All in favor: Virginia advances as the STR East Coast market leader
By the end of Q3 2021, short-term rental (STR) owners in Virginia Beach (VB) received the green light from city council members to operate in the Oceanfront Resort zoning district. After a precarious first two quarters, the city approval represented forward momentum in the state’s burgeoning STR market, and just in time—the STR industry has been one of the fastest growing niches in pandemic-era real estate.
VB city leaders approved new safety regulations after a summer that shut out STRs while other locations across the state enjoyed increased revenue year on year. Moving forward into Q1 2022, STR investor marketing campaigns are connecting and identifying untapped demographics to fuel healthy industry growth in established and new territories; a win for the city at large.
Virginia holds three positions in the Top 25 cities with the most short-term rentals that have yielded the highest capital gains; Norfolk (4), Virginia Beach (5), and Chesapeake (12). ‘The latest figures indicate robust and continued growth of the state’s nascent STR market,’ says Emir Dukic, CEO of Rabbu, a full-service asset management company that helps investors source, optimize, and sell short-term rental properties. ‘All signs point to an optimistic future, especially compared to 2019 when STR homeowners were grappling with 60-day annual rental cap regulations.’
From cold mountain to deliverance
Shenandoah, situated among Virginia’s Blue Ridge Mountains began to offer STRs in 2018. A police department report had determined that STRs were safe. Local STR proponents cited a landmark decision by the Texas Supreme Court that unanimously ruled in favor of an STR owner regarding a “residential use only” deed restriction. The Texas court acknowledged that property deeds lacked transparency as they didn’t address the amount of time a home could be rented before the property could be found in violation of the residential use clause. The ruling had a polarizing effect on the STR industry nationwide. In Q4 2018, Shenandoah was home to 33 active STRs. Three years later, the mountain community had 67 properties earning a daily average of $292 with an overall 97 percent annual booking rate.
‘Virginia STRs have benefited from state legislators who have overridden local ordinances that thwarted healthy development,’ says Dukic. Meanwhile, industry forecasters anticipate continued support at the state level. Growth patterns have followed demand trends in other states; rural and mid-size cities are still the preferred destination for vacation and business travelers as the pandemic wanes. ‘For investors, homeowners, and local economies, STRs have been a kind of saving grace.’
The enduring strength of Virginia property demand has been constant during this period of industry rebirth. STRs represent a more reliable asset class than other real estate investment opportunities, which seem increasingly outdated without updated business models that take the pandemic-pressures into account. With new technology and service industry support partners in place, STR investing remains on course in the face of inflation, pandemic lockdowns, and the possibility of an increase in interest rates.
Virginia financial figures have also revealed how the STR market is less vulnerable to price volatility. Demand isn’t retreating, it’s advancing. STR investments have demonstrated market durability by weathering short bursts of economic upheaval; a feat which other industries, formerly considered impervious to erratic market fluctuations, have failed to achieve.
This lesson was learned the hard way in Virginia Beach. The irony behind the STR summer bans, and how they had the opposite effect of their intended purpose, became a concrete example of the power of STRs within local economies. During Q2 and Q3, parts of VB’s STR market transitioned underground, where it flourished without regulation. STRs might be new for the beach resort town in their name, but home sharing is a business practice with a history dating back over 100 years.
New kids on the STR block: Military personnel
With a growing nationwide housing shortage, US military families and state department employees have become the latest industry drivers that have proven to be a natural demographic. At the start of 2022, military housing allowances increased by 5 percent nationwide to help Permanent Change Station (PCS) personnel secure short-term housing amid a competitive marketplace. The increase represented the largest uptick in six years. Virginia is home to the second-largest active-duty population nationwide with almost 130,000 members.
U.S. government-funded lodging is a $5 billion market. The Department of Defense (DoD) moves approximately 450,000 employees worldwide annually. ‘Tucked inside Virginia’s STR market is intense demand from incoming active-duty military personnel,’ says Dukic. ‘PCSorders are not always long-term. When military personnel receive PCS orders to Norfolk, for example, STRs provide a streamlined relocation option without the expectation of longer lease commitments.’ Thanks to STRs, when an officer receives a six-month or one-year PCS to Virginia, they can go it alone and return home after completing their commitment.
Military active-duty members have also become STR hosts. The convenience of listing their homes when they receive a PCS assignment mitigates the normal burden of finding tenants on short notice and for strange stay periods. Military displacements can last a few days or upwards of nine months. US military families move on average every 2-3 years, which makes STRs a practical and stress-free remedy as well as a substantial revenue stream.
‘The positive force of Virginia’s STR market has only become more clear during the pandemic-era,’ Dukic says. ‘The flourishing economy is giving travelers and residents better ways to stay, while offering hosts and local families the chance to participate as investors in a new and lucrative asset class.’ Regulations that once stood in the way of the industry’s continued growth have since been overturned to everyone’s benefit, and in good time; considering all market indicators, the STR boom is here to stay.
Story by Yunas Chaudhry. Chaudhry is a super-connector with Blogger Outreach Agency who helps businesses find their audience online through outreach, partnerships, Photography, branding and networking. He frequently writes about the latest advancements in digital marketing and focuses his efforts on developing customized blogger outreach plans depending on the industry stainless steel tongue scraper and competition.