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Short-term rental ban's butterfly effect

Shannon McNaught * Delaware
shannon.marvel@doverpost.com
Dover Post
Dover Post

The pandemic has caused a slight decline in Delaware home sales, while the market for vacation rentals has all but disappeared.

Short-term rentals are the main concern of Beau Zebley, president of the Delaware Association of Realtors. He believes the amount of vacation rental profits lost between March and now is around $50 million.

“If they have millions of dollars of loss at the beach,” Zebley said, “It’s going to be reflected statewide.”

Long-term effect

Tom McGlone is a rental specialist at Seachange Vacation Rentals in Rehoboth Beach, where new bookings have slowed to a trickle.

“There’s a lot of confusion out there and people are afraid,” he said. “New guests and … people who booked prior to [the pandemic] happening, they’re concerned, you know. Can they come? Is everything going to be closed? Can they go to the beach? The messages from the governor have been very confusing.”

Seachange is allowing renters to transfer their credits to next year and McGlone said many are using that option.

Since the governor’s March emergency order, out-of-state visitors have faced restrictions. As it stands, any out-of-state visitor must self-quarantine for two weeks upon arrival. Short-term rentals remain banned.

“All these companies at the beach have property management divisions and they all have similar contracts with homeowners. Basically, these houses are booked for nine weeks a season,” Zebley said. “They pay out all the money to the property owner, minus the management fee and commission. So when the governor says you can’t come here because you’re from out of state, they have to ask for that money back.”

Much of the summer’s rental money has already changed hands.

“The companies don’t have the reserves to pay back those tenants. Without short-term rentals, they could go bankrupt,” Zebley warned. “The people who own these homes use that money to pay their mortgage. Some of them will default.”

He and other realtors are attempting to convince the governor to reverse the short-term rental ban and the 14-day quarantine for out-of-staters.

“This whole beach tourism thing is a lot bigger than just the beach,” Zebley said. “It’s critical to our state economy. It’s what keeps us from having sales taxes and state property taxes. If this doesn’t get figured out quickly, what’s going to happen is there’s going to be no state money available for nonprofits in the coming years.”

Home sales slightly lower

Jean Dowding sells homes with the Dowding Group at Remax 1st Choice, in Kent and New Castle counties.

“We saw a decline in March with the initial state of emergency shut down,” she said. “We are back on track, with sales around the same level as this time last year.”

According to data from Bright Multiple Listing Service, Delaware home sales between March 1 and May 21 are very similar to last year. Sussex County saw the biggest decline, with 1,290 homes sold during that period last year and 1,115 this year. Numbers in Kent and New Castle were nearly identical.

Realtors are adjusting to the restrictions, too.

“Everybody has done an amazing job at re-gearing and becoming comfortable in the virtual world,” said Patricia Anderson, CEO of the Sussex County Association of Realtors. The association offers virtual tools and classes to its members.

Martin West is a realtor for Bryan Realty Group, which has offices in Dover and Rehoboth. He sells primarily in Sussex County. He said the switch to sanitary practices has been smooth.

“We are all acknowledging that we all have to follow the standard protocol-wear masks, don’t shake hands, keep your distance as much as humanly possible, use hand sanitizer before and after you get out of the car,” West said. “You have to inform your buyers not to touch anything. I open the door, turn on light switches, anything like that.”

One silver lining West has seen during the pandemic is that the potential buyers he deals with are more serious. Zebley agreed.

“People are more committed,” Zebley said. “They’re not doing a lot of shopping around.”

Andersen, CEO of the Sussex County of Association of Realtors, is optimistic about the future of Delaware home sales.

“The feeling is that people who have sheltered in place in urban areas are looking to move out,” Anderson said. “They want space. They want to breathe. So we may be seeing a shift to more rural, suburban areas.”

Homebuilders aren’t seeing sales slow down, either. Insight Homes has about 20 communities throughout Sussex County and one Kent. In the midst of the pandemic, they’re in the process of building over 30 homes.

“We’ve had people signing contracts virtually and making deposits on lots. Our salespeople Facetime walking through the home and answer any questions that way,” said Insight Homes market manager Debbi Brunner. “The customers seem to be rolling with it.”

Only a limited number of tradesmen are able to work on homes at once on due to social distancing requirements, but Insight has so many homes in progress it hasn’t been an issue.

The only aspect of home building in which Insight has encountered a bit of a back-up is in the permitting process, which is the responsibility of the county.

“It’s taking a little longer now,” Brunner said.