The growth of short-term housing, e.g., Airbnbs and VRBOs, in Patagonia is a good news/bad news story.
On the plus side, Town Manager Ron Robinson says the short-term rentals facilitate more people coming to Patagonia who support local businesses and no doubt increase the Town’s sales tax revenue.
On the minus side, the growth in short-term rentals, especially when properties are purchased by investors as businesses, has reduced long-term rentals and owner-occupied housing, contributed to increased home prices and increased rents, and led to less cohesive neighborhoods. Local employers are finding the lack of housing a barrier for hiring and retaining permanent employees.
Robinson estimates there are 560 total housing units in Patagonia. Of those, at least 70 are short-term rentals. The true count is unknown as not every short-term rental property owner has obtained the legally required, Town-issued business license and state-issued Transaction Privilege Tax (TPT) license. Further, the state collects all sales taxes on behalf of the Town, but does not report the sources of the sales tax when it remits the money. So, while sales tax revenues have increased about 250% since 2019, the Town does not know what businesses or even what types of businesses have paid these taxes.
Many of the short-term rentals are homes owned by investors who live in Patagonia part-time or not at all. Robinson suggests the increase in both out-of-town owners and short-term rentals may be related to promotion of recreational pursuits like birding and gravel biking, predevelopment work at the Hermosa Mine site, and recent promotional efforts by housing developers like Martin Short.
Other small rural towns in the west have experienced similar problems. Stephanie Smith and her husband moved from Joshua Tree, CA to Arizona in 2021 and bought property in Wildlife Haven just outside of Patagonia. Smith describes the trajectory of Airbnb growth which began in 2010 in Joshua Tree as “initially a good idea that became a very wrong idea.” She owned three Airbnbs at one point, but sold them all when it became clear that the rapid influx of investors buying up properties for short-term rentals was fundamentally changing the character of the town. There were fewer and fewer actual residents and more and more businesses offering short-term rentals. Smith’s experience in Joshua Tree led her to enroll in a graduate program in urban planning at the U of A. She hopes her degree will give her more knowledge and skills to help her new community, Patagonia, and other communities avoid the fate of Joshua Tree.
Cholla Duir and her family moved to Patagonia from Carbondale, CO. Over a ten-year period, Carbondale grew dramatically to become a recreational community where few people actually lived full-time, but many people came for outdoor recreation and the amenities that came with it. Outside investors bought up properties in town, turning many into short-term rentals. Housing became too expensive for people in the service industry and for many long-time renters. Property owners in town, and ranchers with holdings outside of Carbondale, sold to outside investors and developers willing to pay big bucks. The culture of the community fundamentally changed. Duir sees some indications that Patagonia may be headed down a similar path.
Patagonia is certainly experiencing growth in recreational tourism. Recently, a conditional use permit has been requested for the Paseo Verde Eco-Lodge, which is proposed to include a lodge and five short-term rental cabins. According to Robinson, the Patagonia Town Council is concerned about the growth of short-term rentals and will be scheduling a study session to look at the positive and negative impacts for the Town and to determine if there are tools to help mitigate negative impacts.
The State of Arizona, as a property rights state, allows few limits on what property owners can do with their short-term rental properties. In 2016, the State Legislature passed SB1350, which generally prohibited a city, town or county from restricting the use or regulation of vacation rentals and short-term rentals except for regulations meant to protect public health and safety. It also provided a mechanism to collect and remit rental taxes to the Arizona Department of Revenue.
The law has evolved since then. Hosting platforms like Airbnb and VRBO are now required to collect and remit occupancy taxes; rentals are not allowed to be used for special events that require a separate permit or license; and property owners are required to provide contact information for whoever is responsible for responding to complaints.
In August, Governor Ducey signed SB1168, giving local governments more power to enforce all applicable laws, regulations, and ordinances pertaining to vacation and short-term rentals. It allows local governments to require property owners to obtain and maintain a local regulatory permit or license, notify single family residences surrounding their property before it is first used as a short-term rental, and maintain liability insurance or advertise through an online lodging marketplace that provides coverage. Local jurisdictions can also impose a civil penalty of up to $1,000 or suspend a business license for up to 12 months for specific verified violations.
The increasing number of short-term rentals is only one factor driving the local shortage of affordable and workforce housing. Looking ahead, the current housing problems may increase dramatically in the Town and the County. South32 projects that if the Hermosa Mine moves forward, it will create 400-500 long-term jobs once the mine is operating, plus approximately 2,000 construction jobs in its development stage. Patagonia will be facing this new demand with limited land and housing stock and a population with the highest proportion of low-income households in Santa Cruz County.
Meanwhile, Santa Cruz County is developing a housing strategy to address affordable and workforce housing shortfalls. The County held forums in Patagonia and Rio Rico on Nov. 16 to get initial input from both communities on housing needs and opportunities. Hopefully, shining the spotlight on the lack of affordable and workforce housing may generate some solutions.