especially after dozens of students unenrolled during the pandemic.

In May 2020, the school district canceled their junior high and high school football programs, citing a lack of players as a primary reason to indefinitely end them. Around the same time, the district governing board voted to close the Big Park Community School because of budget cuts and declining enrollment.

“It’s a real problem for our school systems, and in fact, a lot of developers I talked to are trying to develop housing for families just to save our school system because we can’t have all the families with children leaving,” Boone said.

“I guess you could say there are several investors who want to develop for the good of the community. They also, though, mostly are profit developers and they have expectations. So it requires really to keep the units affordable, it requires subsidies from the city to make their projects work.”

Contact northern Arizona reporter Lacey Latch at llatch@gannett.com or on social media @laceylatch. Coverage of northern Arizona on azcentral.com and in The Arizona Republic is funded by the nonprofit Report for America and a grant from the Vitalyst Health Foundation in association with The Arizona Republic.

This article originally appeared on Arizona Republic: Sedona homeowners could get up to $10,000 from city to rent to locals