S1: Right before the pandemic, Peter Holley moved back home to Austin, Texas, his hometown, and he was kind of surprised by what he saw. Peters, a journalist for Texas Monthly magazine. He knew Austin had been booming with tech jobs and tourist attractions generally becoming less weird.
S2: There was one particular business that was really popular in Austin that was sold pinatas and it was torn down and replaced with a business that catered to. It was like a cafe for cat owners.
S1: This is not a surprising story, right? The pinata shop replaced by a cat cafe. That’s a pretty typical trajectory for a sleepy town that heats up fast. It follows the basic gentrification blueprint, but Peter noticed something else as he settled into the new Austin, something almost eerie. There were just fewer people who lived there.
S2: There’s neighborhood streets where, you know, people used to hang out on their porches and talk and people knew each other by name. And now you see them kind of replaced with these McMansions that people come in to on the weekends and throw large parties and then take off.
S1: The McMansions, the large parties, they’re possible because houses that used to be rented for a year at a time by people who live in Austin are now rented for a weekend at a time by people who play there.
S2: We had a handful of of neighborhoods, particularly in East Austin, which was largely Hispanic and black community that are close to downtown, and that is quickly transitioned into Airbnbs and vacation rental hotspots, turning these kind of close knit communities into playgrounds for for wealthy people and for poor partiers.
S1: You might be feeling implicated in this. I am implicated in this. I am one of many happy customers of Airbnb and VRBO. I get a few rentals a year to go, hang with family or stay someplace interesting. I never gave much thought how I might be changing the neighborhoods where I’m staying. I told Peter this he gets it.
S2: It’s even more ironic for me because I was so tired of being in a short term rental neighborhood in Austin. The I’m actually doing this interview from another short term rental in Houston just to get away from the short term rental market in Austin. So I am both fleeing, fleeing the conditions and contributing to them simultaneously.
S1: Oh my gosh, that’s hilarious. It’s like going on hunger strike because you’re tired of starving.
S2: Exactly. You can’t escape it anymore. This is like our new reality.
S1: Peter got word from someone if you think it’s a twilight zone in Austin. Check out Galveston Galveston less than an hour’s drive from Houston. It’s a barrier island in the Gulf, and it’s been a vacation destination for decades. But he used to have a more working class feel and a year-round contingent that has faded recently.
S2: There’s no one around, there’s no kids, you know, riding bikes, there’s no family sitting on porches, there’s no sense that there’s a community there. It almost feels kind of like a Disneyland resort.
S1: Today on the show, what happens when the entire neighborhood is just visiting one town in Texas shows us the pitfalls of the short term rental boom. This is what next? I’m Mary Wilson filling in for Mary Harris. Keep listening. Can you describe driving out to Galveston Island as I understand it, it’s kind of an unusual juxtaposition of things.
S2: Well, if you’re coming from Houston, you’re you’re going through kind of this mass suburban sprawl and you have to pass through communities that are kind of on the edge of this petrochemical industrial complex. One of the largest in the world and you do get through that. You feel like you’ve kind of escaped something bad, Maxine. And then you get to the coast and there’s kind of this sense of relaxation. You can start to smell the water and there’s birds everywhere and you feel like you’re moving into a different place. And it’s really relaxing and you go across a long multi mile causeway and suddenly you’re on the island and you really do feel like you’ve been transported to a new a new location and kind of a new culture. And one of the first things you really notice when you get onto the island is both the palm trees, but also these massive, sprawling Victorian mansions that look like they haven’t changed, you know, since the 1880s.
S1: Let’s talk about the vacation rentals. So it’s not just Airbnb, there’s a ton of these companies that have moved in. Can you characterize how a short term rental and Galveston is typically used? Like, are people moving in and just spending a weekend? Are there people who are like trying to work remotely somewhere cool and they’re spending a couple of months?
S2: Well, I think 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. Well, the economics, you know, people Holley spend 150 to 200 dollars a night, but some of these homes, especially the old historic ones, can go for more than a thousand dollars 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?
S1: Yeah, I was poking around online and there are all these property management companies that they they’re selling their services as they’re able to manage your property for you. So you just buy the house and, you know, clean it up, I guess, and then they’ll manage the rental for you. And what they what they tell prospective buyers is that the average guests spend about 240 bucks a night for a vacation rental and Galveston. I mean, you know, it’s in their interest to kind of round up, I guess. But that was kind of surprising to me. That’s a lot.
S2: It’s a lot of money and it adds up really quick. I mean, how much is that a week that’s got to be more than a thousand dollars. And if you think about it from the perspective of an investor, if you know that you can make $2.50 a day buying a house that you can flip for $200000 and start making that much money, I mean, 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.
S1: So you went to Galveston to get a feel for. What it was like with these, this boom of short term rentals, what did it feel like to walk around the neighborhoods where short term rentals kind of dominated?
S2: It’s really strange because on the one hand, when you walk around these neighborhoods, they’re really beautiful. A lot of these homes have been purchased and flipped and remodeled and oftentimes painted in like these beautiful pastel colors. And so you walk around the island and you and you’re struck by the beauty, and it really has been an upgrade from where the island was maybe 10 years ago. But the flip side of that is that there’s a sense of complete emptiness. We went to a particular neighborhood where short term rentals have really proliferated, and in about a two block space, there was maybe 20 short term rentals. And as we walked around all I saw, I didn’t see any people, but I did see maids, you know, scurrying from one short term rental to the other, as if on some sort of timed clock carrying cleaning supplies. And 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.
S1: Mm-Hmm. You got numbers from the city that show that there’s about 5000 homes on the island being used as short term rentals, and the island only has about 30000 homes. So based on my really shoddy math, I think that’s about 17 percent of the island’s homes are now rentals. Did you get any sense of if that’s a big or a small number compared to other vacation towns?
S2: What is kind of notable about that number is that since 2019, there’s been about a thousand new short term rentals in Galveston each year. And so at its current pace, about a third of the island’s housing stock would be short term rentals within the next five or six years. And now that is like a really startling fact the idea that a third of your city’s housing is essentially empty.
S1: Peter says there are benefits to the rental takeover happening in Galveston. The trend is giving one of the oldest cities in Texas a fresh coat of paint. The rental boom also helps economically. The city gets to take a nine percent tax write off the top of every short term rental. Another six 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.
S2: There is a discussion that’s just beginning about whether that money can be pushed towards affordable housing because there’s a major lack of affordable housing in Galveston. But it’s we’re at the beginning stages of this conversation, and I think the reason for that is because the short term rentals have have grown so quickly, so dramatically over the last last year or so. So people are making a lot of money. It’s 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 kind of more inequity for people to take a step back and say, Hey, we need to fix this. It’s kind of a more amplified version of what’s happening everywhere else. It’s also a city that’s traditionally been a middle class haven. And so it’s harder, I think, on folks in Galveston than it would be in a place like Austin, where you have a lot of tech money and a lot of kind of professional money, and people can adapt more easily to the housing surge.
S1: You know, Galveston is where the original Juneteenth celebration happened, it has this really significant, you know, history for black Texans. But I understand that 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 while you were there who were frustrated by that.
S2: Yeah, people are really frustrated because one of Galveston kind of claims to fame, if you will, is is the sense that it was this egalitarian, racially diverse haven for Texans and losing 40 percent of of the black population over the last two decades is devastating. It changes the culture of the island and it changes kind of the historical legacy of the island. And it’s becoming increasingly with, you know, more investment and more outsiders. It’s becoming an older, whiter population.
S1: You talked to one woman who she’s been watching. The prices go up for houses in Galveston. She moved there. I think about 10 years ago, she she moved there from Idaho. And I guess the surge in housing prices was also affecting her local property taxes, which had gone up something like 70 percent in the past year. And she was just one example of someone who might be priced out of Galveston. You know, she’s not even someone who’s who’s from the island, you know, she’s a transplant herself. It just made me wonder, like as people with wealth are moving in as people who want to make an investment are moving in, who’s being pushed out? Do you have a good sense of that?
S2: The woman we’re talking about her name is Cody Wright, and she works as a bookkeeper, and she was drawn to Galveston because she realized, Hey, I can live this kind of laid back beach lifestyle and start my own business in a way that I couldn’t if I was in Florida or California, and it would cost me millions of dollars to do the same. And so, Cody, you know, in any other context, Cody is not like a vulnerable person. She has a successful business and she owns multiple houses, actually. And she may be forced out because of the significant rise in property taxes. So if someone like Cody’s being forced out, you can definitely assume that somebody who’s more low income, somebody who works like in the service industry or who works on cruise ships, or who is a firefighter or a teacher, or, you know, who has a middle class income, there’s no way that they can afford to live on the island anymore.
S1: We’re going to take a quick break here when we come back. Some tourist towns are fixing their short term rental problems. Could Galveston do the same? 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. And one thing Peter 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. That woman that Peter named checked before the break, Cody, right? She explained this to him.
S2: As we mentioned before, Cody is from Idaho. And as soon as she got to the island, she realized that it had this kind of routine where after a big storm, people would go out into the streets and they would, you know, they clean up shingles out of the streets, they pick up trees, they look for downed power lines and they would check on on their neighbors. And there was a storm last month where Cody kind of walked outside and realized that she didn’t even know her neighbors anymore. There was no one to really check on the houses that she normally would check on. That used to be full of families were all short term rentals, and so she just sort of stood there and I think she walked back inside because there was really nothing to do. But what really struck her was that she no longer had a community, and she no longer necessarily felt safe in the same way or taken care of.
S1: Yeah, it just strikes me like, can you live somewhere like this without neighbors? I mean, you know, Galveston. I looked up the list of major storms and floods and hurricanes that have hit Galveston in the past century or so. The list is long. I mean, the town is not getting smacked every year, but big storms come with some regularity. It strikes me as the kind of place like if you’re going to have real resilience of people and not just buildings, you kind of need people who live there and are looking out for you.
S2: Yeah, Galveston gets smacked by a really big hurricane every 15 years or so. But with climate change, they’re seeing big storms with some regularity now. It’s a place that’s always been marked by its resilience and its sense of community and this kind of pride in rebuilding when the island is devastated. So it’s interesting to think about what that looks like in the future, when people can’t afford to live there and you have first responders and firefighters and policemen who are now forced off the island as well, like will the island be able to rebuild? Will people be safe if there’s not many people around and they’re kind of isolated when a storm hits?
S1: Do people in Galveston see a connection between storms and gentrification?
S2: I think they absolutely do. I think there’s a real sense that, hey, if our firefighters can’t live here, what are we going to do when the island is inundated with flooding? And when you have older folks and vulnerable residents who are trapped there, and it very much is a realistic possibility. In 2008, Hurricane Ike, you know, wiped out the island entirely. I think it filled the island with eight or 10 feet of flooding and then people were trapped. So this isn’t like this isn’t this isn’t recent history. This is like a very real possibility of a storm hitting Galveston and people not having first responders there to to help them.
S1: One thing I’ve read about that’s really troubling about Galveston is that same hurricane you mentioned Hurricane Ike in 2008. One of the things that caused was a storm surge that flooded a bunch of public housing buildings, and they had to be raised. And some 12 years later, they still half of them hadn’t been rebuilt. So the island, I mean, you and I are talking about, you know, affordable housing, middle income, housing disappearing. But it looks like most of the lower income housing has long since disappeared on Galveston Island.
S2: Yeah, I think I destroyed like 60 percent of the island’s public housing, and it was one of the first kind of changes that ushered in this new era of prosperity in some ways on the island where 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.
S1: And so is the rhythm. Basically, a hurricane comes in, destroys a bunch of property people who have money to rebuild, rebuild or buy up more property, maybe and make an investment. And people who don’t have spare money get out of dodge.
S2: That’s exactly right. And I think Hurricane Ike was the first time that that really made itself known. You know, certainly with every disaster, certain people see economic opportunity, and Galveston is no different. And I think what it really comes down to is storm insurance. And so 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. And so the other thing about that is that it makes it less likely for people to come back to the island because if you can’t afford the insurance and you know, another hurricane is going to come in a decade, why would you invest there
S1: if affordable housing is the problem? What are some of the proposed remedies?
S2: Some of the remedies look similar to what New Orleans has done with their short term rental market, where they placed caps on the number of rentals in some neighborhoods and they outright banned short term rentals in other neighborhoods. The city realized that it was losing its culture and its history to the Airbnbs and the VR bows of the world. And it took really decisive action, and from what I understand, there’s it’s already helped quite a bit.
S1: Oh wow, that’s a promising. When I look at Galveston and when I think about the story you’re telling about Galveston, it’s a story that’s, you know, it’s a story that’s paused in the middle. You know, we’re looking at this city as it’s in the middle of a story. And I really don’t know how it’s going to shake out. And in ways, you know, Galveston is really unique because it is subject to such extreme weather events, but in other ways, it’s really not unique. It’s in the middle of this trend that’s affecting some of my favorite sleepy, gritty towns all over the country. And I just feel like I’m really I’m really rooting for them to, you know, figure it out because I just wonder which towns are going to emerge with the smartest policies. You know, like you mentioned, New Orleans figured some stuff out. I wonder if there will be more innovations to come that will make it so that. Not just people who can afford to buy up three properties can can make an investment in a town and really live there.
S2: Yeah, I do think you’re right that we’re in the middle of a story and we don’t know how it’s going to play out. It’s going to be really interesting to see. But Galveston has this long history of resilience. But I think in some ways like this might be its biggest storm for, you know, it’s kind of a corny way to put it, but this is a storm as
S1: in the short term, you see the short term rental boom as a storm in and of itself.
S2: I do. I see it as kind of an economic storm that the city hasn’t really experienced before. And I do wonder if the city will be able to respond to it the way it has with actual physical hurricane storms. I don’t know the answer to that.
S1: Peter Holley, thank you so much for talking to us today.
S2: Thanks for having me. It was a pleasure.
S1: Peter Holley is a senior editor at Texas Monthly Magazine. And that’s the show. What next is produced by Elena Schwartz, Danielle, Hewitt, Davis Land Carmel Delshad and Me Mary Wilson. We get guidance each and every day from Alison Benedict and Alicia Montgomery. Our super host, Mary Harris, will be back tomorrow. Thanks for listening.