With little regulation, Downeast becomes hotbed of vacation rentals

No one tracks occupancy numbers in region, as AirBNB, VRBO hit records in 2024

MOUNT DESERT, Dec. 31, 2024 - Every gateway community in the shadow of Acadia National Park had record bookings in 2024 for short term vacation rentals such as AirBNB and VRBO, according to the STR analytics firm AirDNA.

Even Bar Harbor, the only municipality in the region with an ordinance restricting STRs, reported 782 listings in 2024, even though it permitted only 661 units. Bar Harbor has the region’s highest concentration of hotels and motels, some of which use the STR platforms to market rooms. (Bar Harbor also finds scofflaws each year who rent rooms without a permit.)

The number of listings in 2024 reported by AirDNA include: Ellsworth, 976; Southwest Harbor, 403; Mount Desert, 318; Tremont, 312. The city of Bangor, with three times the year-round population of the four towns on MDI, had only 621 listings.

On MDI, about 20 percent of the housing stock is now STRs.

No one knows exactly how many tourists occupy those units as no regulation exists to track occupancy. Bar Harbor’s principal concern in adopting its ordinance was the overtaking of the year-round housing stock by out-of-town investors.

Some, like the former chair of the appeals board in Bar Harbor is raising an alarm on the environmental impact of such unregulated housing units.

“Our present LUO (Land Use Ordinance) stipulation for VR-1’s allows every house in the residential zones to be a potential business,” Ellen Dohmen wrote in a letter to the Town Council in November. VR-1s allow owner-occupied rentals to rent for three nights.

“Since we are allowed to rent our primary residences three times a week with no limitation on the number of people who can be included in each reservation, a house could rent to perhaps 10 people three times a week, bringing potentially 30 people to a house in one week.

“How does this affect our water, sewer, parking and trash? If it is an area not on town water or sewer, how does this affect the water table in the area where the adjacent houses use the same water source for their wells? And how will a septic system designed and permitted for a household of six handle repeated rental groups of up to 10?

“Third, if just two of the renters have cars, where on an already crowded street like Ledgelawn will those cars be parked? Assuredly, there is no room on the street, and the garages aren’t big enough for so many cars at a time. And how does this affect the amount of trash we accumulate in a week?”

The most rural part of MDI, Tremont, rebuffed a proposed ordinance to regulate short term rentals last year. It is the only town on MDI without sewers.

After the ordinance was rejected, AirDNA upgraded Tremont’s investment score to 98, making it the most desirable market for investors of STRs in all of Downeast. The score takes into account rental income, growth potential and lack of government regulation.

In 2021, Southwest Harbor Harbor was ranked the 10th hottest market in the country by AirDNA with a score of 79.4, but that was during the pandemic and the data was in great flux.

That year Maui was the No. 1 market for investors with a score of 90.7. There was no market with a perfect score.

Now there are 100 markets with a score of 100, underlying the explosion of this sub sector in the housing market.

In 2023 Ellsworth was ranked as the ninth hottest STR market by AirDNA. Its score today is at 92. SWH’s rating is at 89. They both trail Tremont.

A big factor in AirDNA’s scoring is the extent of regulation in a market.

A Tremont proposal to register STRs was rejected by two votes, 120-118, last May 13. (Several members of the select board own and operate multiple STRs.)

It was the weakest of proposals floated on the island, calling only for registrations with no limits on the number of STRs as was proposed in Mount Desert. There, voters defeated an ordinance 134 to 72 at town meeting May 7 for STRs in year-round homes which were not primary residences to be be capped at 10 percent of the town’s housing stock over time.

Bar Harbor voters approved MDI’s most restrictive STR ordinance 1,260 to 840 in November 2021, capping STRs at 9 percent of the housing stock.

That put pressure on all the neighboring towns. But except for Bar Harbor, virtually no other towns followed suit.

At least Mount Desert and Tremont attempted to corral this beast.

Southwest Harbor and Ellsworth did nothing.

Downeast Maine, with its proximity to Acadia National Park, is now one of hottest STR investment markets in the Northeast, according to AirDNA. The dark blue in the map below indicates average AirDNA scores of between 80 and 100.

New York City has the country’s most restrictive STR regulations, practically banning AirBNB’s short-term rentals.

Towns in the highly desirable vacation destination in the Hudson Valley north of Manhattan have also imposed multiple ordinances restricting rentals on AirBNB and VRBO.

“The Hudson River and Catskills region has been a red hot market for would-be investors, but towns in the area have responded to the commodification of their local housing stock by enacting laws on STRs as varied as the hamlets themselves,” wrote Harry McNamara, a real estate salesperson with Country House Realty.

“Local laws often include features like: Limits on the number of permitted non-owner occupied rentals, residency requirements, health and safety inspections, special use permits, fees ranging from trivial to prohibitive, and in more than one instance, the number of rental days allowed per year.”

In the waning days of December, New York Gov. Kathy Hochul signed S885C/A4130C, requiring hosts to add their properties to a registry, the nation’s first statewide short-term rental registry, designed by legislators to ease the housing crisis. The law defines a “short-term rental unit” as a residential unit rented for under 30 days.

Counties now may create their own registries to better understand their impact on the local economy and the availability of housing.

The booking platforms that list those rentals will have to send quarterly reports on where each property is located, how many nights it was occupied and how many people stayed there.

“Communities will have the tools to grasp the true scope of short-term rentals, empowering them to develop strategies to expand stable housing options, increase affordability, and unlock untapped revenue,” said state Sen. Michelle Hinchey, a Democrat from the Hudson Valley who sponsored the bill.

Short-term rental properties will also be required to pay the same sales and occupancy taxes as hotels which varies across the state, according to the Times Union in Albany.

“Small and independently owned hotels and motels will face a level playing field,” said Assemblywoman Patricia Fahy, a Democrat from Albany and the bill’s other sponsor. “Local governments will unlock new tourism revenue to help attract visitors, stabilize housing markets, and address the affordability crisis.”

Booking services will have to include the amount collected in taxes from each property in their quarterly reports to counties, giving local government agencies a way to know how much tax revenue should come from each rental.

Airbnb, the leading booking service, maintains voluntary tax collections with 37 counties in New York. But there’s currently no way for counties to know if the amount paid by company reflects their total sales, the bill’s sponsors said.

Counties also have no way of knowing how many short-term rental properties operate in their jurisdiction unless a municipality has already created its own registry for their hosts. Several localities in New York have done so in recent years.

In Downeast, it may be to late to arrest the growth of STRs, as inventory has been all but exhausted.

Maine Listings, the state’s multiple listings service, has 11 properties for sale in Tremont, with only five properties under $1 million. Southwest Harbor has 10 properties listed with only six under $1 million. Mount Desert has 20 listings, with six above $1 million. Bar Harbor has 20 listings, with 15 under $1 million.

How many of them will sell to STR investors lured by the promise of no existing regulation and that they will be able to lock in their incumbency even if regulations are imposed?

“We can’t ignore the changes in the quality of life in our neighborhoods,” Dohmen wrote.” Most often in our spring, summer and fall seasons, people are outside in their yards, gardening, barbecuing, and interacting with their neighbors. If the people who are occupying the adjacent house are total strangers, what does this do to the quality of the neighborhood? And how does it feel to the remaining neighbors to have what are essentially businesses taking over their neighborhoods? Wherein do these rented residential houses differ from mini-hotels, B & B’s or rental cottages?

“Our hotels, motels, inns, and B & B’s are legitimate businesses, licensed as such, and subject to business taxes. This is not the case with VR-1’s.

“I think the availability of all this transient accommodation anywhere in Bar Harbor is definitely contributing to our over-population of tourists and is undermining our quality of life. If local residents need the extra income in order to pay our very high taxes, the number of rentals per week, the number of people per reservation, whether or not the house is served by town water and sewer, and control of parking all must be factored into a reconsideration.”