The Haines Borough Housing Working Group on April 27 considered a tax incentive for multi-unit residential dwellings and discussed the state of short-term rentals in the borough but ultimately took no action on either topic.
The group reviewed an incentive based on a Fairbanks North Star Borough policy that allows a property tax exemption of up to 10 years on new residential housing complexes with five or more units and up to two years on complexes with fewer than five residential units. Last year the City and Borough of Juneau passed a 12-year abatement on new residential complexes downtown with at least four units.
The basis for the exemption in Haines would be to incentivize construction of new affordable housing in the borough as part of a multi-pronged solution to a housing shortage.
There was a question, though, about how effective it would be, and ultimately the housing group didn’t move forward with the idea.
Last month, at the housing group’s recommendation, the Haines Borough Assembly approved a similar tax exemption for subdivision developers.
Chris Thorgesen, who owns several multi-unit residential properties in town, said a tax break on new multi residential buildings would be beneficial but that lowering month-to-month costs, like utilities and waste collection, would be more effective in the long run.
“Everything has gone up, from property taxes to water and sewer to electric, oil, trash — everything has gone up in price,” Thorgesen said.
Nationwide prices were up 8.5% in March from the year before, according to the U.S. Department of Labor. Interest rates are also rising as the Federal Reserve attempts to bring down inflation.
Thorgesen also noted that housing availability is linked to the real estate cycle and that 10 years ago in Haines there were more empty buildings for sale that could be remodeled as residential units. He said he didn’t see an incentive for a developer to build a large multi-unit complex without a more stable year-round workforce and reason to think the building would appreciate.
The housing group also discussed short-term rentals but didn’t make any recommendations regarding them.
There are 47 vacation rentals in the borough, three of which are hotels, according to a memo from borough planner Dave Long.
The annual number of vacation rental permit applications dropped after 10 were approved in 2017. Only two permits were approved last year, one in 2020, three in 2019 and six in 2018.
Four rentals have gone out of business in the last year, according to Randa Szymanski, who manages reservations for numerous vacation rental owners.
In a March letter to the planning commission, Szymanski said “there seems to be an undercurrent of feeling in town that the number of vacation rentals are adversely affecting the local housing market. However it all seems to be vague and based on feelings rather than actual numbers.”
At the housing group meeting, planner Long said he thinks the lodging market has shifted in recent years. There are fewer hotels than there used to be, but not fewer visitors, he said, and vacation rentals have helped meet demand.
Still, even if it’s not the case in Haines, there are concerns in communities across the state and country that short-term rentals are limiting long-term housing options.
In Sitka, where a housing shortage has been reported, the assembly considered a one-year ban on short-term rentals but narrowly voted against it amid uncertainty about whether data really supported it.
The Haines Borough Planning Commission denied a vacation rental permit application in March for the first time, citing opposition from neighbors.
The borough is expected to collect $128,000 in lodging bed taxes in fiscal year 2023, up more than 50% from last year and back to pre-pandemic levels.