Hancock County towns could restrict vacation rentals to ease coastal housing crunch

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Owning a vacation rental in Hancock County can be a lucrative business.

A recent analysis from AirDNA, a company that combs through short-term rental listing data from sites such as Airbnb and VRBO, listed Southwest Harbor on Mount Desert Island as one of the top 10 places in the country to invest in a rental property.

The largest town on the island’s so-called “quietside” ranked behind more prominent locales such as Maui and Joshua Tree, but AirDNA found that rentals in Southwest Harbor enjoy a 76 percent occupancy rate, average a price of $330 a night and can bring in an average of $73,000 in annual revenue.

But some towns around the county want to reel in the rentals, saying they contribute to rising real estate costs, lack of affordable housing and the conversion of year-round homes to seasonal cash cows.

The municipality leading the way is Bar Harbor, which recently implemented a cap on the number of rental units in town that aren’t the owner’s primary home. Under the regulations, which voters approved in 2021, the town will cap the number of non-owner occupied rentals at 9 percent of the total dwellings in town.

The cap stands at 302 rentals, though the town will likely be over that for several years because it’s allowing all current owners of the non-owner occupied rentals to continue operating as long as they fill out their paperwork annually. Bar Harbor seeks to eventually dip under the cap by banning the transfer of those rental licenses to new owners.

Last year the town had a total of 740 rental registrations. There isn’t an exact breakdown between owner-occupied and non-owner occupied units because there was no such distinction in the regulation in 2021 and the new registrations aren’t due until the end of May, said Angela Chamberlain, Bar Harbor’s code enforcement officer.

But there’s no doubt in her mind that the town will have more than 302 non-owner occupied rentals.

“Absolutely we’ll be over it, unless a lot of people don’t renew this year,” Chamberlain said.

Bar Harbor’s decision could have a ripple effect throughout the area, because the town is the primary landing spot for tourists looking to take in the island and Acadia National Park.

Though Southwest Harbor has been a prime spot for rental home buyers for decades, Joe Wright, owner of the Southwest Harbor-based real estate agency LS Robinson Real Estate, said that Bar Harbor’s new regulations will “dramatically change the market.”

For the past three years, there’s been an influx of new homeowners in general, but Wright predicted that potential buyers of investment rental properties would now turn to the island’s three other towns in the wake of the new regulations. The AirDNA analysis also suggested Bernard, a village of Tremont, or Ellsworth are good investments at lower prices.

“If you’re coming here to invest in a vacation home, you can’t buy one in Bar Harbor,” Wright said. “So many people don’t know the rule exists and have to learn that.”

Portland, Freeport, Cape Elizabeth and other towns in Maine have all implemented regulations around the rentals. Other Hancock County towns are wading into the discussion too. Stonington, for example, is in the process of forming a task force to look at rentals and the Winter Harbor Planning Board is talking about it.

The coastal town near the Schoodic Peninsula portion of Acadia National Park has seen a huge turnover in real estate in the past year, and Carruthers predicts a lot more Airbnbs this summer.

“It’s definitely changing the look of our town,” said Cathy Carruthers, Winter Harbor town manager.

But not everyone agrees with having tighter restrictions. Some people vehemently opposed the rules in Bar Harbor, which are the subject of a lawsuit by Erica Brooks, a former planning board member and local real estate broker.

Brooks argues that the town should have passed the restrictions with a stronger majority and disagreed with the direct connection between increasing rentals and the lack of affordable housing. She felt that many of the homes that were being used as rentals were often large, expensive and near the ocean.

“These are homes that, 95 percent of the time, wouldn’t be considered an affordable home,” she said.

She also said that for many, the only way to live in these expensive coastal towns is to rent out rooms in their own home or buy another property to supplement their income.

State Rep. Billy Bob Faulkingham, R-Winter Harbor, even tried to pass a bill last year that would have prohibited municipal bans on short-term rentals.

“Maine is seeing a growing industry in short-term rentals,” he said at the time. “The individuals who provide this service are creating a necessary and valuable form of lodging that is supporting the tourism industry that buoys our state economy.”

In some of the smaller towns around the county, the issue hasn’t even come up yet. Officials in Brooklin, Brooksville and Lamoine said they’ve heard little to no objections to them.

But Sedgwick, a small, rural town on the western side of the county, is also considering an ordinance change that would add short-term rentals to the site plan review process, allowing the town to get a better understanding of how many of them there are.

Though they bring good economic opportunities to the area, Peter Neill, a member of the Sedgwick Planning Board, worries that such ventures could cut into the town’s housing stock, making it hard for young people to live in town.

“What happens to them, if it’s all short-term rentals for people who are here for two weeks,” Neill said.

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