Southern Indiana sees growth in short-term rental listings

Dec. 2—SOUTHERN INDIANA — For Ronnie Eve, owning a short-term rental property has been a good investment as he rents Airbnb units in downtown New Albany.

Eve, a local mortgage broker, owns two Airbnb units at 223 Pearl St., and a third is under renovation.

This was Eve's first venture into short-term rentals. The units were first listed in February.

"I was talking to some people in real estate about the [short-term rental] occupancy rates in New Albany, and I was shocked to hear how high the occupancy rates were," he said.

His venture has been successful so far, and the property is listed as a "guest favorite" on Airbnb.

Southern Indiana has seen a growing number of short-term rental listings on platforms such as Airbnb in recent years, particularly in Jeffersonville and New Albany.

According to data from AirDNA, New Albany has 185 active short-term rental listings between Airbnb and Vrbo, and Jeffersonville has 181. In terms of available listings, New Albany has 133, and Jeffersonville has 136.

In New Albany, the occupancy rate is 51%, and in Jeffersonville, the rate is 55%.

AirDNA reports that short-term rentals brought in more than $40,000 a year in average revenue in New Albany and $43,000 a year in Jeffersonville.

Mike Schoonover, a real estate agent at 812 Living Group in Jeffersonville, said he noticed the local growth in short-term rentals before the pandemic as more people started investing in properties and flipping houses.

"I think just the social media push along with podcasts and low-interest rates have helped, especially for investment properties, and that really did drive a boom since a little bit before the pandemic," he said.

When it comes to the housing market, Schoonover described the effects of short-term rentals as a "mixed bag."

"The amount of houses that were available that a buyer could go and buy — they've been at historic lows," he said. "If you look at Airbnb today, depending on how you move the map, there are somewhere between 350 to 450 short-term rentals available in our market."

"If those were up for sale, then that would create more inventory, and I think you would see prices stabilized," he said. "So the fact that we keep having properties come off the market that can't be purchased both short-term and long-term has certainly made it harder for buyers."

However, this situation has also helped sellers receive more money from homes, he said.

"Short-term rentals have been a bit of a lifesaver for home sellers to keep transactions moving forward because I've had a dozen clients or more in the last two years that say, well, we want to sell, but we can't find a house that we want to move to, so what do we do," Schoonover said.

"And the short-term rental has been an answer for them," he said.

Uric Dufrene, Sanders Chair in Business at Indiana University Southeast, said as more homes are used for short-term rental, "it could be contributing to the tightness in real estate markets," since these properties might traditionally be put up for sale or listed for long-term rental.

This also depends on the specific area, and locations with high tourism might be particularly affected.

For the consumer, the expansion of Airbnb listings is a positive as they face more options, Dufrene said.

For Airbnb owners, one of the downsides to this increase in short-term rentals is a lower occupancy rate per owner.

"There's been an increase in the supply of Airbnbs overall, so that's one of the reasons I think we're seeing lower occupancy rates now," Dufrene said.

The increased competition could potentially result in Airbnb owners selling or listing their homes for long-term rentals if their occupancy rates are affected, he said. This would benefit long-term renters and buyers by increasing housing inventory, according to Dufrene.

"That might mean a greater supply-demand situation with respect to housing, and that could put some downward pressure on rents, which is good for the consumer," he said. "And the same thing for buyers — it's good for buyers."

State Rep. Ed Clere, R-New Albany, said there is a need for balance when it comes to short-term rentals in the community, including a "diversity of housing." He has also worked as a licensed real estate broker for more than 20 years.

"Whether it's short-term rental or traditional rental property, it's important to not have too much in any single neighborhood," Clere said. "Neighborhood stability depends to a large extent on having a high percentage of owner occupancy."

Clere also emphasizes the value of Airbnb rentals in certain situations. He noted several downtown New Albany locations that have been transformed into short-term rentals, which he feels have been "additive" to that part of the city.

"In a place such as downtown New Albany, it can support other businesses," he said.

However, he feels this varies from neighborhood to neighborhood, saying that "the problem is the concentration of rental in certain areas."

"Short-term rentals are more appropriate for some areas or some neighborhoods than others," Clere said.

In Indiana, a 2018 law limited local government's ability to enact laws restricting short-term rental platforms, but it does allow cities to require permits and liability insurance.

Clere described this legislation as an "attempt to strike a balance" between government and property owners, but he said "it may need to be revisited" in the future.

Eve partnered with a general contractor to buy and remodel his New Albany property. Over the year, he has continued to see more short-term rental listings come on the market.

He said he has made adjustments to keep up with the increased competition.

"There's quite a few Airbnbs down here, so I'm pretty proactive," he said. "I'm watching — have we rented, are we two weeks out. I'll adjust pricing at that point. I'll offer a discount, and that kind of moves us up to the top of the list in terms of who they're seeing whenever they're doing a search.

Eve said as they remodeled the Pearl Street property, he and his business partner invested "a lot of money to get it where it is now."

"It was a very worn-out '90s-looking feel before in terms of cabinets and color, and we just came in and freshened it up," he said. "It was basically a down-to-the-drywall remodel."

The proximity to Louisville has been a major draw for guests staying at the units, as well as the downtown location near New Albany shops and restaurants. The opening of The Prologue wedding venue next door to the Airbnb units has also brought in guests, according to Eve.

Eve said many schedule their Airbnb stays far in advance, and a week after this year's Kentucky Derby, his New Albany units were already booked for the next year's Derby.

For slower times of the year, they are also looking into options such as Furnished Finder, a company that provides medium-term rentals. These types of rentals are available for people such as traveling nurses who would be staying for a longer period than Airbnb guests.

"You get a little slower in the winter, so we figured, why not just put someone in here long-term and not have to mess with it," Eve said.

People are recognizing the value of listing properties on Airbnb, but he also acknowledges that short-term rentals can be a "double-edged sword."

"I see the negative of having more Airbnbs than available rentals in this market because there is a shortage of apartment space and just living space in Louisville and the Louisville Metro," Eve said.

He notes that although he and his business partner could have rented out the units for long-term residents, there are benefits to owning an Airbnb property.

"The money is better in the short-term rentals — it's just more involved," he said. "I'm actively reviewing and scheduling cleaners and things of that nature. I have someone come in and clean this sometimes two times a week, so I know what shape my building is in at all times versus having someone who comes in and rents who might not be the cleanest and take care of it like I want to take care of it."