Should your short-term rental become commercial property? Buncombe leaders considering

ASHEVILLE - Questions about what would happen if short-term rentals located in Buncombe County were classified as commercial properties will be part of a presentation to the Board of Commissioners Oct. 18.

That’s according to a conversation that has been ongoing inside the county for some time, but was brought to the fore following a presentation by the Ad Hoc Reappraisal Committee, a group that presented roughly nine months of research and recommendations to commissioners July 19.

Two of those recommendations suggested a serious look at how Buncombe approaches short-term rentals, which currently exist under very limited regulation if they are inside county limits. This differs greatly from city of Asheville regulation, where, since 2018, residents are banned from renting out entire homes for periods of less than 30 days. The city does allow homestays — the renting out of up to two rooms on short-term bases as long as the owners also live in the house, as previously reported by the Citizen Times.

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Those Ad Hoc Reappraisal Committee recommendations state:

• “Differentiate short-term rentals, investments and/or secondary homes’ assessment approach from that of single-family homes used as primary residence.”

• “Allocate short-term rental revenue to fund Health and Human Services Homeowner Grant.”

These were designated as “long-term” goals in the recommendation.

Tax Assessor Keith Miller told the Citizen Times Sept. 28 he plans to discuss these and other topics during an Oct. 18 Board of Commissioners meeting.

“I think you're going to hear more about the question that came from the Ad Hoc (Reappraisal) Committee on short term rentals, when I will be doing a presentation for the commissioners,” he said. “And I will be talking a little more to the commissioners about where we're at with that, and have some recommendations on how we move forward.”

County is open to commercial classification

Though potential changes to the way Buncombe treats short-term rentals may be a way off, they’re currently heavy on the mind of leaders who, in part, are trying to reconcile the county’s tourism culture with its need for affordable housing.

One of those is Board Chair Brownie Newman, who wrote an email Sept. 1 following up on some of the recommendations the Ad Hoc committee put on the table.

After the July 19 presentation, Newman talked with Miller about short-term rentals and how the county might go about taking a more active role in addressing their local proliferation.

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“Keith basically seems open to classifying these properties as commercial/income properties rather than residential,” Newman said in the Sept. 1 email, which was sent to several commissioners along with members of Asheville-based economic research firm Urban3.

Urban3’s Ori Baber and Joe Minicozzi brought a study to county commissioners and management early 2021, detailing possible inequities in Buncombe’s property appraisal process.

As previously reported by the Citizen Times, Miller and Urban3 during the course of the Ad Hoc Reappraisal Committee process, told members that Buncombe County may have missed out on about $450,000 in tax revenue because of an estimated $96 million in unreported home improvements in 2021.

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Newman said in the email that he and Miller ran the math on a hypothetical home converted into a vacation rental generating thousands of dollars in revenue each year. In one approach, a property’s tax valuation might change because of the revenue generated by short-term rental income. That would increase the amount of money owed to the county, but not by much, Newman reasoned in the email.

“Keith said the biggest challenge with going down this path is that Airbnb, Vrbo and similar platforms do not disclose exactly where the properties are located, just the general location,” Newman added in the email.

According to publicly available data on AirDNA.co, which tracks short-term rentals, there currently are hundreds of them in Buncombe’s unincorporated communities and census-designated areas:

• Fairview: 277

• Swannanoa: 249

• Alexander: 58

• Leicester: 184

• Candler: 380

• Arden: 205

• Barnardsville: 63

“Keith says we would need to hire probably multiple staff to go look for the properties and attempt to locate them,” Newman said in the email. “The additional staff and admin work associated with this alternative approach may mean that there is not much additional public revenue generated by this approach. Part of the reason for investigating this was the hope that it may be a way for vacation rentals to generate revenue the county could use to mitigate the adverse impacts of overtourism, for example, by investing more in affordable housing.”

Miller addressed his conversation with Newman and what was said in the email.

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“The whole conversation there was really about, ‘Do we value (short-term rentals) on the income approach? Or do we continue to value them on the sales comparison approach,” Miller said in a Sept. 28 interview.

“And there's really a lot of things to consider: Are they commercial or are they residential? What is the … best use? What was the use they were built for? There's a lot of things to consider. There's also a consideration that, when you start valuing on the income approach, some values could go down, the same as they go up. So we don't know that complete picture without really knowing all the properties and understanding more about what they actually are renting for.”

The bigger picture

Newman said in a Sept. 28 interview that inquiry into Buncombe short-term rental future is just that: a lot of questions that need answers.

“I do understand that this may not be a question that is entirely within the purview of local government (or) for the local tax office to decide some of these issues around the classification of different kinds of properties,” Newman said in the interview. “To me, it's still early in the process.”

Furthermore, he noted, the Sept. 1 email wasn’t just about short-term rentals. It’s just a part of a larger picture about the county’s property tax assessment process. One of the Ad Hoc Reappraisal Committee’s driving goals was to assess as many parts of the housing market as it could and make recommendations for how to have a successful, equitable appraisal process in the coming years.

“The purpose of that email I sent was, from my meeting with the tax office, there's actually quite a bit of very substantive follow-up going on here,” Newman said in the interview.

He said he’s interested in hearing from Miller about short-term rentals on Oct. 18, but he’s more interested in whether home values are being over or under-assessed in some places.

“I think that there is a little bit of that going on,” he said. “It doesn't mean that it's wildly inaccurate or anything like that … but nevertheless, we want to be as accurate as we can.”

Andrew Jones is an investigative reporter for the Asheville Citizen Times, part of the USA TODAY Network. Reach him at @arjonesreports on Facebook and Twitter, 828-226-6203 or arjones@citizentimes.com. Please help support this type of journalism with a subscription to the Citizen Times.

This article originally appeared on Asheville Citizen Times: Home or business? Buncombe mulling short-term rental classification