Second Homes & Vacation Rentals are a Drag on Napa Housing
Chris d Craiker AIA/NCARB
It’s no surprise that Napa is a prime target for second homes and vacation rentals. According to Brokerage Agent Media, BAM, Napa is number five in the United States luxury second home markets. Even as late as the end of 2022, the average second home price was $2.6 million. Most of Napa has very stringent restrictions on vacation rentals. The legal numbers is 40 in the city of Napa. However, there’s no restrictions on second homes or vacation homes.
The total number of US residence is about 114 million of which nationally 5.1% are second homes according to the National Association of Home Builders, NAHB. In California the ratio is almost 7.5% of the 17million homes and condos. No statistics are available for Napa County but one source estimates it as is close to 10%, considering Napa has a large number of vacation condos. That’s one out of every ten residents. This is a rough estimate but something to consider.
A second home is defined as a property one owns and lives in for part of the time but not year-round. This includes vacation homes, beach homes, country estates, and even pied a Terre’. There are many differences between the two for both legal and tax consequences. To be a second home, one must reside in the property for 14 days in a year or at least 10% of the time if you lease it. While the vacation rental market concentrates on short term weekend vacations, many people want to rent a home for a month or longer vacation. Therefore, these rentals don’t go on the books as a vacation rental.
The current population of Napa is 136,207. In 2021 the median household income was $97,498, and yet 9.0% of our residence live below the poverty level. Napa needs to step up the production of work-force housing to keep pace with our needs.
Sales of primary residence then used as second or vacation homes has reached record levels ever since 2021 with Bay Area and International buyer’s flush with cash and embracing a remote work ethic that COVID-19 has brought. Napa is an easy candidate as a secondary abode and a vacation summer home. Safety and security also drive buyers with assets out of urban cities to more remote community and Napa fits that bill. One report is second home sales in the US has jumped 70% last year and while the real estate market has soured with high interest rates and fears of recession, the conversion of existing family homes to weekend getaways has not waned.
While the whole real estate market goes through a pause, the desire to buy a second home is still expected to be part of the reset. Up until fall 2022 the demand for second homes was twice the demand for primary homes. Buyers also look at second homes as potential investment opportunities as future leasehold or long-term/short-term vacation rental.
The combination of second homes, short term vacation rentals as well as illegal rentals, has become a hot debate among government officials, the hotel industry, housing advocates, and local residence as the impact on availability of affordable, long-term housing shrinks. Simply stated: they reduce the existing housing stock and help drive rental and sales prices up. According to the Harvard Law and Policy review, short term vacation rentals and the proliferation of second homes reduce the affordable housing supply by the conversion of available affordable housing units. Once removed from the work-force housing market, it’s difficult to ever return. This leads to gentrification of neighborhoods and central neighborhood cores such as Napa’s Historic Downtown lose its diversity. The street parking goes from pickups and family vans to Porches and Mercedes.
While the cities and County of Napa have done a pretty good job of tracking down and eliminating illegal rentals, they still proliferate. Unfortunately, there’s no way to stop the conversion of primary residence to secondary weekend vacation homes.
I have to confess, when I came to Napa in 1993 to open a bed & breakfast it was a predominantly blue-collar town and a lot more diverse and friendly than Marin where I resided. In thirty years, it’s gone from a town people drove by on their way to Up Valley B&Bs and wineries to a world-class wine destination. While I don’t regret converting an old, dilapidated Queen Anne into a charming B&B, I lament the continuing loss of affordable housing to gold collar occasional inhabitants.
Chris d Craiker AIA/NCARB loves walking Downtown Napa’s streets and alleys…in the daytime, of course.