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Right before the pandemic, Peter Holley moved back to his hometown of Austin, Texas, and was surprised by what he saw. He knew Austin had been booming with tech jobs and tourist attractions, following the basic gentrification blueprint. But Holley, a senior editor at Texas Monthly, also noticed that there were just fewer people who live here: “There are neighborhood streets where people used to hang out on their porches and talk. And now you see them replaced with these McMansions that people come into on the weekends and use to throw large parties and then take off,” he explains. The McMansions and large parties are possible because houses that used to be rented for a year by people who live in Austin are now rented for a weekend by people who just visit Austin. Holley got word from someone that the island of Galveston, which is less than an hour’s drive from Houston, was even worse than Austin when it came to this trend. It’s been a vacation destination for decades, but it used to have more of a working-class population. As Holley told me, “We had a handful of neighborhoods with largely Hispanic and Black communities that have quickly transitioned into hot spots for Airbnbs and vacation rentals, turning these close-knit areas into playgrounds for wealthy people and for partiers.” On Tuesday’s episode of What Next, I spoke with Holley about how Galveston shows the pitfalls of the short-term rental boom, and what happens when the people who make up an entire neighborhood are really just visiting, not living there. Our conversation has been edited and condensed for clarity.
Mary Wilson: Can you characterize how a short-term rental in Galveston is typically used?
Peter Holley: Well, typically it’s been people coming in and spending a long weekend there, often from Houston. That’s the main source of tourists. But during the pandemic, you also had a lot of people coming from New York and California and other places, who were spending several months there at a time. Some of these homes, especially the old and historic ones, can go for more than $1,000 a night. So if you’re a homeowner, there’s a huge incentive to rent out your house and make far more than you ever could renting the property out conventionally.
There are all these property management companies that are selling their services as being able to manage your property for you. So you just buy the house and clean it up, I guess, and then they’ll manage the rental for you. And what they what they tell prospective buyers is that average guests spend about $240 a night for a vacation rental in Galveston.
It’s a lot of money and it adds up really quick. If you think about it from the perspective of an investor, if you know that you can make $250 a day by just buying a house that you can flip … it’s a great investment for a lot of people, and there’s a real incentive to invest and then not live on the island.
You went to Galveston to get a feel for what it was like with these booming short-term rentals. What did it feel like to walk around the neighborhoods where short-term rentals have dominated?
It’s really strange because on the one hand, when you walk around these neighborhoods, they’re really beautiful. The flip side of that is that there’s a sense of complete emptiness. We went to a particular neighborhood where there were maybe 20 short-term rentals in a two-block. And as we walked around, I didn’t see any people, but I did see maids scurrying from one short-term rental to the other, as if on some sort of timed clock, carrying cleaning supplies. It was like being in a big open-air hotel, except it was outside and in the middle of the day. It was a really strange experience.
You got numbers from the city that show there are about 5,000 homes on the island being used as short-term rentals, and the island only has about 30,000 homes. Did you get any sense of whether that’s a big or a small number compared to those for other vacation towns?
What is notable about that number is that since 2019, there have been about a thousand new short-term rentals in Galveston each year. So at the current pace, about a third of the island’s housing stock would be short-term rentals within the next five or six years. That is a really startling fact, the idea that a third of your city’s housing is essentially empty.
This boom does help economically: The city gets to take a 9 percent tax right off the top of every short-term rental. Another 6 percent tax goes to the state. So that’s a lot of money to reinvest locally. But so far, that cash hasn’t been enough to save long-term residents from being displaced.
There is a discussion that’s just beginning about whether that money can be pushed toward affordable housing, because there’s a major lack of affordable housing in Galveston. Short-term rentals have grown so quickly, so dramatically over the past year or so that it’s been hard to actually get them to stop and say, “Hey, this is also a problem. Should we change it?” People are kind of reveling in the cash flow, and I think it’s going to take a few years and maybe even a more inequity for people to take a step back and say, “Hey, we need to fix this.”
Galveston has also traditionally been a middle class haven. So this is all harder, I think, on folks there than it would be in a place like Austin, where you have a lot of tech money and people can adapt more easily to the housing surge.
Galveston is where the original Juneteenth celebration happened. It has a really significant history for Black Texans. But it’s lost more than 40 percent of its Black residents over the past 20 years. I was wondering if you talked to anybody on the island who was frustrated by that.
People are really frustrated because one of Galveston’s claims to fame, if you will, is the sense that it was this egalitarian, racially diverse haven for Texans, and losing 40 percent of the Black population over the past two decades is devastating. It changes the culture of the island, and it changes the historical legacy: With more investment and more outsiders, it’s becoming an older, whiter population.
Galveston sits on the Gulf of Mexico. That’s part of the town’s charm—it’s got a beach—but it’s also right in the path of high-intensity storms. One thing you heard is that when people started getting priced off the island, Galveston lost this cadre of locals who knew how to weather a bad storm and what to do when it passed.
One woman I spoke with moved to Galveston from Idaho, and she realized that the island had this kind of routine where, after a big storm, people would go out onto the streets and clean up shingles, pick up trees, look for downed power lines, and check on their neighbors. There was a storm last month, and this woman realized that she didn’t even know her neighbors anymore. There was no one to check on the houses she normally would check on—they used to be full of families and were all short-term rentals now. What really struck her was that she no longer had a community, and she no longer necessarily felt safe or taken care of.
Do people in Galveston see a connection between storms and gentrification?
They absolutely do. I think there’s a real sense that if even our firefighters can’t live here, what are we going to do when the island is inundated with flooding? You can end up with older folks and vulnerable residents who are trapped there. There is a very real possibility of a storm hitting Galveston and people not having first responders there to help them.
In 2008, Hurricane Ike wiped out the island entirely. It destroyed 60 percent of the island’s public housing, and that was one of the first changes that ushered in this new era on the island: You lost public housing and it was replaced by upscale housing and housing that has since become short-term rentals, so there’s a connection between hurricanes and affordability that continues to this day.
I think what it really comes down to is storm insurance. People who can afford expensive storm insurance will always have the ability to rebuild, and people who can’t afford storm insurance find themselves at a real loss. That makes it less likely for people to come back to the island because if you can’t afford the insurance and another hurricane is going to come in a decade, why would you invest there?
What are some of the proposed remedies?
Some of the remedies look similar to what New Orleans has done with its short-term rental market: placing caps on the number of rentals in some neighborhoods and outright banning short-term rentals in other neighborhoods. The city realized it was losing its culture and its history to the Airbnbs of the world. It took really decisive action, and from what I understand, that’s already helped quite a bit.