Airbnb has descended on America's small cities. Now locals must decide how to contain it.

• Bozeman, Montana, is a locus of the debate over short-term rentals that's erupting across the US.
• Some residents blame them for rising housing costs, and others say they're essential to the economy.

On a chilly Sunday evening in February, 300 residents of Bozeman, Montana, gathered at a local church to discuss an issue splitting the town of 54,000: a ban on whole-home short-term rentals.

The room was tense, the Bozeman Daily Chronicle reported. Some attendees wore shirts demanding "House the People," a response to the explosion of short-term rentals in the city, which is 80 miles southeast of Helena, the state capital.

Attendees also took turns shouting at the four city commissioners present.

"We need you to move with the urgency and fire that we feel every day," said Emily LaShelle, a member of Bozeman Tenants United, the group that organized the event and is rallying the town around the permanent ban.

Bozeman is home to 760 short-term rentals, which account for about 3% of the total households in town, NBC Montana reported. That number has grown as housing costs — both for renters and homeowners — have continued to rise.

Home prices rose 40% in Bozeman from February 2020 to February 2023, to $645,000 from an average of $460,000, Zillow found. The average rent for a one-bedroom has nearly doubled in the same period of time, from $1,000 to $1,975, according to Zumper. Some residents say it's causing the town to hemorrhage residents who can no longer afford it, or burdening those who stay with untenable housing costs.

Benjamin Finegan, a Bozeman local and tenants-union member, worries that if investors continue to buy up homes for wealthy vacationers for another ten years, "there will be no more Bozeman."

The pandemic effect on housing and travel

As the world locked down, Bozeman's white-water rivers and snowy peaks looked attractive to just about everyone.

The Bozeman-area realtor Tamara Williams saw a wave of out-of-state buyers crash into town seeking pandemic refuge. She estimates that 50% of the real estate in the city is now owned by people who don't live there full time. Oftentimes, these empty vacation homes become short-term rentals.

There are now more Airbnbs and Vrbos in Bozeman than ever, with listings jumping from 500 in January 2020 to almost 900 in February 2023, according to AirDNA.

Those short-term rentals are also making more money per night, from $199 in January 2020 to $285 in February 2023 — and they're booked more often, from 44% occupancy to nearly 64%, according to AirDNA.

On top of that, Williams said new residents who arrived during the pandemic were comfortable paying over the asking price on for-sale properties, driving overall housing costs up.

In many ways, Bozeman sits at the eye of the short-term-rental storm. It's small and rural, the type of destination that boomed during the pandemic, with a 67% increase in nights booked on Airbnb and Vrbo from the beginning to the end of 2020, according to AirDNA. And in a town that's always relied in some capacity on tourism, residents are divided over what to do.

But it isn't just Bozeman. Short-term rentals are a hot-button issue everywhere: including main travel hubs like New York City and Honolulu, secondary cities like Dallas, Atlanta, and New Orleans, and smaller tourist draws like Steamboat Springs, Colorado, and Dauphin Island, Alabama. In cities both small and large, some locals are calling out short-term rentals for making housing more expensive. The same question is perplexing local governments and fueling impassioned locals to weigh in: What should we do about Airbnb-style, short-term rentals?

In 2023, short-term rentals have become too big to ignore. People have been able to book a vacation rental online since 1995, when the first Vrbo listings went live. But something about the contours of post-lockdown travel —including people's preference for remote locations within driving distance of their permanent homes and socially distanced accommodations — made the business model explode. Airbnb posted its first profitable year ever in 2022, with gross returns of $1.9 billion, and the analytics firm AirDNA reported the company had an industry-high 1.4 million listings last year.

At the same time, the housing crisis has worsened nationwide. Since the second quarter of 2020, the average price of a home in the US increased by 40%, from $374,000 to $535,000, according to the St. Louis Fed, without commensurate wage growth, thus pushing homeownership further out of reach for many Americans. Over the same period, the average US rent increased 15%, from $1,468 to $1,700, according to RentCafe reports.

For some, the parallel phenomena make short-term rentals an obvious target, especially in cities that lured residents and real-estate investors over the past few years.

Airbnb declined to comment.

Amid a housing crisis, some fingers point at short-term rentals

There is no current data pointing to a direct connection between short-term-rental profits and housing costs, but Bozeman locals say they feel the pressure on the ground.

For Bozeman Tenants United, it's simple math: Bozeman homes should be occupied by Bozeman residents first, before out-of-towners.

"Those are units that could be housing local working-class people here in our community in Bozeman," Katie Fire Thunder, a local resident and tenants-union member, said.

Formed in 2020, Bozeman Tenants United surveyed Bozeman residents on the most pressing issues in local housing and landed on short-term rentals. Fire Thunder said the increase in short-term rentals and vacation-owned properties is just one harbinger of a concerning trend. "We're often referred to as 'Boz Angeles,' because of how exclusive and elite Bozeman can be to people," Fire Thunder said.

But it's not just the new Whole Foods, which opened in February 2023, that is a sign of change. Local officials have already spoken out about the increase of short-term rentals in the pipeline, on top of the recent explosion.

Bozeman's deputy mayor, Terry Cunningham, told the Montana Free Press that a "significant" number of the estimated 1,000 units under construction are projected to become short-term rentals.

The union has proposed a ban on whole-home rentals, where an owner may occupy the home part of the year or not at all. Short-term-rental listings within a full-time owner-occupied home are not a concern for the union at this time. Finegan said that after discussions with Bozeman residents, it became clear some residents rent out a spare room to help cover housing costs. These arrangements, he said, hew closer to "how the idea of a bed-and-breakfast was initially imagined."

The union is hoping that a whole-home rental ban would eventually open these homes up as long-term rentals for residents. Finegan doesn't believe it would solve housing issues overnight, but is "one piece of the puzzle" and "one of the most impactful things in our control."

But cities must weigh unclear costs and benefits

Mike Rutkowski, a Bozeman real-estate agent and short-term-rental owner, has been in the business since 2009 and currently owns three properties in the area that he rents out on Airbnb. He brought a list of 18 bullet points to the February meeting, including an idea for "temporary zoning districts" that would restrict rentals to a certain part of town.

Rutkowski said that a total ban would disrupt tourism, a "bedrock" industry of Bozeman.

Millions of travelers descend upon Bozeman every year to enjoy its unspoiled nature and nearby attractions such as the iconic Yellowstone National Park and the ritzy Big Sky resort. All those visitors directly support 30,000 jobs and $200 million in tax revenue, according to the Bozeman Chamber of Commerce.

"The city is in a catch-22," Rutkowski told Insider. "They can't really function without the short-term rentals" because they help support the local economy.

He recognizes the impact his business has on prospective homebuyers, but also on residents, especially young people, priced out of the rental market in the area. "I feel for them," he said.

Nationwide, older generations have the upper hand when it comes to housing, beating millennials out of homeownership. Rutkowski added, "They're at a huge disadvantage in life just by being born at the wrong time. It's terrible."

A long road ahead

The repercussions of an outright ban on short-term rentals are unclear, and a ban won't solve the city's housing issues overnight.

"When there's a shortage of housing, every additional unit helps," Mark Egge, a state-housing task force member, told the Montana Free Press, adding the decision to ban short-term rentals "would need to be weighed against the cost to the economy."

Williams, the Bozeman-area realtor, said she understands the balance between tourism and fostering community. "I would like it contained," she said, adding that she, too, would like to see "a short-term-rental-only neighborhood."

She believes in the "freedom" of homeownership, but worries about what the future of Bozeman might look like.

"It would be a disservice to the entire community if it became a short-term-rental community and there wasn't really anything left for the people that live here," she said.

Finegan, the union member, said the fight was over "what housing is for and who housing is for."

The short-term-rental debate won't be over anytime soon. Residents of South Lake Tahoe, California, another vacation hot spot in the West, voted to phase out vacation rentals in 2018 but have been locked in a court battle ever since. Dallas residents will be able to vote, potentially this month, on new short-term rental restrictions, and Nantucket, Massachusetts, is debating a measure that would ban 95% of current short-term rentals on the island.

Though short-term rentals pose a dilemma nationwide, the solution will be specific to every town touched by them.