Q: There appears to be confusion on what the short-term cap proposed in the referendum covers and what it does not. Can you explain your understanding of the proposed ordinance?
A: The referendum ordinance does not propose to eliminate short-term rentals but attempts to keep a balance between rentals, second homes and full-time residents. The referendum ordinance caps the short-term rentals owned by investors at 1,600, and all existing license holders can renew their license, even if the number of licenses issued at the time of the referendum is above 1,600. It allows full-time residents to rent their homes up to 72 days per year with no cap and it allows for the transfer of a license to an eligible family member. There are no limits on seasonal or long-term rentals.
Q: You have mentioned that not passing this referendum can represent an existential threat to the Isle of Palms and to the residential nature of the island? Is this not somewhat of an alarmist view?
A: I absolutely do not believe this is alarmist. Total short-term rental licenses, which is an undisputable statistic, have increased from 1,403 to 1,819 in less than two years. This is an increase of 30%. Even more concerning is that 40% of all homes are now short-term rentals. In that same time, short-term rentals migrated into our core neighborhoods, with some neighborhoods seeing rentals nearly double in number. Over 28% of single-family homes and 63% of non-single-family homes are now rentals. This is a very accelerated movement into our residential neighborhoods and throughout the island. This is not surprising considering that Isle of Palms is the only community in this area with no short-term rental restrictions. Mount Pleasant has very serious restrictions limiting licenses to 1% of residential dwellings, which is just over 400. Sullivan’s Island essentially bans STRs. Folly has an 800 license limit that residents just approved via referendum, and downtown Charleston has very severe restrictions, as does Kiawah. So if you are a real estate investor in this area, Isle of Palms is the only game in town that is wide open.
Q: Historically, Isle of Palms has promoted a mix of short-term rentals, permanent residents and second home owners. Why the sudden change?
A: There is no change. Again, the referendum ordinance does not propose to eliminate any short-term rentals, limits licenses at all-time highs and preserves the balance between rentals, second homes and full-time residents. While the mix has historically been one-third for each of the categories, the cap in the referendum of 1,600 investor short-term rentals out of 4,584 total households is 35%. With the unlimited number of full-time resident – 4% – rentals, the percentage approaches 40%. This is higher than the historical mix and at the highest level of STRs we have ever had on this island. As a matter of fact, the proposed cap in the referendum is trying to maintain a healthy mix, not destroy it.
Q: There have been numerous claims, including by a few Council members, that taxes will go up since a large portion of city revenue comes from short-term rentals.
A: Those who make these statements, including Council members, are wrong. First, the referendum sets a cap at the highest number of short-term rentals in the history of the Isle of Palms. How does anyone jump to the assumption of lower city revenues from a higher number of rentals? There will be no tax increases as a result of the referendum, which is another false claim. Also, some have suggested that as much as 80% of city revenues come from short-term rentals. The city has a fiscal year 2024 budgeted revenue of $26.4 million. Total revenue generated from short-term rentals is budgeted at $8.7 million, or 33% of total revenue. Roughly $.9 million of this must be sent to the Charleston Visitors Bureau for advertising and about $1.7 million is earmarked for beach restoration. That leaves about $6.1 million for city operating expenses, or 23% of total revenue, not 80%. The referendum does not impact city revenues, and your property taxes will not increase as a result.
Q: There are also claims, including from a few Council members, that property values will go down with a cap.
A: I believe this is nonsense. Part of the argument is that after Folly Beach enacted a cap on short-term rentals, their home values have dropped. There are many factors that determine property values. It is bad practice to selectively pick certain factors with very limited data and then claim the sky will fall. Actually, the MLS data for September homes sold on Folly Beach show a 48% increase in median value over 2022. Why is that not being shared? The same data for Isle of Palms show only a 28% increase. Those that make these claims are being dishonest and manipulative or don’t understand the complexity of property values, including interest rates, supply and demand and the overall economy. Sullivan’s Island is a living case study of increasing home values after limiting short-term rentals.
Q: What about the rentals in the commercial areas at Front Beach?
A: I strongly feel this will be addressed by City Council after the referendum is passed. The petition could not address these commercial areas, as this would be a zoning change and by law, citizens cannot change zoning by referendum. I believe all of Council, including all of those running for election, are prepared to address this issue and have gone on the record to do so. This is not a reason to vote against the referendum.
Q: You are an IOP resident and have three children. What if you wanted to leave your home to your three children who want to rent it out through STRs. Does a cap restrict that?
A: Only if the cap has been reached will nonresident children of an IOP resident be unable to immediately obtain a STR license. If the limit has been reached, the children can rent seasonally or long-term with no restrictions until a short-term rental license becomes available. Transferability can also be re-assessed by Council, but not through the current referendum.
However, I do have three children, and, if I left my property to them, typically what we see is the children selling the property. There certainly are some rare estate planning issues for which a cap may be restrictive or may cause a wait to get a license. However, as a primary residential community, that is a price I am willing to pay to maintain a quality of life and maintain the value of my investment. I think most residents would agree with that.
Q: It appears that you are a resounding yes vote on the referendum. Do you have any hesitation voting yes?
A: No hesitation whatsoever. I have never been more convinced that a yes vote is so crucial to this island maintaining its residential nature. There is a lot of real estate money, inside and outside the island, pouring in trying to scare residents. I would encourage residents to study the issue and ask themselves what they want this community to look like. If you are to believe the naysayers, then ask yourself why almost every other community around us has STR restrictions. Do we know something they do not? I would urge residents to go to the polls and make an informed vote and not listen to the fear tactics by those with financial and special interests.
